07 Mar 2016

Tom and I Talk Trump

Contra Krugman 8 Comments

Krugman was half-right this time.

8 Responses to “Tom and I Talk Trump”

  1. Tel says:

    With regards to Trump’s protectionism and international trade, Krugman buys in

    The Mitt-Hawley Fallacy 2016-03-04:

    Total final spending on domestically produced goods and services is

    Total domestic spending + Exports – Imports = GDP

    Now suppose we have a trade war. This will cut exports, which other things equal depresses the economy. But it will also cut imports, which other things equal is expansionary. For the world as a whole, the cuts in exports and imports will by definition be equal, so as far as world demand is concerned, trade wars are a wash.

    OK, I’m sure some people will start shouting “Krugman says protectionism does no harm.” But no: protectionism in general should reduce efficiency, and hence the economy’s potential output. But that’s not at all the same as saying that it causes recessions.

    There’s a lot of weirdness here, first we see that Krugman presumes the GDP is the key metric for any economy (and of course this is normal for Keynesians) but then because he can see imports and exports cancelled out in the GDP calculation he can conclude it’s a wash.

    But then he brings up “efficiency” which is apparently unrelated to GDP (or at least, that’s what left-wing arithmetic says) but this new “efficiency” factor is important on the supply side. Hmmmm, supply side, I wonder if there’s something to that? If we improve the capacity of the economy to produce output, this could be beneficial in all sorts of ways… Gosh, that might lead to a whole branch of economics or something.

  2. Tel says:

    Another point about that protectionism vs offshoring debate… it isn’t about Pareto optimization. It’s one of the many situations where some people are hurt by it, while others are made better off. The difficulty of people like Krugman coming up with “efficiency” terms is those are necessarily aggregate terms containing presumptions about inter-personal utility equivalence.

    From a genuine pure Austrian standpoint you can’t say whether protectionism is good or bad. As I’ve pointed out before, the British Empire did make use of a bunch of protectionist mechanisms and did pretty well out of that, although they used it judiciously, and overall they did partake in a lot of trade (and lot of immigration too). It isn’t at all obvious whether going the full open borders strategy would have helped them.

    This is of course the debate that the UK is having now about jumping out of the EU in order to avoid mass migration coming in from Turkey and Eastern Europe. The main threat the the EU is waving around to discourage them from leaving is the threat of protectionism.

    • Andrew_FL says:

      “From a genuine pure Austrian standpoint you can’t say whether protectionism is good or bad.”

      You can’t say anything is “good” or “bad” what part of Wertfreiheit is so difficult to grasp?

      Austrian theory allows one to conclude that protectionism will have certain results. One needs an ethical theory to decide whether those results are “good” or “bad” and an ethical theory to address whether one “should” or “should not”

      What’s your ethical theory that justifies the use of force to protect the privilege, in the Anglo-Saxon law sense, of having a particular kind of job? What ethical theory justifies the use of force to make the consumer pay for that protection whether it works or not?

      • guest says:

        “… what part of Wertfreiheit is so difficult to grasp?”



        • Andrew_FL says:

          Yup, I did that on purpose.

      • Tel says:

        If you can find a genuine Pareto improvement, you can claim it is good, without any moral theory. All parties effected claim it is good, other parties are not affected.

        However, changing the open/closed border status effects many parties and invariably some will be worse off. At that point you need to trade off someone’s advantage against another person’s disadvantage. You can have your moral theory for that… but then the other guy who ends up worse off will very likely also have a different moral theory. At that point you are down to broadswords in a pit or a US Presidential race whichever you see as more workable.

  3. E. Harding says:

    Contra Krugman needs 10-15 more IQ points, 1 oz Chicago school and 1 half-oz Scott the Psychiatrist. Then it would be good.

    • Andrew_FL says:

      Translation: Please hire me to ruin your show

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