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Old 02-27-2016, 10:56 AM   #161
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I think for a long while everyone accepted certain truths about the way the economy worked - free trade makes us richer; a rising tide lifts all boats; deregulation helps the economy grow; creative destruction creates more jobs than it destroys; etc.
When I see arguments against these points, which I'll admit are increasingly in vogue, they almost always focus on only one part of the total system--usually the perceived adverse impact on workers in the developed economies. That makes the case an easy one, but conveniently avoids the huge improvements in living standards for the majority of the world's population who don't live in the developed world. And when they (as is often the case) begin their case studies with a post-WWII US labor market which was at its economic zenith, the errors in the argument become more evident.

I would truly like to see a well-researched and intellectually rigorous study that shows that protectionism and mercantilism produce more overall wealth than free markets.

This is all distinct from the discussion of the increasing "power" of capital in producing wealth (relative to the ability of labor to do the same)--recently popularized by Piketty and his adherents. Even after accounting for major errors in his data and the need to re-look at his conclusions necessitated by the burst of the housing bubble, there may be something to his argument. For that, we need to look closely at that rising tide, and why more people have no boats. If they used their "boat money" to pay for cable TV, that would be something worth noting.
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Old 02-27-2016, 02:39 PM   #162
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Social unrest often happens of unbearable hardship of lower classes in poor economic conditions. In the East many countries use terror to control it. On the other hand Western Democracies have social security via welfare, housing assistance, food stamps etc. However in weak economic conditions (in our case, I think, it caused in big part by the Globalization), the lack of collected Taxes by the Government (low pay vs middle class pay) causes chronic budget deficit and growth of National Debt what eventually may lead to much greater damage to our financial system and crises bigger than 2008. Large portion of our Debt is own by the Fed Reserve which issues new money and buys Treasuries or other assets they need in order to keep stable economy (at least from 2008 till 2014). Like in my original post I think that return of large portion of lost manufacturing jobs and services (like IT) back to US may resolve our growing problems, the question is how to do it. Of course it is what I think and I could be wrong.
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Old 02-27-2016, 02:45 PM   #163
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Old 02-27-2016, 03:47 PM   #164
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When I see arguments against these points, which I'll admit are increasingly in vogue, they almost always focus on only one part of the total system--usually the perceived adverse impact on workers in the developed economies. That makes the case an easy one, but conveniently avoids the huge improvements in living standards for the majority of the world's population who don't live in the developed world. And when they (as is often the case) begin their case studies with a post-WWII US labor market which was at its economic zenith, the errors in the argument become more evident.
It's certainly fair to argue that trade has helped raise global income levels and helped ameliorate world poverty.

But it's also fair to say that the original argument in favor of trade wasn't that it was a zero sum income transfer to poor nations. Everyone believed that trade benefited all participants, poor and rich alike. That last bit is increasingly coming into question.

Of course if our primary concern is helping the world's poor, then we could do far more for them by simply opening our borders and letting them come and work here directly.
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Old 02-27-2016, 03:53 PM   #165
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Even after accounting for major errors in his data and the need to re-look at his conclusions necessitated by the burst of the housing bubble, there may be something to his argument.
I have no dog in the Piketty FT fight, but if you care, Piketty did respond to the FT article you linked to.

The Economist summed up the spat thusly . . .

Quote:
One suspects that Mr Giles will not be satisfied by [Piketty's] response, and the discussion is likely to continue. But increasingly the battle seems to be one over methodological choices and data interpretation rather than major data errors or fabrications, as the initial FT work suggested. As for outstanding issues, better data and further research will reveal whether Mr Piketty's analysis is too pessimistic—or the opposite.
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Old 02-27-2016, 05:56 PM   #166
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Everyone believed that trade benefited all participants, poor and rich alike. That last bit is increasingly coming into question.
Those questioning it owe a suggested substitute. We've attempted to tariff and protect ourselves into prosperity before, and it didn't turn out very well. So, I'd imagine the "questioners" will either propose a renewal of that approach using "better tools" or some sort of international redistribution scheme that brushes lightly over the issues of private property rights and challenges posed by human nature (linkages of work to reward and all that). But, there is always something new under the sun.

Voluntary trade benefits both buyer and seller (else neither would engage in it). Trade free of tariffs, restrictions, and other "drag" improves the efficiency of markets and the assures resources (capital, labor, etc) are put to highest use. In the aggregate, it benefits all. But that's not to say that that every entity benefits when trade is free of restrictions. The sole concrete contractor in Smithtown benefits greatly from Smithtown's "municipal buy local" ordnance, selling substandard concrete at 50% markup to the city. So do the employees of that contractor. But those putting up buildings using that concrete, those paying taxes in Smithtown, those other concrete sellers in nearby towns--everyone else loses. And, in the aggregate (ha!), there is less wealth than if the markets had been free, because resources are being used less efficiently.
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Old 02-27-2016, 08:15 PM   #167
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Those questioning it owe a suggested substitute.
It's not a matter of questioning all trade. I think the question is whether trade among nations with widely different labor prices and protections is as generally beneficial as you assume. Sure, we get cheaper stuff, but when real median personal income declines - as it has in the U.S. over the past decade and a half even adjusted for all that cheap stuff - it's worth challenging those assumptions.

And we agree that trade is widely beneficial. But just because it is widely beneficial doesn't mean it is beneficial in every instance.

And even if a specific trade relationship is beneficial in aggregate, it still may not be desirable if those benefits accrue to a small fraction of the population while the remainder experience lower wages as a result.

Meanwhile voluntary trade between a shopper in Megamart and the hugely complex international system that puts products on store shelves tells us nothing about the dispersion of benefits. The shopper can't possibly know that saving 13 cents on a product might cost him 25 cents in lost wages. Just because he thinks he's getting a good deal doesn't mean he's actually getting a good deal.

I'm not saying definitively that all or even any of this is true. All I'm saying is that the theory of trade advanced in the 80's and 90's doesn't seem to match the reality of the world in 2016. And good science dictates that when empirical evidence yields results that differ from theory, it's wise to revisit the theory.
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Old 02-27-2016, 09:29 PM   #168
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Sure, we get cheaper stuff, but when real median personal income declines - as it has in the U.S. over the past decade and a half even adjusted for all that cheap stuff - it's worth challenging those assumptions.
The good news, even from a parochial US perspective, is that median household incomes are headed in a good direction since the post-recession hit and are just about back to where they were 15 years ago on an inflation-adjusted basis.




But, again, we are just looking at one country.
Notional and for illustration only: If annual median incomes declined by $500 per family in developed countries, but that was accompanied by a 25% increase in median family incomes in the least developed countries, is the world worse off? If an average family in the US or Germany has to wait 3 additional months before replacing their car, but thousands of families get electricity in their homes for the first time, has the world experienced a net increase or decrease in prosperity? In happiness?
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Old 02-28-2016, 07:09 AM   #169
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If an average family in the US or Germany has to wait 3 additional months before replacing their car, but thousands of families get electricity in their homes for the first time, has the world experienced a net increase or decrease in prosperity? In happiness?
I don't disagree with your utilitarian argument in favor of trade. But it is a highly unusual position to take with regard to crafting a nation's policy.

As a test of how much we really support this kind of approach to policy we might ask how willing we are to extend it to other areas. Are we willing, for example, to use "the needs of the many outweigh the needs of the few" as the basis for our immigration policy too, or just trade?
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Old 02-28-2016, 07:21 AM   #170
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Before this thread closes, I'd just like to say, "please stay away from my pieces of the pie." Thank you for your support.
Which pieces do you want?
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Old 02-28-2016, 07:28 AM   #171
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I think it is not uncommon for college-educated folks to move a little bit even though they have a preference for being near family and friends.

But less educated folks really do not just pick and move for jobs as much. They just cannot afford it for the most part.

There was that exodus in the 1980s from Michigan to Texas though.
There was also a large historical migration of minorities from south to north for union jobs. Most have now retired and moved back to MS, AL, AR, LA, GA.
Automation and moving jobs overseas have eliminated those jobs for minorities.
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Old 02-28-2016, 08:03 AM   #172
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As a test of how much we really support this kind of approach to policy we might ask how willing we are to extend it to other areas. Are we willing, for example, to use "the needs of the many outweigh the needs of the few" as the basis for our immigration policy too, or just trade?
With regards to immigration, some points:
-- There are practical limits to how many of the world's poor can be smoothly assimilated into developed economies. This lifeboat is only so big, no one is well served when the whole cruise ship tries to climb in.
-- There are political and cultural limits to how many of the world's poor can be brought into developed countries. Ms Merkel could tell us all about that, but we don't need to look beyond our own borders to see how it is already affecting US politics in negative ways.
--Does it enrich Botswana when their most industrious people migrate to the developed world? Or would it better for Botswana for them to stay there and develop businesses, with all the ancillary benefits for other Botswanans?

I think it is more practical to bring development to poor people than to bring poor people to the development.
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Old 02-28-2016, 08:07 AM   #173
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As a test of how much we really support this kind of approach to policy we might ask how willing we are to extend it to other areas. Are we willing, for example, to use "the needs of the many outweigh the needs of the few" as the basis for our immigration policy too, or just trade?
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With regards to immigration, some points:
I'll take that as a no.
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Old 02-28-2016, 10:07 AM   #174
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I'll take that as a no.
Okay. The rationale is there for anyone to use in deciding which policy best serves the "needs of the many."
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Old 02-28-2016, 10:28 AM   #175
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Okay. The rationale is there for anyone to use in deciding which policy best serves the "needs of the many."
That's why they're called rationalizations.
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Old 02-28-2016, 10:34 AM   #176
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That's why they're called rationalizations.
The root is "rational."
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Old 02-28-2016, 10:46 AM   #177
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The root is "rational."


I have no idea what you argued 15 years ago on the topic so this isn't directed at you.

But I do find it extremely disingenuous to see pundits who originally argued in favor of trade on the basis that it raised living standards in all countries to suddenly adopt a "greater good" argument when confronted with evidence that some trade may suppress living standards in already rich nations.

And to compound matters many then selectively use this "greater good" argument for trade but find all manner of reasons why the same logic doesn't hold for immigration policy, tax policy, foreign policy, safety net programs, health care, and on and on.

It smacks loudly of ignoring inconvenient facts to avoid updating cherished prior positions. And that's not something one can reason with.
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Old 02-28-2016, 01:52 PM   #178
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As we know the economy / country wealth is tied to Geopolitics. I just was reading this interview and not sure if George Friedman is correct in his predictions (including our National Debt). What do you think?
STRATFOR George Friedman predictions for the future - Business Insider

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Old 02-28-2016, 02:06 PM   #179
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It smacks loudly of ignoring inconvenient facts to avoid updating cherished prior positions.
That's a huge problem with macroeconomics in general. With microeconomics it is quite feasible to do controlled experiments and be reasonably sure that the important variables have been controlled. When we talk about national / international economies we can't do simultaneous null and test cases, usually we just have "before" and "after" and lots of arguments (from eminent economists) from preconceived positions about which factors were significant, which factors were causative, etc. Or even about what happened.
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