So they do better, but are not better off.
Protectionism benefits a smaller class of people at the expense of the majority. Free trade benefits the majority at the expense of a smaller class of people. Therefore, free trade is bad.
:shrugs:
Regards,
Shodan
Protectionism is a good idea in some economic circumstances and a bad idea in others. Throughout the 19th Century the Whigs and the Republicans demanded a high protective tariff – it was never a misconceived policy at the time, was it?
Comparative advantage is not a new concept. I know what it is. Maybe I am not being clear but what part of what I said do you think is incorrect? Doesn’t everyone have a comparative advantage? Its the thing they are best at compared to everyone else.
Yeah, I agree. What did you think I said?
I make more mistakes cutting and pasting than you can imagine.
remove the words “and the typical American does better” from the first paragraph.
I think it depends. Sure free trade leads to lower prices that everyone enjoys. It can also lead to a permanently reduced wage level for some people. If that group becomes large enough and the wage level is reduced enough, you might be better off without the lower prices.
If protectionism leads to a domestic 1% increase in prices but a 3% increase in real wages and a 2% decrease in unemployment but a 5% reduction in returns on capital (owned by people both within and outside the country) then perhaps protectionism is good for the country even if it is not so good for the world as a whole. Perhaps the benefits are not distributed to maximize utility because wealth effects override the increase in aggregate wealth. Free trade that heaps benefits on the rich while heaping burdens on the poor might not maximize utility.
Free trade is not an unmitigated good that is good for a particular country in all circumstances. America can be worse off if free trade guts our middle class and we end up with a hollow economy.
:shrugs:
Regards,
Shodan
[/QUOTE]
The part where you referred to competitive advantage as if it was synonymous with comparative advantage.
No, it’s not. You are talking about competitive advantage again, I think.
As mentioned, it can make sense to outsource production of a good to another country even if you are better at producing that good domestically. It has to do with opportunity cost.
Country A is the best in the world at two things - producing widgets, and producing whatzits. They are five times better than country B at producing widgets, and 50% better at producing whatzits. But they are the best in the world at both - just by different degrees.
Country B is not the best in the world at producing whatzits or widgits - country A is better. But it can make economic sense to outsource to B, because the opportunity cost of country B giving up its production of widgits and concentrating on whatzits is lower than it would be for country A.
Regards,
Shodan
Do you think everyone has a competitive advantage? Do you think that I think that everyone has a competitive advantage?
The ideas of competitive advantage and comparative advantage are closely linked, so confusion is to be expected. Comparative advantage is that activity in which you have the greatest competitive advantage compared to other countries even if you have you are at a competitive disadvantage in every activity there is one activity in which your competitive advantage is greater (less disadvantaged) than others.
Yeah I understand but you are assuming that you cannot produce enough widgets to satisfy global demand AND Whatzits to satisfy global demand leaving Country B sucking its thumb.
I know… but my point is that somewhere like Bhutan was dealt a rather raw hand. The largest sector of their economy is selling electricity from a middling-sized dam/hydroelectric plant to India. Is that what they do best or at the lowest opportunity cost?
You can change your comparative advantages.
There is an economist out of Korea (Ha-Joon Chang - Wikipedia)who makes a pretty compelling case for protectionism to foster nascent industries that can lead to better comparative advantages. Usually countries like Bhutan start up the ladder with low tech high relatively labor intensive industries like garment manufacturing and agriculture. Then they move on to higher and higher tech industries like steel then shipbuilding, car manufacturing, then high tech industries like electronics, medicine and R&D until you reach the pinnacle and everyone is working the frialator at McDonalds or greet people at the door at Wal Mart or trading derivatives at Goldman Sachs. But you can’t do that if your nascent industries have to compete with well developed and organized industries in other countries. So you bite the bullet and you engage in protectionism.
Protectionism comes at a cost but it is a price that you kinda have to pay if you want to develop a garment industry that more developed countries are only half-assing but still doing better than you.
In tonight’s debate, Trump just said something to the effect of “I’m all for free trade, but not when they’re beating us.”
Here are some funny stories for you anti-free traders, you tariff lovers. I guess the answer to the OP that my article gives is "If it were not for free trade, good American children would play with dolls instead of these X-men thingies which aren’t even people !
I think you’re missing the point. no one is saying that trade is always bad. We are saying that free trade isn’t always good.
FTR – the TPP isn’t free trade, is it? It’s carefully-regulated trade.
So a non-Pareto optimal change that provides $1B improvements to various people and harms 100 or so employees of Standard Buggy Whips Ltd. gets nixed because their Congressman plays golf with President Trump. Nice going!
Yes, the TPP is free trade in the sense we are discussing.
If you would like to argue that reducing or eliminating tariffs isn’t free trade, go ahead, but don’t expect to be taken seriously.
Regards,
Shodan
That ain’t free trade.
You didn’t read the last sentence of my post.
Regards,
Shodan
WTF are you talking about?
This is a non-pareto optimal change that fucks over a lot of people and makes rich people richer.
And we are not talking about buggy whips, people are still making and buying the thing that the American workers used to make, they just make them in China now.
I did, but the TPP involves a great deal besides eliminating tariffs.
Blame wage floors that keep people idle or engaged in destructive activities for that. We have a large surplus of uneconomically viable labor under current labor regulations. Why shouldn’t the capitalist class take their capital and IP to other labor suppliers? It’s a global economy.
Cite that wage floors do any of that?