My latest policy brief, "Strong and Competitive: The American Economy in the Free Trade Era," written for the Institute for Social Policy and Understanding, is now available online. An economist might notice that I defend free trade without ever mentioning comparative advantage, but my handlers worried that it is too complex a read for most of their supporters anyway. I've yet to figure out how to simply and intuitivey explain comparative advantage, although I've seen some valiant attempts. I think such an explanation would be a great boon to the world.
My next policy brief, due out in October, I believe, will be on the presidential election. I'm not sure yet what I'll say.
I've also received the proofs for my latest political science journal article, "A Primer on Applying to the Liberal Arts College," which will be appearing in the October issue of PS: Political Science and Politics. You can see my name in the table of contents here. It's advice for writing a good application for new PhDs who are applying for a job at a liberal arts college. It's based on my experience running a job search, in which the applicants' overwhelming lack of understanding of the job market and hiring process became abundantly clear. That is, they were just as clueless about how to write a good letter of application as I was when I finished my PhD. My friend, Jim, who just proofread the final copy for me, agreed that he also didn't understand the importance of the cover letter until after sitting on a hiring committee. This isn't an especially intellectual work, but I think it should help a few job candidates. Unfortunately it probably won't be available online for a year or so.
I have other projects on tap, too. My friend, Jeff has finally sent me moe current data on patents granted and R&D in the US, Taiwan, and Korea, so with luck we can finish our long-in-process article on that causes of the development of intellectual property rights regimes in developing countries, and I am working with my chemist friend, Michael on a paper comparing the benefits of the dollar coin vs. the paper dollar. He initially wrote it as a quickie paper in grad school, and recently found out that it's been floating around in influential circles, but they can't make use of it because it's not a peer-reviewed article. Our goal is to change that, which requires some upgrading of the paper, but I think we'll have a completed version by spring '09.
Showing posts with label free trade. Show all posts
Showing posts with label free trade. Show all posts
29 July 2008
22 April 2008
McCain Gets Free Trade Half Right
Campaigning in Youngstown, Ohio, John McCain defended free trade, while still getting it wrong. Here's what he said.
The more goods and services you can buy, the more well off you are. So if China sells stuff to us super-cheap, we can buy more stuff, and we're better off. It also leaves us more money left over to buy other stuff, including American made stuff, like dvds of Hollywood movies, dinner at Applebees, Amish-made furniture, etc.
On the other hand, if China is really selling things below cost, then they are losing money, and their ability to buy goods and services is declining. And if they are really keeping American made goods out of China, then they're just depriving themselves of access to quality goods.
In other words, if China doesn't play fair, America gets richer while China gets poorer.
Unfortunately, too many people still think the basis of the good life is jobs, rather than goods and services. Jobs are merely the means to the end of acquiring lots of goods and services. It's an odd misconception to have, when you consider that most people's vision of paradise is having everything we need without having to work. Just think, if China really did "dump" goods on America, giving us everything we need for free, it would destroy millions of jobs--but we'd be that much closer to paradise.
McCain again defended free trade during a town hall meeting at Youngstown State University, but added that other countries have violated the principle at the expense of the U.S. interests. "We have to insist on fair and open competition," McCain told a man who protested Chinese "dumping" of cheap steel, crippling steel communities such as Youngstown.McCain dangerously mixes the notion of "fair" trade with free trade, showing that he still doesn't really get it. Let's say China's not being fair, that they are "dumping" goods in the U.S., and not allowing U.S. goods in. Conventional wisdom, and McCain is wholly conventional here, says the U.S. is being hurt while China prospers. But, as so often happens, conventional wisdom is anything but wise.
The more goods and services you can buy, the more well off you are. So if China sells stuff to us super-cheap, we can buy more stuff, and we're better off. It also leaves us more money left over to buy other stuff, including American made stuff, like dvds of Hollywood movies, dinner at Applebees, Amish-made furniture, etc.
On the other hand, if China is really selling things below cost, then they are losing money, and their ability to buy goods and services is declining. And if they are really keeping American made goods out of China, then they're just depriving themselves of access to quality goods.
In other words, if China doesn't play fair, America gets richer while China gets poorer.
Unfortunately, too many people still think the basis of the good life is jobs, rather than goods and services. Jobs are merely the means to the end of acquiring lots of goods and services. It's an odd misconception to have, when you consider that most people's vision of paradise is having everything we need without having to work. Just think, if China really did "dump" goods on America, giving us everything we need for free, it would destroy millions of jobs--but we'd be that much closer to paradise.
06 March 2008
Tired Old Protectionists
The New York Times has an opinion article by a trade lawyer named Robert Lighthizer claiming free traders act on principles, regardless of facts.
More amusing though is this tidbit.
Lighthizer is correct when he says
And somehow Lighthizer thinks the best way to build "a prosperous middle class" is to make me pay more for the things I buy. Somehow he missed Adam Smith's lesson that the amount of goods and services you can command determines your wealth, not how much money you make, or where it is produced.
Really, it's too bad he hasn't read the relevant literature.
They see nothing but dogma — no matter how many jobs are lost, how high the trade deficit rises or how low the dollar falls.Frederic Bastiat knew this criticism well, back in the 1830s.
"We advocates of free trade are accused of being theorists, of not taking practice sufficiently into consideration." Economic Sophisms, First Series, Chapter 13.Too bad Lighthizer hasn't read the relevant literature.
More amusing though is this tidbit.
Free trade has long been popular with liberals, and it remains so with liberal elites today.I could introduce him to quite a few liberals, but none that heartily support free trade. And, noticeably, this anti-free trade screed appears in....the New York Times.
Lighthizer is correct when he says
Conservative statesmen from Alexander Hamilton to Ronald Reagan sometimes supported protectionism...That's exactly the problem--we can't even rely on our conservatives to support free trade consistently, which is why I'm concerned for our future.
And somehow Lighthizer thinks the best way to build "a prosperous middle class" is to make me pay more for the things I buy. Somehow he missed Adam Smith's lesson that the amount of goods and services you can command determines your wealth, not how much money you make, or where it is produced.
Really, it's too bad he hasn't read the relevant literature.
20 February 2008
Why I Can’t Vote for Obama, Part I: Economic Policy
The 5 voters in my “Who should James vote for” poll (or the 1 person who voted 5 times), say I should vote for Barack Obama. But the more I think about him, the more I realize I just can’t. Barack Obama wants change. So do I. But in the past week, both a white man from Iowa, and a black woman from Florida have asked me, “Change what?” And I don’t want the changes Obama does. So here’s part I, Obama on trade policy. Tomorrow, Obama on foreign policy.
Obama has been careful not to explicitly say he’s anti-free trade. Only Dennis Kucinich is foolish enough to say so openly. Obama recently said,
Because if we don’t import, which we do buy sending other countries money, they won’t have any money to send us, so we won’t be able to export.
But, you might argue, our manufacturing sector has declined. It's true that (a) manufacturing employment has declined, and (b) that the proportion of the GDP coming from manufacturing has declined. But manufacturing has continued to grow, with greater output than before (with fewer workers, because of productivity increases). In 2001, manufacturing was about $4.1 trillion dollars, and after dipping because of recession from '01 through '03, grew to $4.9 trillion in 2006.
If we look specifically at auto industry employment, which is of greatest concern to Michigan, overall employment has fallen, but due almost wholly to the poor performance of GM and Ford. If we look at the foreign-based manufacturers, their US employment has increased by over 50% since 1995. And it is possible to make money as an automaker in the US, and even through foreign sales.
Obama has been careful not to explicitly say he’s anti-free trade. Only Dennis Kucinich is foolish enough to say so openly. Obama recently said,
“Revolutions in communication and technology have made it easier for companies to send jobs wherever labor is cheapest, and that’s something that cannot be reversed… So I’m not going to stand here and say that we can stop every job from going overseas. I don’t believe that we can — or should — stop free trade.”But his website says
"Obama will fight for a trade policy that opens up foreign markets to support good American jobs. He will use trade agreements to spread good labor and environmental standards around the world and stand firm against agreements like the Central American Free Trade Agreement that fail to live up to those important benchmarks. .. Obama believes that NAFTA and its potential were oversold to the American people. Obama will work with the leaders of Canada and Mexico to fix NAFTA so that it works for American workers."And in a recent speech, he said,
"…trade deals like NAFTA ship jobs overseas and force parents to compete with their teenagers to work for minimum wage at Wal-Mart." (Thank you Greg Mankiw.)Here in Michigan, the only state to have a declining gross state product in 2006, free trade seems a hard sell. But let’s look at the figures.
Michigan’s gross state product in 2006, was $337.8 billion (in chained 2000 dollars).
- Michigan’s exports in 2006 were $40.4 billion (in 2006 dollars). See also U.S. Census Bureau.
- Michigan is 5th, or 6th (click link above) out of the 50 states in total dollar value of exports. . See either the first link in the previous item, or here, or here.
- The Democratic Leadership Council says:
Michigan ranks ninth in the nation in the number of workers hired by foreign companies, hosting 1,000 companies from more than 20 countries which support more than 205,000 jobs -- about one in every 15 of Michigan's private-sector jobs, and an especially high proportion of manufacturing jobs.
- Michigan’s top two export targets are Canada and Mexico (scroll down to table two in the link), the two countries who are our partners in NAFTA. My state exports over $38 billion (in 2006 dollars) to Canada, and nearly $5 billion to Mexico. Third on the list is Germany, at a measly $1 billion. So what do you think screwing with NAFTA would do to Michigan’s economy?
Because if we don’t import, which we do buy sending other countries money, they won’t have any money to send us, so we won’t be able to export.
But, you might argue, our manufacturing sector has declined. It's true that (a) manufacturing employment has declined, and (b) that the proportion of the GDP coming from manufacturing has declined. But manufacturing has continued to grow, with greater output than before (with fewer workers, because of productivity increases). In 2001, manufacturing was about $4.1 trillion dollars, and after dipping because of recession from '01 through '03, grew to $4.9 trillion in 2006.
If we look specifically at auto industry employment, which is of greatest concern to Michigan, overall employment has fallen, but due almost wholly to the poor performance of GM and Ford. If we look at the foreign-based manufacturers, their US employment has increased by over 50% since 1995. And it is possible to make money as an automaker in the US, and even through foreign sales.
"Toyota, on track to overtake General Motors as the world's biggest automaker this year, said Friday its April-June profit jumped 32.3% to a record high for a quarter, lifted by strong overseas sales and a weaker yen. (USA Today)Obama needs to read two books, at least, on economics. And here’s the two I’d recommend, for him or anyone. Bastiat’s Economic Sophisms (AKA Fallacies of Protection), which can also be read online, and Russels Robert’s The Choice: A Parable of Free Trade and ProtectionConvince me Barack Obama supports free trade, and I’ll be one step closer to supporting him.
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