I'm a bit on the fence about this.
Many of our foreign competitors get state support while our companies do not.
The textbook answer is: "So what? More and cheaper products for us."
But a side effect is the loss of human capital as an economy deindustrializes and moves to a consumption-based economy financed by (perhaps) money printing and extraction of resources via war.
I don't think we should ignore the social implications either, if certain geographic areas rapidly deindustrialize there comes with it all sorts of social problems and unrest.
One of my advisors had a similar perspective. The dismissive argument is based on the possibility of making side transfers that leave everyone better off, but those side transfers don't always happen.
I'm certainly skeptical of claims that tariffs are welfare enhancing. However, I know the standard trade models (which are extremely accurate for economic models) indicate that a large economy can be a net beneficiary of even pretty large tariffs.
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The dismissive argument is based on the possibility of making side transfers that leave everyone better off, but those side transfers don't always happen.
Another issue I have with economists and their side transfers is that it's all based on a flawed model of the human being as a consumer first and foremost.
But I believe that humans derive utility not just out of consumption, but also out of a sense of productivity and contribution. Between two people who consume the same, but one earns it and one receives transfers from the government, I believe that the one who earns it will report higher life satisfaction.
And again, reliance on transfers results in (probably) loss of human capital making future prosperity harder to sustain.
I'm certainly skeptical of claims that tariffs are welfare enhancing
I agree that tariffs are a blunt instrument. Unfortunately, I'm the furthest thing from a trade economist so I don't really have any useful proposals to make. I just wanted to point out some of the flaws in "free trade absolutist" thinking.
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What I wonder about is the scenario where it's not a militaristic empire paying for subsidized goods with newly printed fiat, but rather a peaceful free market nation trading with a protectionist regime.
Clearly subsidies will mess with the balance of production, by sending a false signal about comparative advantage. Also clearly, the importing nation will have a reduced cost of living at the expense of the foreign tax payers who fund the subsidy. Why does this mean a loss of human capital, though, or a shift towards a consumeristic economy?
It seems like the new, distorted, comparative advantage could just as easily be in making goods that people find more satisfying to make and the reduced cost of imported goods is essentially the same as a technological innovation. I suppose people say many of the same things about cultural effects of labor saving technologies.
My broader point is that it's hard to know if adverse effects of free trade in our society are about free trade or if they're the result of other pathological institutions.
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Yeah, agreed. I think some of my presupposed assumptions are indeed the existence of a pathological welfare state and warfare state.
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Result of pathological institutions
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