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145 sats \ 10 replies \ @Undisciplined 13 Feb \ on: Why economists got free trade with China so wrong econ
This is a good case study of where economists can get in trouble with their glib simplicity.
"Free trade is welfare enhancing in aggregate."
Economists get this right.
"There will be losers."
Economists get this right too.
"The surplus from free trade will eventually make those losers better off."
Non sequitur. My advisor often asked to see these magical side payments that are making everyone better off.
There's another important element that explains domestic support for tariffs, even fairly large ones. Mainstream trade theory, which is probably the most accurate empirical economic theory, supports the idea that large nations with diverse industrial bases can be net beneficiaries of tariffs.
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I forgot to even mention the regulatory part. Yeah, if you're going to go the free trade and let the domestic economy adapt route, you have to deregulate the economy so it is adaptable.
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World Trade Organization never rules against China
The referees are definitely rigged
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"The surplus from free trade will eventually make those losers better off." Non sequitur. My advisor often asked to see these magical side payments that are making everyone better off.
Too many DC policy wonks got their economics degree and remembered "Free trade is welfare enhancing" but didn't actually learn how to conduct the welfare analysis. (Because it's too hard for them.)
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Also, welfare enhancing for who? Not everyone is a universalist.
I don't like tariffs, because a) it's a violation of people's rights to restrict voluntary transactions and b) it makes poor people in foreign countries worse off. The financial impact on Americans is actually fairly negligible. According to one of my trade professors, if the US went full autarky, GDP would only take about a 3% hit.
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Another good point. Economists have implicitly adopted a consequentialist ethic, whether they're aware of it or not. But I'm not willing to trade my freedoms for mOaR coNsuMptIon ... and I'm sure not many other people are either.
Reminds me of the grad student who wrote a paper on how having immigrant neighbors gives you less racist views, therefore we should randomly put immigrants in areas with a small immigrant population.
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I love silly myopic policy prescriptions. Grad students are a treasure trove for those.
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I actually called it out in the seminar haha and my colleagues backed me up. One guy even said something like, "That's just going to make the natives go <makes a gun loading motion with his hands>"
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Except there are no guns in Europe
Has this grad student been to Germany today? Twenty percent of Germany is foreign born today
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