IPFS Menckens Ghost

More About: Politics: Republican Campaigns

Trump Debates Milton Friedman on Trade

Worthwhile six minutes:

Trump vs Friedman - Trade Policy Debate - YouTube

Or:

https://www.youtube.com/watch?v=7DhagKyvDck

Enjoy.

On a related note, below is one of my favorite comments about auto manufacturing, by Steven Landsburg:

There are two technologies for producing automobiles in America.  One is to manufacture them in Detroit, and the other is to grow them in Iowa.  Everybody knows about the first technology; let me tell you about the second.  First you plant seeds, which are the raw materials from which automobiles are constructed.  You wait a few months until wheat appears. Then you harvest the wheat, load it onto ships, and sail the ships westward into the Pacific Ocean.  After a few months, the ships reappear with Toyotas on them.

Note that Friedman and Landsburg referred to Japan, because Japan at the time was the bogeyman -- the country that was going to overrun the USA because it engaged in protectionism but we didn't.  (Remember the fears about the Japanese buying all of Manhattan and Hawaii?)  Now the bogeymen are China and Mexico, while Japan is in a downward spiral, due to labor market inflexibility, a declining birth rate, and immigration barriers.

A lot of the benefits of trade are counterintuitive.  A rule of politics is that the more that the right public policy is counterintuitive, the greater the opportunity for demagogues to get elected by advocating the wrong policy. 

A very counterintuitive concept is comparative advantage.

Absolute advantage is a lot easier to understand than comparative advantage.  If the USA is more productive at making computer chips, and Mexico is more productive at making tortillas, the USA has an absolute advantage in computer chips and Mexico has an absolute advantage in tortillas.  Thus the USA should specialize in computer chips, and Mexico should specialize in tortillas.

But let's say that the USA has an advantage in both computer chips and tortillas as follows:

One American can produce 200 computer chips and 150 tortillas.

One Mexican can produce 50 computer chips and 100 tortillas.

Comparative advantage says that the production of computer chips and tortillas would increase overall and benefit all parties if the USA would specialize in computer chips and forgo the production of tortillas, and if Mexico would specialize in tortillas and forge the production of computer chips.  Makes your head spin, right?  Heck, I might not even have it right. 

Now imagine a presidential candidate trying to explain this in a debate or in a soundbite on CNN or Fox News.  It's much easier to appeal to anti-foreigner fears, which seem to be a genetic or evolutionary aspect of human nature.  An insightful but very tough read on how such irrationality affects politics is the book, The Myth of the Rational Voter:  Why Democracies Choose Bad Policies [and leaders].

Regards,
Mencken's Ghost


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