Capitalism? Nah, Moneterism.
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Richard A. Abbott wrote:
The Stolper-Samuelson theorem demonstrates how changes in output prices affect the prices of the factors when positive production and zero economic profit are maintained in each industry . It is useful in analyzing the effects on factor income, either when countries move from autarky to free trade or when tariffs or other government regulations are imposed within the context of a H-O model
'Twas brillig, and the slithy toves Did gyre and gimble in the wabe: All mimsy were the borogoves, And the mome raths outgrabe.' Richard, that kind of gobbledegook may provide steady employment for a number of academics, but once an economic model requires "zero economic profit," I'm relatively sure it is another attempt of a soft science to pretend it's a hard one.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
Oakman wrote:
I'm relatively sure it is another attempt of a soft science to pretend it's a hard one.
Funny how a lot of the people who pooh-pooh scientific climate models buy whole heartedly into economic theories based on ultra simplified models loaded with tons of assumptions. They hardly approach the rigor and evidence requirements for a true scientific theory.
"Republicans are the party that says government doesn't work and then they get elected and prove it." -- P.J. O'Rourke
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Are you saying Europe, Africa -> Russia India, Far East -> China or Europe -> Russia Africa -> India Far East -> China ? At first glance it looked like the latter, but when I read it again, it looks like the former.
Cheers, Vıkram.
Carpe Diem.
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Oakman wrote:
I'm relatively sure it is another attempt of a soft science to pretend it's a hard one.
Funny how a lot of the people who pooh-pooh scientific climate models buy whole heartedly into economic theories based on ultra simplified models loaded with tons of assumptions. They hardly approach the rigor and evidence requirements for a true scientific theory.
"Republicans are the party that says government doesn't work and then they get elected and prove it." -- P.J. O'Rourke
Tim Craig wrote:
They hardly approach the rigor and evidence requirements for a true scientific theory.
I don't want to dismiss the whole field nor all of its practitioners, I've thought for a long time that Economics is the great great grandfather of Hari Seldon's psychohistory. But, it is my understanding that while there were a number of people - some of them practicing economists - there was no model that suggested even six months in advance either the depth, nor the rate of decline of the economy. Human beings are very complex and, even in large groups, not all that predictable.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
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73Zeppelin wrote:
capitalism is not the act of "aggregating capital".
That's true. But at the same time, I think he's trying to point out that we have, for quite awhile been trying to get along without any capital, just credit. By leveraging every ounce of real capital into ten ounces of credit, the banks have gone down the road of no return. By borrowing money for a house they couldn't afford, consumers have gone down that same road, and by writing insurance policies that paid off like they were casino jackpots, they created a a failure is its own reward mentality.
73Zeppelin wrote:
Secondly: tariffs will do more harm than good. Protectionism will just lead to retaliatory tariffs.
And how can that hurt a country with a horrible deficit of payments problem? Other countries will tax the pittance they buy from us because we are taxing the flood of good that are coming into our country? Forgive me, Zep, but we should care, why?
73Zeppelin wrote:
You sold yourselves out. You're dependent on foreign energy sources, foreign production and foreign demand for US debt.
You're absolutely right, but what better way of encouraging the development of our own energy resources, and our own production than making foreign goods more expensive? Why shouldn't we say that since countries like China and India (among others) pay subsistence wages to millions of people who might as well be slaves, we will add taxes to the cost of those goods rather than continuing to subsidize slavery, and economic exploitation similar to that of the middle ages?
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
Oakman wrote:
And how can that hurt a country with a horrible deficit of payments problem? Other countries will tax the pittance they buy from us because we are taxing the flood of good that are coming into our country? Forgive me, Zep, but we should care, why?
You should care because you would probably be happier with a positive balance of trade. A positive balance of trade, among other factors, leads to a positive current account. Trade deficites result in slow GDP growth and unemployment. It also affects your net international investment position[^]. It's also unsustainable in the long-run, just like trying to live and grow on credit was. As a net importer, even punishing protectionist tariffs won't go far in reducing the US trade deficit. Anyways, I always liked Buffett's[^] proposal on this topic.
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73Zeppelin wrote:
Protectionism will just lead to retaliatory tariffs.
Other countries already have tariffs that we don't. Which other successful industrialized nations practice "free" trade with no protectionist tariffs? Seriously, name one.
This statement is false
There's a difference between protectionist tariffs and punative protectionist tariffs. I think Buffett's import certificates[^] are a much better idea.
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73Zeppelin wrote:
capitalism is not the act of "aggregating capital".
That's true. But at the same time, I think he's trying to point out that we have, for quite awhile been trying to get along without any capital, just credit. By leveraging every ounce of real capital into ten ounces of credit, the banks have gone down the road of no return. By borrowing money for a house they couldn't afford, consumers have gone down that same road, and by writing insurance policies that paid off like they were casino jackpots, they created a a failure is its own reward mentality.
73Zeppelin wrote:
Secondly: tariffs will do more harm than good. Protectionism will just lead to retaliatory tariffs.
And how can that hurt a country with a horrible deficit of payments problem? Other countries will tax the pittance they buy from us because we are taxing the flood of good that are coming into our country? Forgive me, Zep, but we should care, why?
73Zeppelin wrote:
You sold yourselves out. You're dependent on foreign energy sources, foreign production and foreign demand for US debt.
You're absolutely right, but what better way of encouraging the development of our own energy resources, and our own production than making foreign goods more expensive? Why shouldn't we say that since countries like China and India (among others) pay subsistence wages to millions of people who might as well be slaves, we will add taxes to the cost of those goods rather than continuing to subsidize slavery, and economic exploitation similar to that of the middle ages?
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
Forgot to ask - did you receive my email?
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Richard A. Abbott wrote:
The Stolper-Samuelson theorem demonstrates how changes in output prices affect the prices of the factors when positive production and zero economic profit are maintained in each industry . It is useful in analyzing the effects on factor income, either when countries move from autarky to free trade or when tariffs or other government regulations are imposed within the context of a H-O model
'Twas brillig, and the slithy toves Did gyre and gimble in the wabe: All mimsy were the borogoves, And the mome raths outgrabe.' Richard, that kind of gobbledegook may provide steady employment for a number of academics, but once an economic model requires "zero economic profit," I'm relatively sure it is another attempt of a soft science to pretend it's a hard one.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
That theorem, and others that are relevant, was my way to show that the principle of protectionism is problematic on many fronts. And as in common with many theorem, they are meant to appear to be gobbledygook no more and no less in the same way that a computer program looks like an unintelligible mess to an uninformed person. So I make no apologies for introducing this academic aspect here. Zero Economic Profit doesn't mean what you might think it means. Essentially it means the "firm will make only normal profit".
Last modified: 1hr 35mins after originally posted --
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Stan Shannon wrote:
Why do you think the Romans didn't just raise tariffs rather than conquering other countries?
The Romans did had tariffs, which -- according to Historian Peter Edwell - were a major factor in determing the price of goods inside the Empire, and they traded extensively with Persia, which they didn't conquer. They even had internal tariffs which they called portoria levied when you cross from one province to another.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
Oakman wrote:
were a major factor in determing the price of goods inside the Empire, and they traded extensively with Persia, which they didn't conquer.
It wasn't from lack of trying. Persia was simply a bit beyond Rome's reach. The reason they conqured was to be able to control trade, resources and wealth. That is the primary reason behind the existence of all empires. Anything resembling a tariff was a temporary expendient until the next war of conquest could be organized.
Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.
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Stan Shannon wrote:
Our wealth is unavoidably linked to the control of energy resources, and that means as much free trade and free market capitalism as possible
Stan, for the market to be free, it must be mutual. The Saudis do not have a free market; the Venezuelans do not have a free market; the Mexicans don't have a free market - of all out major foreign oil supplier, only Canada practices anything like a free market. The Chinese laugh at us for our trading policies. You can rest assured that they do not now, nor will in our lifetimes practice anything that might be considered a free market. When we dropped all our tariffs, it might have been quicker if we simply destroyed all our tanks and planes and disbanded our armies in one fell swoop, rather than piecemeal as we have been doing since the 70's. Either way would be an abandonment of the defense of our country and our way of life.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
I agree with all of that completely. But we really have no other choice. Tariffs would not cure that. They would just create a different set of problems. They would still be laughing at us.
Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.
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73Zeppelin wrote:
capitalism is not the act of "aggregating capital".
That's true. But at the same time, I think he's trying to point out that we have, for quite awhile been trying to get along without any capital, just credit. By leveraging every ounce of real capital into ten ounces of credit, the banks have gone down the road of no return. By borrowing money for a house they couldn't afford, consumers have gone down that same road, and by writing insurance policies that paid off like they were casino jackpots, they created a a failure is its own reward mentality.
73Zeppelin wrote:
Secondly: tariffs will do more harm than good. Protectionism will just lead to retaliatory tariffs.
And how can that hurt a country with a horrible deficit of payments problem? Other countries will tax the pittance they buy from us because we are taxing the flood of good that are coming into our country? Forgive me, Zep, but we should care, why?
73Zeppelin wrote:
You sold yourselves out. You're dependent on foreign energy sources, foreign production and foreign demand for US debt.
You're absolutely right, but what better way of encouraging the development of our own energy resources, and our own production than making foreign goods more expensive? Why shouldn't we say that since countries like China and India (among others) pay subsistence wages to millions of people who might as well be slaves, we will add taxes to the cost of those goods rather than continuing to subsidize slavery, and economic exploitation similar to that of the middle ages?
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
Oakman wrote:
You're absolutely right, but what better way of encouraging the development of our own energy resources, and our own production than making foreign goods more expensive? Why shouldn't we say that since countries like China and India (among others) pay subsistence wages to millions of people who might as well be slaves, we will add taxes to the cost of those goods rather than continuing to subsidize slavery, and economic exploitation similar to that of the middle ages?
I forgot to address this part. Why would you want to pay more for goods "Made in America" that are arguably equivalent to those cheaper goods made elsewhere? That's just artificially inflating prices. Are you telling me that you'd prefer to pay 50,000 dollars for a GM made Honda Civic equivalent than 25,000 dollars for a Japanese manufactured one? That makes no sense and that's what protectionism results in. And given a surplus of the GM Civics, what are you going to do with them? Export them?!? To who? Also which employers are going to be willing to up wages to cover the higher costs of living? Employers operate business for profit, not charity. I just don't see any rationale in arguments favouring protectionist tariffs. I'm pretty sure I'm not missing anything - even Paul Krugman is warning against protectionist knee-jerk reactions. I think the protectionist supporters are arguing down the same lines as those that got burned on CDOs - they just want someone to blame and punish for the mess that was domestically created. America traded domestic production for massive consumption of cheaper foreign goods. That's why the US has the large trade deficit that it does. Free trade didn't do that, American consumers did. You're probably lucky that you have free trade agreements, otherwise the trade deficit would probably be that much larger. I lived in a country that engages in protectionism - Switzerland - and it stinks; everything is overly expensive for no good reason. What resulted from the Swiss policy was high wages - now frozen at a cap - and high, unjustified, living costs. Is that really what you want? Do you think that is going to get you out of the current mess?
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Oakman wrote:
And how can that hurt a country with a horrible deficit of payments problem? Other countries will tax the pittance they buy from us because we are taxing the flood of good that are coming into our country? Forgive me, Zep, but we should care, why?
You should care because you would probably be happier with a positive balance of trade. A positive balance of trade, among other factors, leads to a positive current account. Trade deficites result in slow GDP growth and unemployment. It also affects your net international investment position[^]. It's also unsustainable in the long-run, just like trying to live and grow on credit was. As a net importer, even punishing protectionist tariffs won't go far in reducing the US trade deficit. Anyways, I always liked Buffett's[^] proposal on this topic.
73Zeppelin wrote:
You should care because you would probably be happier with a positive balance of trade. A positive balance of trade, among other factors, leads to a positive current account
Agreed. But in the real world, exactly what must the US do to achieve a positive balance of trade short of threatening to nuke anyone who doesn't buy from us instead of the far east?
73Zeppelin wrote:
As a net importer, even punishing protectionist tariffs won't go far in reducing the US trade deficit.
That may be the received wisdom, but I think much of it is promulgated by the globalists (like Ilion.) But, the argument I have always heard has always been that poorer countries needed to protect their homegrown industry and only the great exporters (like the US until the 70's) could afford no tarrifs - so China, India et al should lower their trade barriers and understand why we are raising ours now.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
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Forgot to ask - did you receive my email?
If you sent it in the last 48, no. I haven't checked the account. Sorry
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
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That theorem, and others that are relevant, was my way to show that the principle of protectionism is problematic on many fronts. And as in common with many theorem, they are meant to appear to be gobbledygook no more and no less in the same way that a computer program looks like an unintelligible mess to an uninformed person. So I make no apologies for introducing this academic aspect here. Zero Economic Profit doesn't mean what you might think it means. Essentially it means the "firm will make only normal profit".
Last modified: 1hr 35mins after originally posted --
Richard A. Abbott wrote:
And as in common with many theorem, they are meant to appear to be gobbledygook no more and no less in the same way that a computer program looks like an unintelligible mess to an uninformed person.
But programs have to work in the real world or they are discarded. Tim's comparison to a climate model is far more accurate. First one determines what the results should be, then one comes up with the postulates that will allow you to produce those results. I have yet to see that anything but the broadest (and most intelligible) economic theories that can be used to attempt to predict reality.
Richard A. Abbott wrote:
Zero Economic Profit doesn't mean what you might think it means. Essentially it means the "firm will make only normal profit".
That's really very funny, you know.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
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Oakman wrote:
were a major factor in determing the price of goods inside the Empire, and they traded extensively with Persia, which they didn't conquer.
It wasn't from lack of trying. Persia was simply a bit beyond Rome's reach. The reason they conqured was to be able to control trade, resources and wealth. That is the primary reason behind the existence of all empires. Anything resembling a tariff was a temporary expendient until the next war of conquest could be organized.
Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.
Stan Shannon wrote:
Anything resembling a tariff was a temporary expendient until the next war of conquest could be organized.
As I pointed out to you, Rome allowed the Empire's provinces to level tariffs against other provinces. That was not a temporary expendient (nor were the tariffs against Persia, for that matter - they lasted longer than the US has existed) but a permanent part of the financial structure of the Empire. Interesting that you should be arguing in favor of big government and I should be arguing against people having the right to buy unfettered by government interference.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
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I agree with all of that completely. But we really have no other choice. Tariffs would not cure that. They would just create a different set of problems. They would still be laughing at us.
Chaining ourselves to the moral high ground does not make us good guys. Aside from making us easy targets, it merely makes us idiotic prisoners of our own self loathing.
Stan Shannon wrote:
They would just create a different set of problems
Perhaps so - but those problems might have solutions that did not involved the destruction of the US as we know it.
Stan Shannon wrote:
They would still be laughing at us.
I suspect they are laughing less right now, though Clinton saying things like "We are all in this together," must have given rise to a chuckle.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
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Richard A. Abbott wrote:
And as in common with many theorem, they are meant to appear to be gobbledygook no more and no less in the same way that a computer program looks like an unintelligible mess to an uninformed person.
But programs have to work in the real world or they are discarded. Tim's comparison to a climate model is far more accurate. First one determines what the results should be, then one comes up with the postulates that will allow you to produce those results. I have yet to see that anything but the broadest (and most intelligible) economic theories that can be used to attempt to predict reality.
Richard A. Abbott wrote:
Zero Economic Profit doesn't mean what you might think it means. Essentially it means the "firm will make only normal profit".
That's really very funny, you know.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
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73Zeppelin wrote:
You should care because you would probably be happier with a positive balance of trade. A positive balance of trade, among other factors, leads to a positive current account
Agreed. But in the real world, exactly what must the US do to achieve a positive balance of trade short of threatening to nuke anyone who doesn't buy from us instead of the far east?
73Zeppelin wrote:
As a net importer, even punishing protectionist tariffs won't go far in reducing the US trade deficit.
That may be the received wisdom, but I think much of it is promulgated by the globalists (like Ilion.) But, the argument I have always heard has always been that poorer countries needed to protect their homegrown industry and only the great exporters (like the US until the 70's) could afford no tarrifs - so China, India et al should lower their trade barriers and understand why we are raising ours now.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
Oakman wrote:
Agreed. But in the real world, exactly what must the US do to achieve a positive balance of trade short of threatening to nuke anyone who doesn't buy from us instead of the far east?
Well, that's the 10,000 dollar question. With an increasingly diminished domestic manufacturing industry (I think you are about to lose GM), a large trade deficit and an economic downturn, I think it will not be easy for the US to reduce the trade deficit anytime soon. I think it should be a more long-term goal. In any event, the deficit should stop accumulating because I don't think there is much desire from the US consumer for consumption at the moment.
Oakman wrote:
That may be the received wisdom, but I think much of it is promulgated by the globalists (like Ilion.) But, the argument I have always heard has always been that poorer countries needed to protect their homegrown industry and only the great exporters (like the US until the 70's) could afford no tarrifs - so China, India et al should lower their trade barriers and understand why we are raising ours now.
It's good to question the perceived wisdom, but I don't understand how instituting protectionist trade tariffs will be beneficial to the US.
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If you sent it in the last 48, no. I haven't checked the account. Sorry
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
No problem.
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No problem.
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Oakman wrote:
You're absolutely right, but what better way of encouraging the development of our own energy resources, and our own production than making foreign goods more expensive? Why shouldn't we say that since countries like China and India (among others) pay subsistence wages to millions of people who might as well be slaves, we will add taxes to the cost of those goods rather than continuing to subsidize slavery, and economic exploitation similar to that of the middle ages?
I forgot to address this part. Why would you want to pay more for goods "Made in America" that are arguably equivalent to those cheaper goods made elsewhere? That's just artificially inflating prices. Are you telling me that you'd prefer to pay 50,000 dollars for a GM made Honda Civic equivalent than 25,000 dollars for a Japanese manufactured one? That makes no sense and that's what protectionism results in. And given a surplus of the GM Civics, what are you going to do with them? Export them?!? To who? Also which employers are going to be willing to up wages to cover the higher costs of living? Employers operate business for profit, not charity. I just don't see any rationale in arguments favouring protectionist tariffs. I'm pretty sure I'm not missing anything - even Paul Krugman is warning against protectionist knee-jerk reactions. I think the protectionist supporters are arguing down the same lines as those that got burned on CDOs - they just want someone to blame and punish for the mess that was domestically created. America traded domestic production for massive consumption of cheaper foreign goods. That's why the US has the large trade deficit that it does. Free trade didn't do that, American consumers did. You're probably lucky that you have free trade agreements, otherwise the trade deficit would probably be that much larger. I lived in a country that engages in protectionism - Switzerland - and it stinks; everything is overly expensive for no good reason. What resulted from the Swiss policy was high wages - now frozen at a cap - and high, unjustified, living costs. Is that really what you want? Do you think that is going to get you out of the current mess?
73Zeppelin wrote:
Why would you want to pay more for goods "Made in America" that are arguably equivalent to those cheaper goods made elsewhere?
As I just got finished saying to Stan, few people would prefer to buy a GM car instead of a Honda. But you can hardly argue that we have not become a throw-away society, can you? Or that the vast majority of goods coming out of the sweatshops (and Honda isn't a sweatshop) are shoddily made with QA an afterthought if considered at all.
73Zeppelin wrote:
America traded domestic production for massive consumption of cheaper foreign goods
Absolutely. And the only way I see to address this problem in the real world, is to stop allowing China to use Gresham's Law to destroy the American economy. I have no problem, by the way with having a fair market - one where both sides do not engage in protectionism, both sides show the same regard for the environment, and both sides show the same concern for the safety of their products. Any other form of Free Trade is like bringing a knife to a gunfight.
73Zeppelin wrote:
What resulted from the Swiss policy was high wages - now frozen at a cap - and high, unjustified, living costs. Is that really what you want?
I am not suggesting that South Carolina engage in protectionist practices, geography would make that a waste of time. The United States has a much larger and potentially robust market for its homegrown goods than Switzerland or South Carolina could have. The EU, which is much more comparable has both overt and covert tariffs protecting its members than the US has had in at least 30 years.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
