Free trade is even better than we (economists) think
David Glasner has a post discussing the merits of free trade. This caught my attention:
To think that an increased chance of losing one’s job in exchange for a slight gain in purchasing power owing to the availability of low-cost imports is an acceptable trade-off for most workers does not seem at all realistic.
. . .
The goal of this post is not to make an argument for protectionist policies, let alone for any of the candidates arguing for protectionist policies. The aim is to show how inadequate the standard arguments for free trade are in responding to the concerns of the people who feel that they have been hurt by free-trade policies or feel that the jobs that they have now are vulnerable to continued free trade and ever-increasing globalization. I don’t say that responses can’t be made, just that they haven’t been made.
That kind of startled me, because I was under the impression that these responses had been made, indeed that there was a vast literature on the value of free trade, above and beyond the various consumer surplus triangles in EC101 textbooks. Unfortunately it’s been so long since I was in grad school that I can no longer cite the relevant literature. But surely someone better versed with that literature (Jagdish Bhagwati, Doug Irwin, Tyler Cowen, Brad DeLong, etc.) could cite lots of examples. (It has to do with more competition, more innovation, less rent seeking, greater political openness, economies of agglomeration, etc., etc.)
What people do is a far more important determinant of their overall estimation of how well-off they are than what they consume. When you meet someone, you are likely, if you are at all interested in finding out about the person, to ask him or her about what he or she does, not about what he or she consumes.
Of course most people are peasant farmers, living near subsistence. Or at least they were close to subsistence until a few years ago, when trade made them much richer. In general, when someone says they have a crappy job it means, “I have a job that only allows me a crappy level of consumption.” Yes, sometimes it means the job is really boring, like assembling toys all day long on an assembly line. Fortunately for Americans, because of trade most of those really boring jobs have been sent to Asia.
And maybe I’m clueless, but I find it hard to believe that what makes people happy or unhappy with their lives depends in a really significant way on how much they consume.
I feel the same way, but maybe all those peasant farmers do not. (I’m affluent by global standards and I’d guess David is too.) And if this is true then do we not need to worry about the impact of trade on wages, only its impact on unemployment?
Moreover, insofar as people depend on being employed in order to finance their routine consumption purchases, they know that being employed is a necessary condition for maintaining their current standard of living. For many if not most people, the unplanned loss of their current job would be a personal disaster, which means that being employed is the dominant – the overwhelming – determinant of their well-being. Ordinary people seem to understand how closely their well-being is tied to the stability of their employment, which is why people are so viscerally opposed to policies that, they fear, could increase the likelihood of losing their jobs.
To think that an increased chance of losing one’s job in exchange for a slight gain in purchasing power owing to the availability of low-cost imports is an acceptable trade-off for most workers does not seem at all realistic.
It would be unfortunate if there was such a trade-off, but I doubt that the existence of free trade means more “unplanned loss” of jobs than would a policy regime with sizable tariffs. Yes, some workers lose jobs due to trade, but the net effect is probably a wash. For every worker losing a job, and getting miserable, another worker gains a job, and gets less miserable.
In fact, the trade debate has never been about consumers vs. workers. We are all consumers, and we are almost all workers. It’s consumers plus special interest groups including exporters and construction workers vs. special interest groups such as firms and workers in import-competing firms.
[As an aside, David’s argument applies better to automation than to trade. This is one reason we know that the “man on the street” does not intuitively understand what’s wrong with free trade, because his views generally do not extend to automation, where they would be more likely to be true.]
At first glance, the welfare loss triangles that we see in undergraduate textbooks seem to understate the costs of trade. Surely the costs to unemployed workers are higher than a simple labor market model predicts. Yes, that’s true, but that doesn’t make the textbook model inaccurate. The gains to other workers who find jobs due to trade will also be much bigger than the naive “opportunity cost ” model might predict. So basically trade is a wash for workers, and a gain for consumers. We are going to have a natural rate of unemployment of about 5% whether we have free trade or 40% tariffs on everything. So enjoy all those imported goodies and don’t feel guilty about it. Indeed you should feel really good about buying imports, as you are contributing to one of the best things that has ever happened, in all of human history.
PS. David Henderson also has some comments on David Glasner’s post.
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2. April 2016 at 11:54
David Glasner for some reason never bothered to explain WHY losing one’s job would be a “personal disaster”. My guess is that it is because it is tied to consumption, which is what he wants to dispute.
Easiest way to see how it is consumption after all is to imagine the “horror” of being able to maintain one’s standard of living, I.e. maintain their consumption, with no longer having to be employed. If as Glasner argues it is the employment itself that is the factor, then the average person would dread such a thing.
Of course, it is what millions of people are TRYING to do on a daily basis by playing the lottery.
Humans are goal seeking animals. We don’t have goals to satisfy means. We use means to satisfy goals. Improving the means to achieve better goals is a good thing, regardless of the short term pain experienced by shifting from less optimal means to superior means.
2. April 2016 at 12:00
“Boring jobs” opening up in China and closing in the US, is a consumer driven outcome.
Why should consumers pay higher prices with lower quality, if there is a better way? To protect the old method of labor, and make everyone worse off in the long run?
The goal for many is more leisure. That means the goal of many is less work, not more work. If we can produce and consume more and more with less and less labor, why should we regard the reduction is labor as inherently a bad thing?
Compassion is a good thing, but it has to be accompanied by reason. Compassion without reason leads to tyranny and poverty.
2. April 2016 at 12:15
I’d be hard pressed to explain why, but I believe that the natural rate of unemployment would be a little higher with 40% tariffs than in the free trade world.
2. April 2016 at 15:04
It’s unfortunate that the rise of free trade has coincided with the rise of protectionist housing policies that have decimated the purchasing power of many Americans.
2. April 2016 at 15:26
The internal logic of Glasner’s argument wouldn’t just dismiss trade for “cheaper” goods from China and Mexico. It applies just as much to Toyota, Volvo, Ikea, Legos, etc. Why would a GM worker care about the increased consumer utility of being able to buy a Honda, when those choices could very well cost him his job? Anti-traders never want to take their arguments to their logical conclusion.
2. April 2016 at 15:49
That it’s always in the interest of people to buy what they want from those who sell it cheapest, is so obvious that it seems ridiculous to take any pains to prove it. But now along come professors of economics(!) to confound the common sense of mankind, by trying to get people to believe that jobs are benefits, when they’re really costs.
That may not be interested sophistry, but it is sophistry.
2. April 2016 at 16:21
Great post.
Some observations:
1. Economists tell the public that running federal deficits forever will incur large debts which are not beneficial.
2. But they say that incurring large debts to foreigners through chronic trade deficits is ok. That when the foreigners buy Treasuries, that is an “investment” or capital flow. And so incurring increasing debts to other nations is ok.
3. They say that protecting Silicon Valley by importing labor is good. This implies that offshoring tech software and manufacturing to India and China is bad in the case of the tech industry. Keeping an industry and jobs in the US is good, in the case of Silicon Valley.
4. Something the same happens in shale oil. There is a lot of hullabaloo that jobs were created in Texas and South Dakota. Obviously, there were a lot of high-paying jobs associated with shale oil production.
5. Unfortunately, the US Federal Reserve does not take advantage of the modern-day fact that supply lines are global. Capital, services, goods, even labor are imported to meet demand. Foreign trade does inoculate the US against inflation. This argument is rarely made.
6. The public might resent establishment economists a little less if the issues were not always how great immigration and free trade are.
There are huge structural impediments in the US economy, including ubiquitous property zoning in a large “national security” archipelago. How about the ubiquitous ban on push-cart vending
Which prevents millions of Americans from starting up their own businesses?
I am sorry to say that most establishment economists are…well, they are establishment economists.
2. April 2016 at 16:24
There are huge structural impediments in the US economy, including ubiquitous property zoning and a large “national security” archipelago. The lawyers guilds. How about the ubiquitous ban on push-cart vending, which prevents millions of Americans from starting up their own businesses?
I am sorry to say that most establishment economists are…well, they are establishment economists.
2. April 2016 at 16:58
bill, That’s possible, or it might be a bit lower. But my best guess is not much different.
ChargerCarl, Good point.
Goose, Just to be clear, Glasner did not say he was an anti-trader, just that free trade arguments were incomplete.
2. April 2016 at 17:17
Of course you are correct, but I think you are still missing the problem. The fact that you are referring to the “vast literature” rebutting the case for protectionism is precisely the problem. Are you expecting the stereotypical “less than 4 years of college white working class flyover” population to wade through academic tomes? Since both parties have generally advocated for free-ish trade, no one has had to defend the benefits of free trade against a self-interested and determined opposition in a wide open public debate.
The last time I remember there being a national discussion about the value of free trade was when Ross Perot and Al Gore sat down with Larry King about NAFTA. That was a long time ago, and the argument needs to be presented anew (and not just in college lecture halls and the blogosphere).
So if there is anything good to come out of the Trump/Sanders phenomena (and I am really stretching to try to find a tiny silver lining around those two hurricanes), it gives us the opportunity to have this debate for a new generation.
2. April 2016 at 18:10
Free trade is great in the aggregate, but people are not thinking in the aggregate: They think about themselves, in simple terms, and are afraid. You can see this in ridiculous places, like the fear of trade and immigrants in computer science, a booming field by any standard.
What people see is that jobs without education are getting lower and lower wages, and that the education is a lottery: Pick the wrong field, and and suddenly your life outcomes drop: Just look at all the people that went into Biology PhDs, thinking there’d be jobs for them. Many are now, for all intents and purposes, untrained labor, and have student loans. That’s the real fear, trade is just a good thing to blame.
Therefore, what I think we are seeing if people afraid of the variance in outcomes, but sensible talk about changing that is political poison in the US, especially when those people consider themselves conservative otherwise. So people blame trade.
It beats the way Europe dealt with this for years though: Europe’s agricultural policy of quotas and subsidies caused quite a bit of strife in the 80s and 90s. For some reason, societies do their best to try to minimize people’s losses, as opposed to use the extra efficiency from trade to try to provide some other compensation.
2. April 2016 at 19:00
People aa peasants before free trade: Scott Sumner, are you conflating technical progress with free trade?
Surely, American living standards boomed in the 1950s and 1960s, when free trade was a relatively iinsignificant part of our domestic economy.
Back then, in terms of economies, the US was virtually an island nation. It was boom, boom, boom, boom, boom.
I didn’t feel like a peasant. In fact the single-family detached neighborhood I grew up in, in Altadena California, looks much the same today as it did then.
2. April 2016 at 19:01
Lol, a blind man can see with his cane that free trade is massively deflationary. Keep pushing wages down through global wage arbitrage and you have no one left to buy products. So far this has not made its way to the USA, but we aren’t that far away from deflation.
https://en.wikipedia.org/wiki/Global_labor_arbitrage
2. April 2016 at 20:34
Sumner, how do you feel about the news that GOPers of all stripes are less likely to support trade deals than Dems (much the opposite of the result in the House). Everyone was trying to out-protectionist each other in the debates, the Dems worse than the GOP candidates.
http://www.people-press.org/2016/03/31/3-views-on-economy-government-services-trade/
2. April 2016 at 20:43
“That it’s always in the interest of people to buy what they want from those who sell it cheapest” — Patrick R. Sullivan
It’s always in their interest to prevent people from buying from their competitors, too. This is, right or wrong, the real “common sense of mankind”, as demonstrated by the opposition free market thinkers, including Smith and Bastiat, had (have) to face. And those pocketing bigger-than-free-market wages or profits are clearly benifiting from trade restrictions.
“imagine the “horror” of being able to maintain one’s standard of living, I.e. maintain their consumption, with no longer having to be employed. If as Glasner argues it is the employment itself that is the factor, then the average person would dread such a thing.
Of course, it is what millions of people are TRYING to do on a daily basis by playing the lottery.”– Major Freedom
If they lose their jobs due to international competition (or internal competition, by the way), they risk living their dream except for the lottery money part. Trade has a redistributive effect on national income, and those who lose the game will blame and oppose the rules. Right or wrong, the American voter thinks trade has harmed him and that cheaper Chinese trinkets are not an acceptable compesation. He surely is voting accordingly.
3. April 2016 at 00:50
working in services is often embarrassing and painful. closed plants afford nice privacy: nobody but your coworkers see how pathetic you are, and they’re just as pathetic. customers are so mean
homebuilding seems like the most potent medium term diversion
the free trade literature sounds interesting. I’m surprised to learn that process and product innovations are more frequent and more valuable without the seemingly more numerous points of contact and understanding under protectionist regimes
3. April 2016 at 01:44
Benjamin Cole:
2. “But they say that incurring large debts to foreigners through chronic trade deficits is ok. That when the foreigners buy Treasuries, that is an “investment” or capital flow. And so incurring increasing debts to other nations is ok.”
Trade deficits do not equal debt to foreigners. They could buy real estate or stock.
3. They say that protecting Silicon Valley by importing labor is good. This implies that offshoring tech software and manufacturing to India and China is bad in the case of the tech industry. Keeping an industry and jobs in the US is good, in the case of Silicon Valley.”
Cite someone who is for immigration, but against offshoring.
Gary Anderson:
“Lol, a blind man can see with his cane that free trade is massively deflationary. Keep pushing wages down through global wage arbitrage and you have no one left to buy products. So far this has not made its way to the USA, but we aren’t that far away from deflation.”
Deflation would cause other prices to fall as well. Not just the price of labor.
3. April 2016 at 03:32
In the US free trade is suppressing wages all the while protectionism and legalized cartels are escalating the costs of housing, healthcare and education. It is an asymmetric situation and one that is making the average American poorer.
3. April 2016 at 06:42
This might be a good time for Russ Roberts’ publisher to issue a new edition of The Choice: A Fable of Free Trade and Protection;
http://www.amazon.com/Choice-Fable-Free-Trade-Protection/dp/0131433547/ref=la_B001H6PMW2_1_1?s=books&ie=UTF8&qid=1459694055&sr=1-1
3. April 2016 at 07:22
I thought this was a really good post from David Glasner. Apparently, you are not as fond of this post as I am. I see his essay as making the point that economists have to put more emphasis on some other factors than just consumption and price in their models as to how human welfare is maximized. He does this by using the current concern in politics over trade. You have reservations about the appropriateness of his example but what do you think of his overall conclusion? Let me quote him-
“Thus, economic theory can tell us that an excise tax on sugar tends to cause an increase in the price, and a reduction of output, of sugar. But the idea that we can reliably make welfare comparisons between alternative states of the world when welfare is assumed to be a function of consumption, and that nothing else matters, is simply preposterous. And its about time that economists enlarged their notions of what constitutes well-being if they want to make useful recommendations about the welfare implications of public policy, especially trade policy.”
3. April 2016 at 08:31
‘And its about time that economists enlarged their notions of what constitutes well-being….’
In which case they wouldn’t be economists, because economists study and analyze the alternative uses of scarce resources. Economists, from several centuries of study have concluded that open, unfettered competition, produces the most efficient provision of those resources that matter to human beings; food, clothing, shelter, entertainment….
Now, it well may be that SOME people care more about things other than the efficient provision of what they consume, but the evidence is that that’s a pretty small group of people. But that’s why we have psychologists and priests.
3. April 2016 at 08:48
“Deflation would cause other prices to fall as well. Not just the price of labor.”
That appears to be happening in Europe. It could happen here. California instituted the $15 minimum wage, which may prevent that from happening. But if it causes more robotics or offshoring of jobs, we will revisit potential deflation again down the road.
Also, millennials are not popping kids out like we Boomers did.
3. April 2016 at 11:22
Patrick R. Sullivan @ 08:31, if you were replying to my comment thank you for the reply. Although my comment ended up following yours, I wasn’t directing it at you, but at Professor Sumner. Regardless, thank you. I consider your comments to always be well informed and intelligent and even if I often disagree with the conclusions you draw, you usually have a logical point.
So yes, economists study and analyze the alternative uses of scarce resources. And they have been doing so, or at least theorizing about that for centuries. Whether the theorizing part constitutes correctly interpreting the available data is very debatable.
So David Glasner is well within the realm of economics if he is, as I suggest, questioning the conclusions of the study and theorizing about how to maximize human welfare through the allocation of resources affected by public policy choices. That part is not really controversial, is it?
3. April 2016 at 12:53
“Major Fedspeak: Here’s your full preview of this week’s big economic events”
http://www.businessinsider.com/monday-scouting-report-april-3-2016-4
3. April 2016 at 14:28
Jerry, ‘maximizing human welfare’ isn’t what economists do.
3. April 2016 at 14:49
i am thinking economists arent ion the real world, where if you dont have job, you dont eat. or if you dont have enough income, you dont eat. thats the US today. they tell us that fee trade is great, that we get lower priced goods. but neglect to mention that your job will go away, and that you new one, wont pay any whee near what the old one did, while your long term costs (like housing/mortgage, transportation) tend to stay the same, no matter that you dont have enough the same income. what economists dont seem to get, is that people like to be able to eat. they dont get the individual at all, they just see what their models and studies show as being benefits. but those tend to apply to fewer and fewer with every iteration
3. April 2016 at 14:52
and then economists will wonder why the rest of us will ignore them. because they dont seem to be advocating any good for us
3. April 2016 at 15:04
Patrick, well maximizing welfare is what politicians often say they are doing, and economists usually are expected, and are quite happy, to comment on it. Scott Sumner is an economist. Scott Sumner spends a lot of his time advocating that the Fed begins a NGDPLT. I believe Scott Sumner recommends this because he believes that it will tend to maximize human welfare. Maybe I am wrong. Maybe he only recommends it because it would maximize his own consumption at the expense of everyone else’s consumption. Or maybe it has nothing at all to do with him being an economist. In short- Your assertion is ridiculous.
3. April 2016 at 15:47
Chuck:
Good point—but if the stocks offer yield or the property rents, then we we still “owe or pay money” to foreigners every year, by increasing amounts.
For that matter, the central banks can monetize debt through QE, as we have seen. So why worry?
My point is that in fact the United States is incurring mounting levels of debt to offshore entities. This is presented as a positive in free trade circles. So are mounting levels of debt good or bad?
3. April 2016 at 16:16
Njnnja, You said:
“Are you expecting the stereotypical “less than 4 years of college white working class flyover” population to wade through academic tomes?”
Obviously not. The comment clearly was not aimed at that group.
Harding, Bizarre question–not even sure what you are asking.
Jerry, I think you need to reread my post. I know what David was trying to do, but what about my response? Repeating to me what he was trying to do is not really very useful, is it? I read his post.
3. April 2016 at 17:30
Scott, Thanks for taking the trouble to respond to my post. Actually I think Jerry Brown did make or suggest a good point which goes to your comment about my argument being more applicable to automation than to trade. My dissatisfaction with how welfare economics characterizes utility and well-being has been developing for a long time and not necessarily in the context of free trade. It just seemed to me that all the recent free trade bashing by Trump (who is a free trader, don’t forget that!) and Bernie Sanders was a good opportunity for me to discuss one of my pet peeves and apply it to free trade. You are right that I didn’t mention any of the more recent defenses of free trade, which I am only vaguely familiar with. And finally, thanks for reminding your readers that I was not advocating protectionism. I am at least as much of a free trader as Trump. I just think that there are complaints about free trade that are not addressed by the traditional arguments for free trade.
3. April 2016 at 17:37
ssumner: you’re right, I just sort of skimmed through Glasner’s post. I guess my comment was more aimed at people like dw.
Gary Andersen: Globally, incomes have been rising. Only segments of the middle-middle and upper-middle class in North America and the EU have seen stagnation.
3. April 2016 at 19:34
isn’t an import tariff a tax on consumption?
is a tariff on manufactured goods whose revenue reimburses boss-side payroll taxes a bad thing?
3. April 2016 at 20:00
I continue to believe the issue isn’t free trade per se, but rather that some sectors are “freer” than others.
When will I be able to re-import pharmaceuticals from Mexico, perform my own blood tests, and webcam chat with a doctor in Bangalore, all without an insurance mandate?
Also note that China carbon emission tripled since 2000–exactly the point that US carbon emissions plateaued. Regulatory arbitrage!
I think there has been a great sucking sound, as some businesses are not just un-protected, but also burdened, by being in the US, while the US is actively protectionist of higher income sectors like tech and health.
3. April 2016 at 20:08
Benjamin said: ““Boring jobs” opening up in China and closing in the US, is a consumer driven outcome.
Why should consumers pay higher prices with lower quality, if there is a better way? To protect the old method of labor, and make everyone worse off in the long run?”
But how is everyone worse off in the long run if everyone is working and there is more turnover of money. If we don’t buy crappy Chinese stuff, how does that help everyone? How does that help the Chinese worker or the American purchaser? Try finding dog food in most stores except the stupid grocery stores that is not made in America.
——————————–
Goose said: Gary Andersen: Globally, incomes have been rising. Only segments of the middle-middle and upper-middle class in North America and the EU have seen stagnation.
But Goose, the Chinese don’t buy anything. We buy the stuff and if we are impoverished, we don’t buy and the whole world falls off the cliff. There is no decoupling from US purchasing power. Impoverish the golden goose of world prosperity and there will be no prosperity.
3. April 2016 at 20:41
@ssumner
-I mean, how do you explain the apparent contradiction between GOP congresspeople being more pro-trade-agreement than Dem congresspeople (on average) and the GOP base being less pro-trade-agreement than the Dem base (as measured in that Pew poll). Sorry if my question was unclear.
3. April 2016 at 21:22
Professor Sumner, nowadays I always read your posts at least three times before commenting. Usually, that is unnecessary because you are a very good writer and make your arguments quite clear. This post is no exception to that- it is well written and quite clear. I think I just disagree with your critique of David Glasner’s post. I wrote this last night but didn’t submit it. Because you have heard it all before.
You say- “For every worker losing a job, and getting miserable, another worker gains a job, and gets less miserable.” How can you possibly prove that? That would be a desirable outcome, and a hopeful outcome, but it is hardly a guaranteed outcome. Especially when a country is running a large and persistent trade deficit and arguably suffers from a lack in aggregate demand.
And that assertion ignores that trade is often about substituting lower priced labor for higher priced labor. Even if lost higher priced jobs are replaced one for one in that situation, workers as a group do not benefit.
And as you say, “we are all consumers, and we are almost all workers”. But those who aren’t workers are the only ones who are guaranteed to benefit when the price of labor declines relatively.
Your point about automation is a good one. I agree that there is less resistance to technological improvements that displace jobs. But technology is not the reason that factories here decide to relocate to lower wage countries. That has a lot to do with the unhappiness David Glasner is talking about. You can’t fight progress, but you sure can be angry about someone undercutting your wage.
3. April 2016 at 22:07
A general comment on the trade and jobs discussion:
Why do so many people assume that the US economy follows an archetypal story of “Trade lost auto worker making $4k/mo his job. He now has to work at WalMart at $800/month”? Manufacturing is already below 15% of labor in the US, and those employed in it often are well trained engineers using robots, AutoCAD et. al. FWIW, the last factories I visited were a BMW engine plant in Europe and a furniture plant in Singapore. In both, the only workers I saw (at all!) were employed in packing parts that had been manufactured by robots, and in driving forklifts. So that’s your manufacturing jobs right there. Usually executed by immigrants too. The irony goes several levels deep.
And your typical service job is not just Wal Mart either. It’s software engineers too, finance people, insurance agents, what have you. With the occasional plumber thrown in, who mind you is not usually a poor fellow. And s/he’s skilled too.
This whole discussion reminds me of why we have farm subsidies in the West. A romantic longing for a bygone era, the mythic connection with food production that city dwellers yearn for. Meanwhile, actual farmers use legions of harvesters piloted by GPS controlled robots, high-biotech GM seeds and top notch chemicals, all hugely dependent on a complex modern economy.
Jerry Brown,
and commenters with similar arguments as “For every worker losing a job, and getting miserable, another worker gains a job, and gets less miserable.” How can you possibly prove that? That would be a desirable outcome, and a hopeful outcome, but it is hardly a guaranteed outcome.
Because in general, there is a tendency for productivity growth as an economy grows. This must be so because productivity growth (more $ output per h worked) is an economy’s main growth engine. So higher developed economies have higher productivity jobs, ceteris paribus. It’s the low productivity jobs (=low $ output per h worked) that are in danger of substitution by imports. They can be replaced mainly by 2 kinds of jobs: non tradeable (usually services) or higher productivity (through machine use, know how, education etc). Assuming there were no job losses (unemployment stable) and demand for low end service jobs stable (how many greeters at Wal Mart does the country need? Any country?), the rest of the jobs likely moved up the value chain to become higher productivity. Corollary, if it were not so, no country depending on massive trade would ever make it into the higher income brackets of, ugh, say, Singapore, or Germany for that matter.
BTW through Baumol’s cost disease effect one would expect low end service jobs to be disproportionally overpaid in a situation where all non service jobs have moved up the value chain to higher productivity labor. Example grabbed from the internet, a Big Mac in Norway, rich through industry and oil, costs about $30, and it’s not due to the rents. And, personal communication, you can now make up to $50/h in waiting tables in Sydney, Australia (due to night time and weekend overpay).
3. April 2016 at 22:54
@Scott,
Sometimes I think you’re being deliberately obtuse. The issue is not whether trade is good in the aggregate or about the “net effect” on jobs. The fact of the matter is that some firms and some individuals end up a lot worse off so they start screaming. If economists fail to acknowledge this they will never win the debate about free trade…. Donald Trump will win the debate.
3. April 2016 at 23:10
mbka, what is your basis for saying that it is low productivity jobs that are more likely to be substituted by imports? Manufacturing is the sector where jobs are most likely to be replaced due to imports. Service sector jobs are, by nature, both less likely to be substituted by imports and more likely to be low productivity jobs.
4. April 2016 at 00:22
Jerry,
I tried to say the following: 1. There are very few jobs left in manufacturing to begin with. 2. the most likely jobs to be substituted are in manufacturing, as you say too. My implied conclusion was that there wasn’t much to worry from such substitutions *in manufacturing* because it affects a small percentage of workers to begin with. I thought that it was clear that I was talking about manufacturing jobs since this is what everybody is always fretting about. And why would the low productivity m. jobs go first? Because they likely have the least comparative advantage to a lesser developed economy, by the reasoning in my first post. And I would think that this is also supported empirically.
I also said 3. Service sector jobs are not, emphatically not, and certainly not by nature, more likely to be low productivity jobs than manufacturing jobs, as you just wrote. Doctors, lawyers, computer programmers, CAD designers, finance and insurance – all service jobs. So I implied that those manufacturing jobs substituted by service jobs must not necessarily be a step down, because if the move up the value chain works correctly, then the substitution will be through high productivity service jobs. Example Apple, instead of doing design and manufacturing in the US, they only do design. Since 80% of product value is in IP and design, by comparative advantage the US “wins” by keeping only the service part, and Taiwan “wins” too, by keeping the 20% manufacturing part.
The only potential problem here are people that by nature CAN be employed in high productivity manufacturing jobs but by some force of nature CAN NOT be employed in high productivity service jobs. I have no good theory why this would be possible, but it may be possible.
4. April 2016 at 05:01
“And your typical service job is not just Wal Mart either. It’s software engineers too, finance people, insurance agents, what have you.”-mbka
Yeah, typical. So, this is the solution, the fired plant workers must become doctors or engineers (why not rock stars, NBA players and Nobel Prize winners while we are at it?). And now we see why a desperate populace is voting for Trump, they are sick and tired of the current “let them eat cake” policy.
4. April 2016 at 05:12
Some free-trade is better than none but can anyone argue the American economy, as regulated as it is, enables free-trade between buyers and sellers? As commenter Steve pointed out, try to exercise the free-trade of importing certain legal pharmaceuticals into the US and then tell us about “free-trade”. Now why is that? The answer was provided by an astute economist 240 years ago and it has little to do with international trade agreements and everything to do with domestic cronyism.
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” ~ Adam Smith – The Wealth of Nations, 1776
4. April 2016 at 05:31
Romney: ‘I Cannot Accept Our Current Trade Surrender’ to China
IndustryWeekAgence France-PresseSep 06, 2011
Presidential hopeful takes swipes at Obama, China in speech unveiling his economic plan.Republican presidential hopeful Mitt Romney unveiled his economic plan Tuesday, vowing to lower taxes, cut red tape, scrap the Obama health plan and end trade “surrender” to countries like China.
–30–
Hmmmm.
4. April 2016 at 05:43
Thiago,
if you want to misconstrue what I wrote, you sure can. There always is a way.
“not just” means just that, “not just”. Even w/o much data, think a little about orders of magnitude. So 15% are in manufacturing, 3% are in farming, some in the military and government. That leaves more than 2/3 of the US population which must be working in service jobs. Unless you imagine that manufacturing and farming make up the fat cat top 20% incomes of the US population, you can, no, you MUST conclude, that it’s the middle class, lower, middle, and upper, that works in these service jobs. When I lived in the US I was middle class and I hardly knew anyone around me that did not work in a service job of some kind. Teachers. Researchers. Car mechanics. Plumbers. Lawyers. Photographers and their models. Real estate agents. Personal trainers. Nearly every single person in the movie, music, and entertainment industries. etc etc. All these are service jobs. It’s not a dichotomy between Wal Mart for the masses and Wall Street for the few. There is a lot in the middle.
4. April 2016 at 06:37
Trade does not create job losses, only changes in types of job.
4. April 2016 at 07:11
Thiago,
So this is coming from a person from a country where imports are so heavily taxed that you have the pleasure of buying shit quality goods for prices equivalent to or greater than what a quality good would cost in the States.
And brilliant how computer components are import taxed to death. The poor, who would benefit the most from access to tech can not afford it.The middle class is forced to use outdated but nonetheless overpriced tech, companies remain disadvantaged as well for the same reason as the middle class (outdated and expensive), and the rich buy their tech in Orlando/Mia/NY and tend to update only when they go to back to Orlando/Mia/NY. A way in which protective tariffs help a populace to remain noncompetitive and less technologically sophisticated. Bravo!
Amazing how people neglect the asset/benefit side when they discuss trade.
Most importantly, why the hell should I be forced to eat Parmesan Cheese from Wisconsin!!!
4. April 2016 at 07:22
I think free trade has made huge positive impacts for both developed and developing countries. But I also believe that future benefits of free trades deals are exaggerated. This is because the majority of gains from free trade have already been cashed in. Barriers to global trade have been largely reduced.
If benefits are overstated then the damage of protectionism is also overstated while the costs of free trade are understated. Economists need to stop hand-waving the harmful distributional effects of trade. Yes we see a net gain of trade but surely something can do done to soften the blow.
4. April 2016 at 07:50
“So this is coming from a person from a country where imports are so heavily taxed that you have the pleasure of buying shit quality goods for prices equivalent to or greater than what a quality good would cost in the States.
And brilliant how computer components are import taxed to death. The poor, who would benefit the most from access to tech can not afford it.The middle class is forced to use outdated but nonetheless overpriced tech, companies remain disadvantaged as well for the same reason as the middle class (outdated and expensive), and the rich buy their tech in Orlando/Mia/NY and tend to update only when they go to back to Orlando/Mia/NY. A way in which protective tariffs help a populace to remain noncompetitive and less technologically sophisticated. Bravo!”– Derivs
Summing it up: To Hell with American workers and their troubles, Brazilians have it worse (and have had it worse since long before computers and taxes on computers were invented, by the way). And to Hell with Brazilian workers and their jobs, Vietnamese workers have it worse, and so it goes ad nauseam. Well, American workers don’t seem to intend to go quietly in the night, do they? It is alarming how more and more America looks like a Latin American country, how every single policy seems to be a conspiration to profit at the expense of the public, how disenfranchised and cast away the average American feels (Americans forget that it was pro-America Menen’s disaster that created the Kirchner couple’s power base). And when seeing this explosive situation and the rise of Trumps and Sanders, who court a desperate White working class, the American intelligentsia keeps mumbling “It can’t happen here”.
4. April 2016 at 08:05
Thiago, one more time. Not “American Workers”. At best, 15% of American salaried “workers”, are even at potential risk of manufacturing substitution by trade. The “working class” is a romanticized fiction held up by the socialist / national-socialist faction. For all practical purposes it has long ceased to exist in any and all Western countries. Of course some still want the finger-chopping metal stamping businesses to come back, and the coal mines. I for once don’t think it’s a bad thing they’re gone.
4. April 2016 at 08:54
“Unless you imagine that manufacturing and farming make up the fat cat top 20% incomes of the US population, you can, no, you MUST conclude, that it’s the middle class, lower, middle, and upper, that works in these service jobs.”
How many of those 20-percenter jobs are private and can be done for the people who lost their livehoods thanks to China, Vietnam et al.?
4. April 2016 at 08:54
while a few of the service jobs can pay well, they are definitely in a minority of jobs and they all require more than a little education to do, and even these jobs are at risk, since a good deal of them have been sourced out of the country. leaving the lower paid jobs in the US. which economists tend to ignore
4. April 2016 at 09:11
“At best, 15% of American salaried “workers”, are even at potential risk of manufacturing substitution by trade. The “working class” is a romanticized fiction held up by the socialist / national-socialist faction.”
Imagine how many jobs there would be if Americans were to build things again instead of drawing logos, designing apps and letting China be the factory of the world. American workers suffer under a immigration policy and a trade policy designed to impoverish them– and the only one brave enough to say so is a vulgarian like Trump. Is it any wonder people hold their noses and vote for him. Sooner or later Americans will succeed in retaking their country.
4. April 2016 at 11:19
@Thiago: Americans build plenty of things, manufacturing output has grown along with that of any other part of the world, it’s just more and more robots and less and less people doing it.
Same thing with agricultural output, it’s mostly automated. Did that impoverish American workers? When will the farmers retake their country?
4. April 2016 at 11:40
msgkings, while it did actually impoverish the farm workers of the time, they did have the option of becoming manufacturing workers. but today with the end of manufacturing being the end of jobs that pay well, and dont require an enormous amount of education (some by jobs being shipped else where or being automated out of existence), leaving the majority with at best minimum wage low level jobs. and economists wonder why they will be ignored, with a track record like theirs, its a wonder any one listens to them.
course back when farm work went away, manufacturing work took over, today nobody really knows what will replace it, cause the high paying jobs in the service industry, require lots of education and training, and the US isnt exactly doing a lot to do much of any thing about it. course that might bring up the question of training for what?
4. April 2016 at 11:56
“When will the farmers retake their country?”
Are you talking serious? America was building then the biggest industrial machine mankind had ever seen, the economy boomed for most of that age, jobs were plenty and generous (and when they weren’t — e.g. The Great Depression– things got ugly). Even Brazil managed a decent transition from an agrarian way of life to a a urban society (some anomalies like favelas notwithstanding) while the economy was going strong in the 50s and 70s.
Now, what can Americans whose livehoods were destroyed by immigration/trade imbalances do? Roll over and die? Well, they seem to have other plans.
“Americans build plenty of things, manufacturing output has grown along with that of any other part of the world, it’s just more and more robots and less and less people doing it.”
Red China, formerly a industrial pygmie that produced less steel than Brazil now exports more than America and uses more ciment the USA did in all the 20 th Century. South Korea exports much more per capita than the USA. Companies like Apple became giant Trojan Horses manned by the Chinese.
4. April 2016 at 11:58
* industrial pygmy that produced less steel than Brazil …
4. April 2016 at 13:32
Pretty soon professors will be paid Latin American wages. I don’t care about that but I do care about airline pilots being paid so little that they worry about their bills instead of landing you safely.
4. April 2016 at 14:07
Thiago,
According to your theory unemployment must be sky high. Let’s check… nope. Well, at least wages must be way down, let’s check… nope.
4. April 2016 at 14:31
David, Yes, there are many problems with utility theory.
Dots, Only on a certain type of consumption.
Harding. Were the polls the same under Bush? Maybe the voter opposition comes from GOP voters opposing anything proposed by Obama.
Jerry, David wasn’t making an AD argument. In any case, I doubt there’d be more years of low AD under free trade than under protectionism.
mbka, Good comment
dtoh, What does that comment have to do with this post? The post was addressed at David, not the average voter. If I was making the argument for the average voter I’d write a completely different post.
Everyone, What happens when automation replaces 90% of the manufacturing jobs at the global level? What happens when you can no longer blame foreigners, and have to blame machines? Will the protectionists then become Luddites?
4. April 2016 at 15:01
“Everyone, What happens when automation replaces 90% of the manufacturing jobs at the global level? What happens when you can no longer blame foreigners, and have to blame machines? Will the protectionists then become Luddites?”
I think automation to that extent would be a net benefit overall. We suffer from low productivity and automation would help this.
But the point David Glasner is making where the distributional effects deserves attention and maybe action still stands.
4. April 2016 at 15:06
It’s quite worrying that people like Thiago are still making these kinds of argument. Thinking of jobs as a commodity in and of themselves is so obviously, so mind-numbingly stupid that it’s hard to imagine how anyone could fail too see it.
Imagine you were a member of a small group of survivors on a desert island. Imagine a handful of the strongest survivors were given the hard job of climbing up high trees to gather coconuts. If someone was to notice the fact that simply shaking the trees allowed enough coconuts to fall using a fraction of the effort would the island community really regard this as a negative because the tree climbers now had nothing to do?
That’s the logic behind protectionism. With regards to the fact a steelworker might prefer his current job to an easier job he considers “demeaning” well I’m sorry but he just doesn’t have the right to commit future generations to slaving away in steel mills or down mines because he doesn’t like the idea of working in McDonalds.
4. April 2016 at 15:10
Also, Gary I’m never quite sure when you’re serious. Airline pilots have the highest median income of any profession in the UK and I’d imagine the same is probabaly true in the US?
4. April 2016 at 15:27
@Scott,
Scott, but you don’t address David’s central argument, which is
“The aim [of this post] is to show how inadequate the standard arguments for free trade are in responding to the concerns of the people who feel that they have been hurt by free-trade policies…”
You just respond with the “standard argument” that everyone is better off in the aggregate, i.e. “Yes, some workers lose jobs due to trade, but the net effect is probably a wash. For every worker losing a job, and getting miserable, another worker gains a job, and gets less miserable.”
But while you don’t respond in the post itself, presumably you agree with David, because in your comment to me, you say you’d make a completely different argument to the average voter. So what non-standard argument would you make to the average voter.
And yes…people will blame the machines if the change is disruptive to a significant number of people. Isn’t that obvious? And… most of the Luddites will be in China.
And BTW – I think that free trade is LOT better than even YOU think.
4. April 2016 at 15:46
I’m not as rabidly anti trade as Trump and Bernie, but the real worry about trade is whether it keeps down wages at least with lower wage countries.
The craziness of this election is driven in large part because of stagnant wages.
People feel a lot of economic insecurity-some feel a lot of other kinds as well.
Remember what Trump said the day he announced back in June: ‘The American dream is dead.’
This resonates with a lot of people who wholeheartedly agree with it
4. April 2016 at 16:20
“It’s quite worrying that people like Thiago are still making these kinds of argument. Thinking of jobs as a commodity in and of themselves is so obviously, so mind-numbingly stupid that it’s hard to imagine how anyone could fail too see it.” — Alexander Hamilton
I don’t think jobs are commodities, I think there are two situations, and the one where people had good jobs is better than the one where they don’t have them– no matter how much money the Chinese government and American plutocrats may be making. Your namesake knew what did make AMERICA great once, let’s hope america may make it great again.
“According to your theory unemployment must be sky high. Let’s check… nope. Well, at least wages must be way down, let’s check… nope.”– Cliff
Participation is down, wages are stagnant since Carter’s days. So this is how Freedom dies… with Chinese trinkets.
4. April 2016 at 17:21
Participation is down from it’s peak, but rising. And likely never to reach that peak again due to demographics more than “chinese trinkets”. Median income isn’t as high as it could be, but still higher than it was since Carter: http://noahpinionblog.blogspot.com/2015/01/postwar-vs-new-gilded-age-how-did.html
In fact, manufacturing pays more now than it did in the 70s: http://www.tradingeconomics.com/united-states/wages-in-manufacturing
And as others have said, even if we were to “insource” our chinese and mexican manufacturing, it still would mostly have negligible effect on employment and participant. Manufacturing is becoming more automated, and the jobs are becoming more scarce. Take this example of Masterlock, which re-shored some jobs a few years ago: http://www.politifact.com/wisconsin/statements/2012/feb/01/barack-obama/president-obama-says-master-lock-has-brought-back-/. Note that after they “re-size[d] and convert[ed] Milwaukee into a more automated and highly efficient manufacturer of parts and components”, the amount of workers fell from 1150 in 1997 to 412 in 2012.
4. April 2016 at 17:57
Scott,
In a free market economy there will always be opportunities for people to work and add value. So the real question is this: When automation is rampant will there still be a free market economy? Will work be rewarded? Or will regulation and taxes make work unprofitable? If the latter then what? Without workers who funds social security and medicare? Who funds the lifestyles of those not working? The future will be interesting. Can’t wait to see how it turns out.
4. April 2016 at 20:30
“So enjoy all those imported goodies and don’t feel guilty about it. Indeed you should feel really good about buying imports, as you are contributing to one of the best things that has ever happened, in all of human history.”
Argh. This is precisely what you just insisted to me in the other thread is *not* the way free trade works. Mind you I still suspect that enabling Chinese businesses to sell to American consumers has been critical to the growth of China, but you insisted the real benefit to China was the ability to buy American manufactured goods and in fact, rather than buy Chinese goods, American consumers would do China more good if they didn’t go shopping at all.
4. April 2016 at 20:42
Thiago making that a distinct on between good jobs and bad jobs is thinking of jobs as commodities. The job is not the end it is a means of producing income for oneself. Also the idea that “good” jobs have been shipped overseas is particularly ridiculous in the case of steelworkers and other manufacturing jobs lost to China. Do you really think the Chinese have done us a disservice by taking those easy jobs in steel mills for a fraction of the wage leaving us stuck slaving away in an office for much higher pay?
4. April 2016 at 22:03
Good thread, mbka and Jerry Brown make good points, B. Cole sounds so primitive, and was put in his place by Chuck, and Sumner admits: “Unfortunately it’s been so long since I was in grad school that I can no longer cite the relevant literature” and amazingly Glasner also admits to not being up to date on the literature. These last two observations lead to: (1) economics is such that there are no universal truths but must, like law, refer to the latest findings (akin to ‘case law’) which changes yearly. Hence economics is largely worthless, and, (2) despite admitting they don’t completely know what they’re talking about, both Sumner and Glasner are confident enough to opine on a topic…I admire that in a perverse way.
5. April 2016 at 00:10
“Everyone, What happens when automation replaces 90% of the manufacturing jobs at the global level? What happens when you can no longer blame foreigners, and have to blame machines? Will the protectionists then become Luddites?”
This may help?
“This is essentially the “skill premium” argument—the idea that technology is creating jobs for highly skilled workers even as it destroys opportunities for the unskilled. I think the evidence clearly shows that this has indeed been the case over the past couple of decades, but I do not think it can continue indefinitely. The reason is simple: machines and computers are advancing in capability and will increasingly invade the realm of the highly educated.
We’ll likely see evidence of this at some point in the form of diminished opportunity and unemployment among recent graduates and also among older college-educated workers who lose jobs and are unable to find comparable positions.
Economists’ faith that the Luddite fallacy is, well, a fallacy—and indeed in much of generally accepted economic theory—rests on two fundamental assumptions about the relationship between workers and machines: (1) machines are tools which are used by, and increase the productivity of, workers, and (2) the vast majority of workers in our population are capable of becoming machine operators; in other words, the average worker can (with proper training) add value to the tasks performed by machines. What happens when these assumptions fail?
What happens when machines become workers—when capital becomes labor?“
http://www.thelightsinthetunnel.com/LIGHTSTUNNEL.PDF
5. April 2016 at 02:35
Possible policy suggestions
Land value taxation directly financing a wage subsidy (to balance out land value costs)
Larger urban agglomerations to give greater opportunities.
Create futures markets for predicting incomes of various skills
A few more which are a little more scifi
Increase surveillance so that people can give small work to the unskilled without a fear that they will spoil the machine/work area.
Create a UN level resolution to create new sovereign charter cities. Allow corporates to run them until they turn a profit. At the least a few new cities get created. A lot of possible new rules could be discovered.
Open up space for exploration. Declare that people who establish a 10 year continuous presence on an asteroid own the asteroid or something like that. Watch the race happen and various manufacturing type jobs get created.
5. April 2016 at 03:27
“The job is not the end it is a means of producing income for oneself.”– Alexandre Hamilton
And those means were destroyed by America’s current trade/immigration policy. Just imagine all the crocodile tears and passionate speechs if, say, Obamacare had had on jobs the destructive effect international trade has had.
“Also the idea that “good” jobs have been shipped overseas is particularly ridiculous in the case of steelworkers and other manufacturing jobs lost to China. Do you really think the Chinese have done us a disservice by taking those easy jobs in steel mills for a fraction of the wage leaving us stuck slaving away in an office for much higher pay?”– Alwxander Hamilton
Yeah, the fired workers and those who could have ben employed are stuck slaving away in an office for much higher pay…
“Participation is down from it’s peak, but rising. And likely never to reach that peak again due to demographics more than “chinese trinkets”. Median income isn’t as high as it could be, but still higher than it was since Carter: http://noahpinionblog.blogspot.com/2015/01/postwar-vs-new-gilded-age-how-did.html“– Goose
http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/
Labor participation has been driven back 40 years. Meanwhile a desperate and impoverished Middle Class decided to cast its lot with Trump. We already know what desperate populaces can do.
5. April 2016 at 04:55
If all production can be handled by robots, and all innovation can be done by AI. And therefore all demand can easily be met without human intervention, I vote for Bernie. I also want to know when my Gemma Chan robot is going to be delivered. Now we will all be able to go out with a huge smile on our face like my idol J Howard Marshall. May he rest in peace.
5. April 2016 at 05:31
Scott said: Everyone, What happens when automation replaces 90% of the manufacturing jobs at the global level? What happens when you can no longer blame foreigners, and have to blame machines? Will the protectionists then become Luddites?
Then business won’t have customers. Pretty stupid if you ask me to go down that path. Albertsons markets did away with the auto checkout machines entirely. People still shop there. Backlashes are happening.
5. April 2016 at 10:51
@Gary Anderson – think base (averages) not case (specific examples). The robotic age is coming, and will impact white collar jobs too. Do you still let the gas attendant pump your gas (if in the USA, outside of New Jersey), or do it yourself, cutting out the middleman?
5. April 2016 at 10:55
@ssumner
-Yes, Republicans were more pro-trade under Bush. Sentiment shifted around 2010-2012.
http://www.gallup.com/poll/181886/majority-opportunity-foreign-trade.aspx
5. April 2016 at 11:06
@E. Harding
That meshes with my memories of the 90s/00s. Maybe when they found themselves in “opposition” (relatively speaking…) the GOP decided on a different strategy for the blue-collar vote? OH and PA being where elections seem to be won or lost since 2004 and all.
5. April 2016 at 16:03
@Thiago. Well they got other jobs anyway. GDP Growth, unemployment rates and total hours worked says you’re wrong. There has been no net loss of jobs. Also you shouldn’t put too much importance on workforce participation. That’s probably down to people retiring early or working in the shadow economy. You can’t just leave the workforce or you would starve, they’re doing something to earn money.
5. April 2016 at 16:37
real question, if automation and AI take 90% of the ‘jobs’, who buys what sold? and how do the 90% survive since there are no jobs, and you have to have one to eat? and what do the 90% decide to do, do they revolt and live, or die? cause thee isnt a middle ground
5. April 2016 at 19:10
David Glasner’s is a good argument for eliminating the minimum wage.
5. April 2016 at 20:54
Floccina, if you contorted David Glasner’s argument enough, you might be just able to twist it into something resembling an argument for eliminating minimum wages. But you would have to establish that the minimum wage actually does result in job losses. And that those job losses, if they had actually occurred, had caused a disproportionate loss in utility (or however you proposed to measure human welfare) compared to their impact upon consumption of the unfortunates losing those sub-minimum wage jobs. That would be a difficult argument to make.
5. April 2016 at 22:04
When Scott Sumner pitches to elites, he pitches that its OK if white people have worse standards of living because some guy in China might be doing better.
When Scott Sumner pitches to workers he lies and says he doesn’t think it will hurt their standard of living, which he says the opposite of in private.
Elites don’t give a fuck about whites, Chinese, global utility functions, or anything else. I know an elite CEO who manufacturers most of his goods in China, he’s in my family. His company uses toxic chemicals that make the workers sick. He said he threw up when he saw the conditions in China. He didn’t change anything through (actually, he’s thinking of moving the factory to an even lower wage country). Why? Because he’s gotten good payouts over the years for doing so. He gets to throw a really extravagent Manhattan wedding for his daughter, own several houses, go on elaborate vacations, etc.
If he was doing it all for the poor Chinese you’d think he could improve working conditions and pay for it with a few less 0.1% consumption extravagances. He’s not doing it for the Chinese though, that’s just some bullshit used to rationalize and sell it to the public.
Most of his USA customers are at the low end and buy on credit/EBT. Then the Chinese keep the currency peg by buying up the credit created in such a transaction in order to keep the peg. People like Sumner call this “investing in America”. Well, a month later the plastic toy is in the garbage but the debts still have to be serviced. What “investment” is going to raise productivity so that debt can be serviced?
Trade, automation, any other reason. They don’t much matter do they. What does matter is that Scott Sumner, and people like him, don’t give a fuck. He’s looking out for him and a narrow social circle. The rest is just propaganda. No matter what the cause, we can count on Scott Sumner not to care what happens to his neighboor.
Even if his propaganda was true, what would it mean? We’ve got a lot less horses now. Once they stopped being useful, why keep them around? We know average IQ people aren’t about to become doctors and engineers. What future do they have? Does Scott give a fuck? Or will he just send them to the glue factory.
If he could do it to his neighbors that he shares a nation, race, religion, culture, and history with how easy will it be for him to turn around and do the same to people he doesn’t share those bonds with when they are no longer useful to him? I have a feeling the global utility function propaganda will only last so long as it helps advance Scott’s career. Once its no longer necessary it will have to go.
For everyone else, if you want a life worth living, you have to form an interest group and fight for it. Scott’s got an interest group whose needs he puts before everyone else, it just happens to be really small. Much smaller then the white race. Don’t buy the propaganda that its all for the starving orphans off someplace somewhere. Do what he does, pursue your interests. Believe me, caring about the welfare of one billion white people is a lot more noble then Scott Sumner and his social circle.
6. April 2016 at 01:34
Holy shit, asdf. Scott sumner, the world’s most influential and evil man. He must be found and executed immediately. The welfare of the entire world is at stake.
And to think, he was once an x-man fighting for good.
6. April 2016 at 05:05
I do consider Scott quite evil. His entire moral philosophy boils down to:
As long as there is someone poorer in the world then you, I’m justified in impoverishing you for my own gain so long as 1% of what I take gets passed along to this theoretical poor person.
Given how many poor people there are in the world and how they will only increase, its going to be many generations before most people in the first world is allowed to pass on a better life to their children.
http://www.prb.org/images13/mdc-ldc.gif
But hey. Maybe those teeming masses can move from $1 a day to $10 a day, and people in America can move from current standards to $10. Barrios and Beans ain’t so bad. Think of the global utility gains from such events. Certainly enough for Scott Sumner and the people he works for to justify keeping the lions share for themselves!
6. April 2016 at 06:53
“I do consider Scott quite evil.”
asdf,
You left out the time he bought his kids puppies for X-mas and forced them to drown them, or the time he shot a man just to watch him die.
I just doubt it is a zero sum game. Like a SIM game, the more markets you build up, the more advanced societies that you have, the more the world grows. The more people progress. You’re like a spec of dust, a dying cell of a 7 billion cell organism attempting to survive and thrive.
6. April 2016 at 07:43
@asdf Wrong. The number of poor people globally has been going down.
Scott your blog has been attracting a lot of crazies in the last year? Any idea why? Just the downside of the blog becoming more popular?
6. April 2016 at 07:47
If your only goal is the increase of life and equality, then by definition its a zero sum game. There is even a name for it, The Repugnant Conclusion.
https://en.wikipedia.org/wiki/Mere_addition_paradox
Half the world, the fastest increasing half, is incapable of adding much to the economy (they don’t have the genes for it). There are also hard limits of ecology and natural resources that we will hit eventually. Assuming we don’t have any political crises that wreck it all before then. All of this is a recipe for a zero sum game. The last several decades of stagnant to declining first world living standards are a sign of that.
What concerns me though is that Scott doesn’t really care. As he points out above, for workers in the first world he already thinks this is a zero sum game, and he wants the foreigners to win it and the native workers to lose it. Some fellow citizen.
I don’t trust such a man. For one I haven’t met many people that can have zero or even negative empathy for their neighbor and yet great empathy for strangers. Empathy radiates outwards in our social relations, each level of connectedness fostering the appropriate level of social bonds. Deficiency at a near level means deficiency at a far level as well. When I encounter someone saying their neighbor needs to get poorer so they can get richer, but its OK because maybe some stranger in another society might be better off via some theory…the psychopathic egoist alarm goes off. And indeed everything I’ve seen in my life confirms this. Both personally and statistically.
Using strangers to suppress neighbors in zero sum games is old as dirt, the Tsar uses the Cossaks to keep the peasants down. I doubt Scott really gives a fuck about anyone, and when the stranger is no longer useful to him he will discard him the same as he did with his neighbor. There is ALWAYS someone poorer out there to exploit. And when robots do everything, its off to the glue factory.
If tales of automation are true, then none of us are safe. High IQ person in the first world, you’re a smart AI away from the glue factory. Remember, if Scott can throw away the welfare of the working class he can throw away the welfare of the professional class when it suits him.
Maybe its a dysgenic, political, and environmental disaster like I think it will be.
Maybe its an AI and automation driven utopia.
What matters is that in the world of Scott, its all about getting ahead. It’s all about what I can do for you and you can do for me. If you aren’t useful to Scott, you might as well be dead. Whether we get the positive or negative story above, most people aren’t going to be able to earn a living wage in a market with that much labor competition and that little labor demand. Not in any free market. And I doubt people like Scott will do much for us then.
6. April 2016 at 08:17
@Alexander Hamilton
Not it hasn’t. People put up some graph that says some people in Africa went from $1 a day to $2 a day. Hint: $2/day is FUCKING POOR. Whether you make $1, $2, or $10 a day if the population of such a group is increasing then the amount of poor in the world is increasing. Exclude China (where last I checked the population ain’t growing) especially but even including and its obvious there has been almost zero progress.
http://www.imf.org/external/pubs/ft/fandd/2012/12/images/ravallion2.jpg
http://static1.businessinsider.com/image/559ead24ecad04a140679458/71-of-the-people-around-the-world-live-on-less-than-10-per-day.jpg
http://cdn.static-economist.com/sites/default/files/imagecache/full-width/images/2013/09/blogs/feast-and-famine/figure3a.jpg
The % of world population making the equivalent of first world minimum wage hasn’t budged much. And we all know the easy gains, high IQ NE Asians, are gone.
Do you want your kids living on minimum wage or worse? It that acceptable to you for the sake of “muh global utility function!” I want a better world for my children. One where they live in safe neighborhoods, get educated, have healthcare, etc. Not barrios and beans. Like any sane person, I’m going to work with my kin to built a better life for ourselves. What need to we have for striver fifth columnists that hate us and want us to die?
6. April 2016 at 11:22
@asdf
Your graphs prove A Hamilton right. Incomes are generally moving upwards. The “relatively poor” expanded due to divergent demographic trends b/w 1st and 3rd world in the 80s; since 2002 it’s leveled off. The general trend is in the positive direction (also that first graphic ends in 2008, a recession year).
You’re “muh job-killing trade” and “muh mexicans” is as eye-rolling and contemptible as blacks constantly harping about police brutality and “the man”. If the white race wants to survive and thrive, they should start by putting down the Oxycotin bottles and learning an actual, marketable skill.
7. April 2016 at 02:32
“A fleet of trucks just drove themselves across Europe”
http://qz.com/656104/a-fleet-of-trucks-just-drove-themselves-across-europe/
7. April 2016 at 07:29
James, What about the distributional effects of automation?
dtoh, You said:
“You just respond with the “standard argument” that everyone is better off in the aggregate, i.e. “Yes, some workers lose jobs due to trade, but the net effect is probably a wash. For every worker losing a job, and getting miserable, another worker gains a job, and gets less miserable.””
I think you missed the point. The public doesn’t understand that trade does not increase unemployment, and it seemed to me that David also failed to understand this point (although it’s hard to be sure). David seemed to imply it’s a consumption/unemployment trade-off, and I’m saying there is no trade-off because there is no increase in the unemployment rate. It’s more consumption and the same amount of unemployment.
Goose, Good comment.
Eric, you are confusing the issue of what to buy when you decide to consume, with the decision over whether to save or consume.
Jerry, So competition from cheap labor in Texas won’t cause job losses in California, but competition from cheap labor in Mexico will cause job losses in California?
asdf, You said:
“When Scott Sumner pitches to workers he lies and says he doesn’t think it will hurt their standard of living, which he says the opposite of in private.”
Nope, I’ve very clearly said that some workers took a hit to their standard of living due to imports from China. I’ve said that consistently.
As for my values, I’m a utilitarian who wants to make the world the happiest possible place. I’m not a nationalist who is willing to impose extreme misery on billions of people so that some of his buddies can have a slightly better living standard, from a position already the highest in world history.
If the global poor don’t matter to you, that’s fine. But don’t expect me to go along with your repulsive value system.
7. April 2016 at 08:45
asdf, I’m pretty sure that rather than having less empathy than you, Scott just disagrees with some of your factual premises.
7. April 2016 at 11:35
@asdf: “Half the world, the fastest increasing half, is incapable of adding much to the economy (they don’t have the genes for it).”
False.
“The last several decades of stagnant to declining first world living standards”
False.
“for workers in the first world [Sumner] already thinks this is a zero sum game”
False.
8. April 2016 at 00:09
@scott I agree that David loses the thread when he goes off on the employment consumption tangent, but his central argument that “the standard arguments for free trade are inadequate in responding to the concerns of the people who feel that they have been hurt by free-trade policies” is I think the important point of his post. Free trade is not a Pareto optimization. Take a look at Benton Harbor, MI, formerly home to a number of auto supply companies. PPP per capita GDP is lower than China, and 95% of the buildings in downtown are shuttered with plywood.
Mill and others understood the importance of minority rights (interests)in a democracy, but I fear modern economics has drifted from its ethical underpinnings. Thus the incomprehension of the opposition to free trade.
8. April 2016 at 15:01
not sure that the majority of Americans would agree that would agree that our living standards arent declining and havent been for a few decades now. and while i think (or hope) that we want the global poor lives shouldnt get better, cause in theory that means our living standards go higher. but for several decades for many its not been true on the US. and dont say well we have better x, doesnt cut it, and makes you look even less inhabiting the world the rest of us live in . that world we see less and less a brighter future, instead we see nothing but gloom
8. April 2016 at 16:45
dtoh, Regarding Benton Harbor, I could show you worse places in North Korea, or Burma. Places that are very poor due to a lack of trade.
You said:
“Mill and others understood the importance of minority rights (interests)in a democracy, but I fear modern economics has drifted from its ethical underpinnings. Thus the incomprehension of the opposition to free trade.”
Not sure who this is aimed at, but I certainly understand the opposition to free trade. It’s partly people who have lost jobs due to imports, and partly due to people who don’t understand economics. Mostly the latter.
Are there any “ethical underpinnings” that are superior to utilitarianism, which was Mill’s value system?
dw, You said:
“not sure that the majority of Americans would agree that would agree that our living standards arent declining and havent been for a few decades now.”
I’d hate to think that Americans are that stupid
8. April 2016 at 16:56
scott, its not that they are stupid, its that they look at what is described as their living standards, and see no relationship to their own. and telling them they are stupid, just makes them think that those who tell them that have little to no relationship to reality, its usually a failing means of convincing some one else of any thing.
8. April 2016 at 20:24
@scott
Let me ask an ethical utility question.
Suppose you could do something where you would gain $2 and your neighbor would lose $1.
1. If you had absolute power (with no blowbacks or repercussions to you), would you do it?
2. If you and your neighbor had to jointly agree to taking the action, how do you think you would split the $1 in gained utility?
8. April 2016 at 21:13
@scott
oh…. and you read to read Mill more closely especially on limits to utilitarianism and the harm principle.