I'm honextly ocnfused here. Perhaps someone can help me figure it out?
How many people does it require before free trade is a bad idea?
If we're talking about a single person...just you as a twenty-year-old kid without a family...is trade good?
If we're talking about a family...parents + kids 4-12 people....is trade good?
A village of 100 folks?
A town of 10,000?
A city of 1 Million?
A state of 1 Million?
A city of 10 Million?
A state of 10 Million?
A small country of 10 Million?
I don't understand the cutoff when someone thinks it's a good idea. I REALLY don't understand how ANYONE can think that protectionism is a good choice for a small country like Belgium, Singapore, or Hong Kong...but not a medium-sized state like Illinois, or a large city like Los Angeles.
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I am a free trader myself, but some of those who oppose it seem to think in terms of equality or sameness, that like should trade with like. So one might favor free trade with Canada, but not Mexico (different culture), or perhaps with Japan but not China or Albania (different wealth).
Alternatively, you might have some kind of weighting by distance, so that you should get local tomatoes, but it's ok to search far and wide for your manganese.
The real answer, of course, is that the motivation is anti-market bias and anti-foreign bias, so it's not going to be much clarified by analysis. e.g. trade with foreigners is bad both because their offerings are too good (driving out local competition) and too bad (taking our money).
Alex,
A principle I hold to on this blog is that it is very easy for people to HONESTLY disagree. While I also think that people are less than aware of their motivations most of the time (as am I), that doesn't stop the fact that there are intelligent, honest, well-intentioned folks on most sides of most debates (I'm not quite willing to say all, but it's awful close).
Having said that...4 years ago, I would have assumed your answer. Today, not so much. I think that someone thinks there's a difference. I just don't know what it is. And I'd like to understand.
It doesn't matter the population number.
The trade needs to be fair/equal/tit for tat.
You assume a kind of theoretical purity in all trade, but the real world is messier:
)We trade with the Chinese, but we get poisoned dog food, or products with disguised flaws. Lose-lose scenario.
)We trade scrap iron for finished electronic goods from China, a limited product for an unlimited one. Lose-win.
)We trade commodities for finished electronic goods. We lose our electronics industry and its dynamic creativity that creates future wealth. We are poorer than if we paid more for home made electronics. Lose-win.
Aretae,
Why exactly do you believe that this is a question with a simple answer?
Consider the hypothesis that there are in fact many complicated factors that make it extremely difficult to assess the consequences of different trade policies in various concrete situations, and simple arguments that are commonly thrown in ideological free-trader vs. protectionist debates don't come anywhere close to capturing this complex reality. How exactly would you argue against this hypothesis?
1.
After a moment, why won't the customers of the Chinese go, "Wait a minute, these suck" and stop of their own accord?
2.
I don't understand what you mean by limited and unlimited. Kindly explain?
3.
The creativity is now in China. Won't they sell the new things to us when they think of them?
Are you thinking of cross-industry synergy creativity, which would naturally won't happen across physical and linguistic barriers?
Alrenous:
)Eventually, maybe, we get acceptable products, but in the meantime we are bearing unintended consequences at a cost that might mitigate the gains from trade.
)Another example: You are a jeweler with five pounds of gold stock. Your neighbor has a garden. You trade gold for food. One day your neighbor has all your gold, and you are in dire straits. OTOH, if you trade with a jeweler who has fifteen pounds of silver, you can reach an equilibrium where you are both better off. Trading resources for consumables is problematic. Butte Montana was big and booming at the height of its copper boom. One day the copper ran out, and the town is a shell of its former self.
)Partly the across-industry dynamic, but manufactured consumables tend to spawn a next generation of higher value products, whereas commodities are static. If you are happy to trade commodities today, you lose on the higher margins that eventually accrue in manufacturing tomorrow.
Thanks.
If I could make an attempt to summarize RSF's ideas in a more general form:
Trade allows people to maximize their short term benefit at the expense of long term development. Trade allows a country, or groups within a country, to purchase consumer products in return for limited resources and/or by accumulating debt.
In a trade-restricted state, these parties would be forced to reduce their current consumption (save and invest) in order to be able to produce these goods themselves. Saving and investing results in long term increased income.
Therefore, we can see that trade restrictions are desirable (under this theory) when the situation meets certain criteria:
1. I can impose trade restrictions over a group that I "like" (i.e. I would prefer that their long term income is increased.)
2. I judge that I am able to choose their actions to maximize the long term benefit better than they can themselves. (This is not such a stretch. Even between two people of equal knowledge and intelligence, each can choose the others actions to maximize the long term benefit better than they can themselves. This is because I don't have to put up with the short term pain of saving and investing. I know that my friend should stop watching TV and eating junkfood, and he knows that I should stop watching TV and eating junkfood. Left to ourselves neither of us would actually stop.)
3. I don't care, or at least I care less, about the long and short term benefits to the third party (eg. Chinese industry.)
4. I judge that I understand the entire economic structure well enough that any unintended results of my policy are unlikely to make the move a net negative.
To give an example of this. Let us assume I have a child. Let us assume that this child is about to leave home and go to university. I would not want her to waste her time and money on drugs, alcohol and wild parties. Hence I may support legal restrictions on drinking and drugs, even if these might reduce the momentary enjoyment and freedom of my child. Furthermore, I may even support such laws despite them restricting my own freedom. I do not really want to do drugs, and the pleasure of occasionally sipping some Scotch would be outweighed by the long term pleasure of having a child actually finish university without liver damage.
Note: This is NOT the only argument in favour of trade restrictions, but I think this is one of the best ones.
I'm not going to give an answer, but point vaguely in the direction of one.
First, assume there is such a thing as a people. Call it Nation, tribe, community, or whatever, a people is what has a culture. The culture I live among is an important part of my environment.
(This first assumption is the departure from libertarianism)
Next, note that a change can be good for you, but, through its effects on you, be bad for the people that you are part of, and, therefore, bad for me as a member of that people.
If we exchange goods, which, ultimately, means exchanging tasks, within a people, then the net effects on the people and the culture are going to wash out.
If we exchange tasks with another people, there can be a net effect on our culture. This could be harmful aesthetically, politically, and ultimately even economically.
Therefore the cutoff for automatically favouring free trade is not some power of 10 of population, it is the size of the particular culture.
drpat, that's a great example.
Why do I have to restrict my alcohol so that your child can get an education?
Second drpat's answer. Although I think it can be boiled down further.
The key is free trade only maximizes overall wealth. It does not maximize the wealth of any particular subgroup. So, theoretically any subgroup may be able to benefit from managed trade. This is what drpat's (1) and (3) are getting at.
Certainly there devilish details; hence his (2) and (4).
An interesting example here is the problem of intellectual property. Consider authors as a group -- or a nation, such as the USA, which creates vast amounts of IP. In it in our interest to have a strong IP regime. But how do we square copyright with "free trade"? Shouldn't China be able to knock off our movies and sell them in America for $1 per DVD?
Seems to me the free trade absolutist would have to say, yes. Overall, everyone is better off if China can supply the world's DVD wants at the lowest possible price.
But what of the argument that the things being sold would not exist except in a regime of global copyright -- that is, managed trade? Seems to me there is something to this.
Leonard, you're conflating management with property and contract enforcement.
If an author releases a DVD to China on the condition that they don't turn around and sell it back at $1, then if they do, they're simply breaking their promise.
Instead, management is only allowing one IP regime. We have non-free trade in IP ownership and contract systems. In ours, it is very hard to prevent China from getting your DVD if you release it to anyone, and at the same time intra-US actors can suppress your DVD by filing spurious copyright suits.
Do things only exist if the creator can secure property rights to them? Yes. But property security isn't trade, but a precursor.
I'll add that my summary above is not the only reason to support free trade, but it is a process that gets there without ever assuming that the supporter is stupid and/or evil.
It is EASY to come up with a trade-restriction story that is rent seeking and/or ignorance based. But as Aratae points out, that's not the smart way to think about things.
And I think that's what we are after here. Can you support trade restrictions even if you are educated and operating in good faith? Yes. Yes you can.
This is not to say I support it, but I try to imagine I am arguing with say... my Dad rather than an evil monopolist trying to protect his ill-gotten gains.
My Dad supports trade restrictions. He once stopped me cold by saying that one of the biggest problems in modern society was people who thought they were entitled to sell something for the highest price they could get.
WTF? How is that....???
Dad is a doctor. A doctor who has spent a lot of time working in remote rural areas. To a remote rural doctor, the "highest price you can get" for many things is "all a person's life savings, and those of his family and friends". Because the alternative is death.
To Dad, selling something for the highest price you can get is something akin to holding a child for ransom or you'll let them die. Because that's what Dad deals in.
That makes his stance much more understandable. But I think it warps his view on things like "acceptable profit margins" for a new widget factory.
My take on history is that the groups of people who go forward are the ones that utilize trade restrictions.
Groups of people who utilize free trade principles as articulated by Aretae go extinct.
Aretae's equations of trade don't include all the variables.
I did this once before with a fellow physics undergrad about the nature of particles. (Are they the point or are they the field?)
The ones that succeed and go forward are the ones with the power to create and to afford trade restrictions.
Which variables are they missing?
The prominent missing variable is the power of in-groups. Humans have come down as distinct groups: Somalis all look like each other and have their own country, Russians look like each other and have their own country, etc. Trade only works if it preserves the in-group. Free traders are too happy to trade in-group heritage for trinkets and go extinct.
You seem to have a coercive mindset about free traders.
If trading away in-group trinkets is a bad idea, you and many people like you will decide not to trade them. You should be free to do so.
Restricted trade => survival AND free trade => survival, for the exact reasons you'd restrict trade.
Rather, free trade is that if other groups (wrongly) feel it is okay, they should be free to shoot themselves in the face and go extinct as a result of their foolishness.
It's just not nobody should force anyone into either group.
I'm not sure I understand what you are getting at.
"Free" trade here also implies "good" trade, and that is not always the case.
Societal survival involves coercion. I don't think you can craft a survivable society without coercion.
Free trade is empirically good. It is not always or purely good. (It is necessarily a good.)
That society requires coercion is propaganda. I'm sorry, but you look like a victim to me.
I'd first guess you've been successfully confused about what 'coercion' is.
My next guess is that you have been told what exists is necessary.
Coercion is a violation of a property right. (Which are natural rights.) Using property rights and the principle of keeping one's promises, any useful current structure can be duplicated without coercion. If it can't, it is inherently coercive -which is an absolute bad in itself- and empirically they all cause more harm than good overall.
With the one possible exception of security, which, as I enjoy repeating, is a precursor to meaningful property rights. And if so, the only reason it can't be is that humans like to coerce, and obviously the counter-coercion apparatus has the opportunity.
Lose the opportunity or interfere with the like, and anarcho-freedom is all set.
Yes, I've been victimized and propagandized. Guilty as charged.
You admit yourself that security needs to be ready to use counter-coercion. QED.
Any group or individual faces coercive challenges: weather, markets, entropy. A delay of immediate gratification is a form of coercion. See B.F. Skinner's "Beyond Freedom and Dignity".
RSF,
There's at least 2 models of freedom going on here.
1. Freedom as capacity: Can I fly?
2. Freedom as can I get what I want how I want it? I want an airplane for $1. I want to live in Seattle, and for it to be sunny most of the time.
3. Freedom as no person threatening to shoot me if I disagree with their preferred solution.
We're talking about #3 as coercion, and the other 2 as reality, regardless Skinner's Determinism.
Threatening to shoot is just one end of a scale. How about yelling at someone?
RSF,
Can you name some of these groups who've gone extinct after adopting free trade?
Even better, a group that was going well until it adopted free trade, rather than one that adopted it after they were 90% gone and lost the power to impose any rules anyway?
Counter-coercion isn't like coercion; that argument is a word game. Security is physical violence, not moral violence.
If you want to argue somewhere that I'd find difficult, examine the relationship between parent and child. Formally, neglecting prior contract, neither has obligation to the other, which means parent can expel child from their property at any time.
"How about yelling at someone?"
Am I yelling at you on my property, or yours?
If you're on my property, no. If you're on your property, and you tell me to stop and I don't, yes.
Unless I agreed not to yell at you before you agreed to enter my property, then yes. But that should be obvious - I'm breaking a promise.
Coercion is breaking your promises. Coercion is not leaving alone those who wish to leave you alone.
Coercion is nothing else.
So why is my definition correct, and others wrong? Because mine isn't self-contradictory. It is the only one where each act can be cleanly categorized. Example below.
"You admit yourself that security needs to be ready to use counter-coercion. QED.
A delay of immediate gratification is a form of coercion."
That is exactly the kind of response I predicted based on my propaganda model. And here I was feeling bad about saying so.
You're a victim of sophistry. People spread these ideas because coercion always feels bad, because it is bad. Necessarily the victims need to be fooled into accepting it, or they get uppity and resistant.
I can tell because A: you're following the party line (ref: compare Newton's calcululs to Leibnitz) and B: the honest defence is, "No, actually I thought of it myself, by way of X." Problem is if you reveal X you necessarily show me how to objectively prove that X is wrong. Which I can then do if it is indeed wrong, and then by your own admission you should change your mind.
So part of the sophistry is being socialized to never, ever reveal X.
Therefore: This comment constitutes me revealing X to the best of my abilities.
There is no possible way delay of gratification can be coercive, so no I'm not going to read that. It is a confusion of coercion, so that they can say things like, 'survival requires coercion.'
Survival never requires you to break your promises. Survival never requires you to impose on those who want to leave you alone.
For example, I want to be immediately satisfied that my argument was accepted. If you don't, you're coercing me. Yeah...not a chance. Even assuming it's true, you want the same so I'm coercing you. Everyone is coercing everyone all the time. All other definitions of coercion suffer from this, and if you want I'm willing and happy to show this for any and all instances you wish to concoct.
drpat:
In terms of immigration as free trade, we have the US, immigrant restrictive from 1924-1965 that raised the fondly remembered 1950's, traded in for cheap chalupas in many areas, the extinction here known as "White flight". Tit for tat would have an equal number of native Americans moving to Mexico, with its cheap living and nice weather, but they maintained barriers to land ownership, citizenship, and access to the public purse.
We see a country like Japan, though in demographic decline, maintain its identity, while Europe and America are undergoing a demographic shift. Extinction is a hyperbolic term here, so let's say reduction.
As for economic extinction, let me submit the White farmers of Zimbabwe, free traders extraordinaire, who had world class agronomics, production, consolidation, and mechanization, but neglected their demographics and political power.
Alrenous:
To paraphrase the Bolshevik: you might not be interested in coercion, but coercion is interested in you.
I'm not familiar with your philosophical arguments. I'll see what I can do to get up to speed.
My training was in behaviorism, where we look at antecedent events to explain all behavior, coerced and otherwise. You are telling me to minimize punishment and negative reinforcement in human affairs. A worthy goal indeed, but I'm not sure it is possible, or even desirable. A culture needs a bit of adversity. We can be positively reinforced into oblivion as surely as we can be coerced into oblivion.
"I'm not familiar with your philosophical arguments. I'll see what I can do to get up to speed."
I was not expecting that. I retract my harsh assessment. Not that you should care, but I'm impressed.
On the other hand, it demonstrates that making the assessment explicit is useful, possibly even necessary.
(Also let the record show I'm willing to make retractions.)
"You are telling me to minimize punishment and negative reinforcement in human affairs. A worthy goal indeed, but I'm not sure it is possible, or even desirable. A culture needs a bit of adversity. We can be positively reinforced into oblivion as surely as we can be coerced into oblivion."
Not exactly.
I'm a fan of just punishment, where just means that we punish those who break their promises or refuse to leave people alone when asked. (I hereby ask that the Government of Canada and USG leave me the hell alone.)
If punishment-alternatives exist, yes by all means use them, but if nothing short of a bullet to the brainpain is sufficient, fire away.
(GoC and USG are welcome to ask I leave them alone in turn, if I am not already doing so.)
Adversity is often good. Wars tend to rend the culture, though; I don't know what exactly you had in mind.
Thanks for the gentle words.
I was thinking of adversity in the Aretae sense, something that makes you look around and check your assumptions.
I can appreciate wanting to be left alone by gov't. I spend time in producer groups battling the latest infringement by central casting. But 5% of what gov't does is useful, and any libertarian society needs to recreate that 5%, but I'm not sure if one can keep that 5% from growing to what we have today, given time and basic human proclivities.
RSF has it right, one big issue is that nobody knows how to stop government growing beyond the necessary levels.
Various schemes have been put forward, some tried, no winners yet.
This thread seems to be jumping back and forth between free trade and free migration. They are related issues I'll grant, but it makes it a bit confusing.
I will note that one major company that allowed heaps of immigrants in, and worse (probably the critical mistake) allowed them to maintain separate ethnic communities, was the Roman empire in the 3rd to 5th centuries AD.
It didn't work out well.
Yeah.
The Libertarian purview makes open borders and open trade a general good. It's a linked issue.
They act like borders and trade restriction has left money on the table for all of human existence. After a few spreadsheets, they now want money and human capital to flow like water to a new, more excellent equilibrium, after which we will then learn how to raise up a native population, since we will be all one people and money, apparently something we can't do now.
Bet against ancient wisdom at your peril.
The obvious solution is to propose separation of security and state. Whether that's possible is an open question.
I like my coercion definition because it clarified both free trade and migration.
If someone wants to trade with you or invite you onto their land, it is coercion for a third party to stop you from doing so.
On the other hand, if they don't want to trade or let you on their land, it is coercion for a third party to force them to let you.
If it can be known that immigration is bad under conditions X, then the market will (eventually) decide it doesn't want immigrants, if those conditions obtain.
Talking with bluntobject, I realized that dropping a bolus of immigrants into a city will result in, socially, exactly the definition of 'colony' from colonialism. They won't connect to the existing interlinked city-wide network, they'll just start their own isolated system.
So many gray areas, Godel's theorem and all.
What if terrorists are inviting each other onto their property to plan attacks? Do we respect their property rights, or do we pre-emptively go after them?
To give someone property rights pre-supposes that they have absorbed a certain amount of the prevailing culture. Immigration kind of works if you keep the levels low enough so the new comers have time to absorb the prevailing culture, or import people already somewhat keyed in. But, some want the prevailing culture changed, so they advocate big immigration from strange areas to effect change.
If you can prove they're planning attacks - threats are recognized under common law as violations. Proof of planning to not leave someone alone is proof of intent to coerce, which is proof that they don't respect the rights of others and therefore, by symmetry, have no right to have their own preferences respected.
That does of course rely on the court's epistemology having integrity. It's not a problem for the definition, however.
"To give someone property rights pre-supposes that they have absorbed a certain amount of the prevailing culture"
I defined ownership as 'reasonable expectation of control.' So, I disagree. All you need for property is basic security against the common threats, namely thieves and weather.
This definition in turn (or something functionally identical) is the only non-contradictory one because if you didn't expect to control a thing, you wouldn't try to in the first place.
E.g. if you know your gold is simply going to be confiscated by Volcker, you don't bother to buy any.
Hence, Volcker can only confiscate gold by deliberately breaking someone's reasonable security arrangements; by falsifying a reasonable assumption; by trickery. If he's honest about his intentions it destroys the wealth he was hoping to gain. (Conversely, stronger property rights/security directly create more wealth.)
That word 'reasonable' seems to have some wiggle room, but in practice could be pinned down by contract, just as soon as someone realizes it needs to be. More importantly, most crime isn't committed in the grey area anyway.
Much of law, when pushed to the edges, hinges on what is considered "reasonable". It helps if the crowd determining what is reasonable share background, experience, and cognitive expectations.
It helps even more if specific individuals formalize what is reasonable and then the crowd can join them or leave them as they individually see fit.
Yes, I'm in agreement, but then Aretae wants no borders, so those who don't agree with the rules come in anyway and sleep in my house and eat my food (figuratively speaking.)
Aretae is certainly against government borders. Is he against private borders? It's plausible, as I've seen several anarchists overreact to state abuses.
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