Monday, May 26, 2008
Those Evil Venezuelans
by Ken Houghton
This is precisely the type of agreement you want to make in free trade: rent out your expertise (a non-rival, public good) for a discount on a commodity that allows you to raise the marginal utility to your population of its government services.
Which is also what Venezuela has been doing with its oil revenues:
Now you can argue, as some are prone to do, that making life marginally easier for the poorer members of your society is not a path to growth. But that's an entirely different argument than "we should charge our poorest members of society more."
Isn't it?
Don't let anyone ever again tell you that Conservatives support "free trade":
London’s Tory mayor, Boris Johnson, today announced that he was scrapping a discounted oil agreement with Venezuela that provides half price bus fares for London ’s poorest citizens. Fares for those on Income Support are expected to double by the end of year, causing serious financial hardship for 80,000 Londoners who had taken advantage of the scheme....
The agreement, which was negotiated by Johnson’s predecessor, Ken Livingstone, bartered London's strategic advice on city planning for cheap Venezuelan oil.
This is precisely the type of agreement you want to make in free trade: rent out your expertise (a non-rival, public good) for a discount on a commodity that allows you to raise the marginal utility to your population of its government services.
Which is also what Venezuela has been doing with its oil revenues:
Venezuela’s socialist president, Hugo Chavez, has used the proceeds from record oil revenues to roll out free health and education services across the country. Incomes for the poorest 60% of Venezuelans have risen by 130% in real terms, according to surveys conducted for the Venezuelan American Chamber of Commerce.
Now you can argue, as some are prone to do, that making life marginally easier for the poorer members of your society is not a path to growth. But that's an entirely different argument than "we should charge our poorest members of society more."
Isn't it?
Labels: Economic Development, free trade
Tuesday, May 20, 2008
How to Devalue Your Brand
by Ken Houghton
Which leads to the obvious conclusion: Republicans "destroyed the credibility of the U.S. in 1998 when they did the same thing to President Clinton.
Strangely, Greg Mankiw (Fortune, January 12, 1998) "knew better."
Got it? If it's a Democratic Congress, then Pelosi is a "problem." If it's a Republican Congress doing the same thing, it's Through No Fault of Their Own.
And by not pointing out that he himself used to know better, Greg Mankiw destroys not Fred Bergsten's credibility, but his own.
Cross-posted to AngryBear, where Tom is on a roll.
UPDATE: Dani Rodrik gives the lie to the whole line of "reasoning.")
*Yes, I omitted Mankiw's framing issue (tomatoes), but if he really wants to claim George W. "Steel Tariffs" Bush was different, the only possible response is "Bring it on."
Greg Mankiw, clearly distracted by his former collaborator's wife having been denied a tenured position at Harvard, quotes Fred Bergsten in the WSJ, Instapundit-style:
By effectively killing "fast track" procedures that guarantee a yes-or-no vote on trade agreements within 90 days, lawmakers in Washington, led by House Speaker Nancy Pelosi, have destroyed the credibility of the U.S. as a reliable negotiating partner.
Which leads to the obvious conclusion: Republicans "destroyed the credibility of the U.S. in 1998 when they did the same thing to President Clinton.
Strangely, Greg Mankiw (Fortune, January 12, 1998) "knew better."
Policy and politics diverged again in the fast-track debate. Clinton was asking Congress for something all recent Presidents have had--the authority to negotiate trade deals that Congress would consider without amendment. This power is crucial if the President is to continue the multilateral process that over the past half-century has moved the world toward freer trade and greater prosperity.
Although economists are united in support of free trade, opinion polls show the American public is more skeptical. The public's view is partly based on the false analogy that trade is like war--some countries must lose for others to win....
Because of the public's ambivalence--and the opposition of interest groups that fear foreign competition--fast track went down to defeat. This may put an end to the multilateral approach to opening up world trade. But it need not mean an end to the free-trade movement.*
Got it? If it's a Democratic Congress, then Pelosi is a "problem." If it's a Republican Congress doing the same thing, it's Through No Fault of Their Own.
And by not pointing out that he himself used to know better, Greg Mankiw destroys not Fred Bergsten's credibility, but his own.
Cross-posted to AngryBear, where Tom is on a roll.
UPDATE: Dani Rodrik gives the lie to the whole line of "reasoning.")
*Yes, I omitted Mankiw's framing issue (tomatoes), but if he really wants to claim George W. "Steel Tariffs" Bush was different, the only possible response is "Bring it on."
Labels: free trade, IOKIYAR, Mankiw
Friday, May 02, 2008
Trade vs. the Big SUV
by Tom Bozzo
(A clue might be a lot to ask of Ryan, whose greatest hits include a Social Security privatization plan which would have put the government on the hook for investment losses in the would-have-been private accounts.)
The obvious reply is that GM's Janesville employees wouldn't likely have been building full-size SUVs but for policies that allow petroleum to enter the U.S. freely and which have declined to establish serious tax incentives for conserving it.
One of the editorial's more curious claims is that Janesville's woes can be attributed in part to "[t]he federal government's conscious neglect of the basic tenets of industrial policy." What tenets might those be? If you ignore that destabilizing-the-Persian-Gulf business, the Bush Administration has been as openly friendly to motoring by gargantuan SUV as is imaginable.
However, the CT may be on to a meta-truth on the industrial policy front. Economics tends to describe production and consumption in highly abstracted terms ('Amalgamated Widgets' etc.), and it seems that's led to an indifference to if not maybe a touch of elite contempt for actually making things. You can see that when Chickenshit John McCain gallantly tells Rust Belt audiences that good jobs are gone forever, or in the more sophisticated version you get out of someone like McKinsey's Diana Farrell (here, from an NYT roundable with Stephen Roach and Josh Bivens):
One thing I'd noticed scanning the notice of proposed rulemaking on U.S. automobile fuel economy standards is that Congress did stick an industrial policy provision in the enabling law: domestic passenger cars are required to have an average fuel economy that's at 92% of the manufacturer's fleet average. So there's an allowance for larger (and hence less fuel-efficient) cars to be built domestically, but perhaps not so much that manufacturers could meet the standards simply by importing the more fuel-efficient ends of their product lines. We'll see how this works out in practice, but at this point the Detroit Three's manufacturing workers' biggest problem is less the outright collapse of the U.S. car market than that they're not screwing together the more marketable end of it.
The Capital e-Times has a remarkably wrong-headed editorial trying to take Rep. Paul Ryan, the GOPipsqueak whose district includes GM's Janesville assembly plant, to task over Ryan's support for various "free trade" agreements. The Janesville plant, which assembles GM's full-size SUVs, is losing a shift and 756 hourly manufacturing jobs thanks to free-falling sales of its output. Shouldn't Ryan get a clue on trade, the editorialist wonders?
(A clue might be a lot to ask of Ryan, whose greatest hits include a Social Security privatization plan which would have put the government on the hook for investment losses in the would-have-been private accounts.)
The obvious reply is that GM's Janesville employees wouldn't likely have been building full-size SUVs but for policies that allow petroleum to enter the U.S. freely and which have declined to establish serious tax incentives for conserving it.
One of the editorial's more curious claims is that Janesville's woes can be attributed in part to "[t]he federal government's conscious neglect of the basic tenets of industrial policy." What tenets might those be? If you ignore that destabilizing-the-Persian-Gulf business, the Bush Administration has been as openly friendly to motoring by gargantuan SUV as is imaginable.
However, the CT may be on to a meta-truth on the industrial policy front. Economics tends to describe production and consumption in highly abstracted terms ('Amalgamated Widgets' etc.), and it seems that's led to an indifference to if not maybe a touch of elite contempt for actually making things. You can see that when Chickenshit John McCain gallantly tells Rust Belt audiences that good jobs are gone forever, or in the more sophisticated version you get out of someone like McKinsey's Diana Farrell (here, from an NYT roundable with Stephen Roach and Josh Bivens):
MS. FARRELL -- This is a big deal in the sense that we see something structural happening. But I would react to the notion that it is a big deal we should try to stop or recognize as anything other than the economic process of change. I think the bigger deal is the fact that we are going to have very serious curtailment of the working age population.This is pretty typical of the 'can't fight Mother Nature' neo-laissez-faire view of the economy, where outsourcing to China in search of a 20 percent unit cost decrease is treated as a matter of universal gravitation rather than human agency. I can also imagine a McKinseyite thinking that the knowledge work we're theoretically specializing in has brains and electrons as inputs, and money as outputs, and who wouldn't want that instead of dirty and tedious manufacturing work. Of course, it doesn't sound quite so good in the Krugman formulation of "selling each other houses... with money borrowed from the Chinese," and when talk turns to offshoring the knowledge work, the narrative would seem to have run away from its tellers.
[...]
MS. FARRELL -- There is an assumption by protectionists that these jobs are going somewhere else, and all this money has been pocketed by C.E.O.'s who take it home. A little more sophisticated version is: It's being pocketed by companies in the form of profits. [Which is to say, knowing what we do about the distribution of the ownership of the means of production, it largely goes to the CEOs or the CEOs' country club buddies. -- TB] One step further and you say those profits are either going to go as returns to the investors in those companies, or they're going to go into new investment by those companies. Those savings enable me, if I am an investor, to consume more and therefore contribute to job recreation, and if I am a company, to re-invest and create jobs. That's important because I agree that we are migrating jobs away, some of which will never return, nor should they.
One thing I'd noticed scanning the notice of proposed rulemaking on U.S. automobile fuel economy standards is that Congress did stick an industrial policy provision in the enabling law: domestic passenger cars are required to have an average fuel economy that's at 92% of the manufacturer's fleet average. So there's an allowance for larger (and hence less fuel-efficient) cars to be built domestically, but perhaps not so much that manufacturers could meet the standards simply by importing the more fuel-efficient ends of their product lines. We'll see how this works out in practice, but at this point the Detroit Three's manufacturing workers' biggest problem is less the outright collapse of the U.S. car market than that they're not screwing together the more marketable end of it.
Labels: Economics, free trade, Trains Planes and Automobiles
Tuesday, April 29, 2008
Two Questions on Economic Growth in Developing Countries
by Ken Houghton
Cross-posted at Economics Question of the Day.
- If the prescription for open markets and universal trade used by many of the "Washington Consensus" is accurate, can someone please cite two examples (I'd probably settle for one, but it would have to be a Really Good One) of companies that have made the transition using that method?
- Relatedly, how is a country supposed to develop a Competitive Advantage in such a scenario?
Cross-posted at Economics Question of the Day.
Labels: Economic Development, free riders, free trade
Wednesday, March 12, 2008
"A Serious Analysis of a Ridiculous Subject, which is of course the opposite of what is usual in economics"
by Ken Houghton
Paul Krugman expands the, er, Foundation of economics with an analysis of trade between Earth and Trantor.
Labels: Economics, free trade, sf
Friday, February 22, 2008
Maine Tobacco Dealers set to go out of Business, thanks to Supreme Court
by Ken Houghton
If that same 17-year-old buys cigarettes over the Internet (without paying state taxes), The Supreme Court believes that's a Great Idea:
I leave it to The Rest of the Story to explain to me what is so special about requiring a confirmation that local retailers are required to make.
Meanwhile, tobacco dealers who rent space and pay taxes and check ID (or get fined for not doing so) in Maine are wondering why they got rogered.
If a 17-year-old tries to buy cigarettes in a store in Bangor, the clerk is required by Federal law to check his or her ID, and refuse the sale.
If that same 17-year-old buys cigarettes over the Internet (without paying state taxes), The Supreme Court believes that's a Great Idea:
The US Supreme Court on Wednesday struck down key portions of a Maine state law aimed at preventing minors from purchasing cigarettes and other tobacco products over the Internet or through other mail-order services. The vote was 9-0.
At issue was whether the 2003 state law was preempted by federal efforts to deregulate the shipping industry nationwide.
In agreeing with the shipping companies, the high court said Maine's law, while well intentioned, interfered with a congressional determination to prevent shipping companies from becoming mired in conflicting state regulations. Instead, Congress sought to leave it to the competitive marketplace to determine which services companies might offer or decline to offer.
"To allow Maine to insist that the carriers provide a special checking system would allow other states to do the same," writes Justice Stephen Breyer in the court's 11-page decision. "To interpret the federal law to permit these, and similar, state requirements could easily lead to a patchwork of state service-determining laws, rules, and regulations." [emphases mine]
I leave it to The Rest of the Story to explain to me what is so special about requiring a confirmation that local retailers are required to make.
Meanwhile, tobacco dealers who rent space and pay taxes and check ID (or get fined for not doing so) in Maine are wondering why they got rogered.
Labels: free trade, Smoking, the rule of law
Tuesday, October 23, 2007
"No-one knows if a roadway's leading nowhere"
by Ken Houghton
US$850 per year puts you at the world median income.
In those circumstances, it's rather easy to claim that globalization is doing some relative good.
(Possibly more later, building on here)
Sobering find of the day:
US$850 per year puts you at the world median income.
In those circumstances, it's rather easy to claim that globalization is doing some relative good.
(Possibly more later, building on here)
Labels: free trade, globalization, Income Inequality
Sunday, September 16, 2007
We're a City of Immigrants
by Ken Houghton
Not only is it the first single from Steve Earle's upcoming album, Washington Square Serenade, it's apparently very true of the NYC Public Schools, which are #22 on Infoweek's list of H1-B Employers in 2006.
Labels: Economics, free trade, immigration, pop music
Thursday, August 30, 2007
Efficient Markets are Definitionally Suboptimal Resource Allocators
by Ken Houghton
As Spencer notes in comments:
Mark Thoma demonstrates that this is necessarily true in basic economic theory, using "bubbles" as an example.
As Spencer notes in comments:
The problem is that this is the way the economy really works-- overshooting in one direction and over correcting in the other.
The problem is economic theory that never builds this into the mainstream models.
We teach the cob-web function in one lecture in intro-economics and then forget it. But the cob-web does a better job of explaining the system than the mainstream theory that academics teach.
It also implies that free markets are inherently much more wasteful than most economist like to believe.
Labels: Economics, free trade, Optimal Resources, teaching
Friday, June 22, 2007
Now THIS is (a move toward) fair trade
by Ken Houghton
No, they haven't stopped playing that McCartney disc. But they have agreed (after claiming last year that they had nothing to do with it) to treat Ethiopian specialty coffees more fairly:
Of course, there is a catch of sorts.
Looks like a deal that will lift traders profits, not farmers. But it's a start.
Good news from Starbucks.
No, they haven't stopped playing that McCartney disc. But they have agreed (after claiming last year that they had nothing to do with it) to treat Ethiopian specialty coffees more fairly:
Starbucks has agreed a wide-ranging accord with Ethiopia to support and promote its coffee, ending a long-running dispute over the issue.
The US retailer will market, distribute and, in some cases, license Ethiopia's range of high-quality coffee brands....
[T]he new agreement acknowledges Ethiopian ownership of popular coffee designations such as Yirgacheffe, Harrar and Sidamo, regardless of whether they are registered or not.
Of course, there is a catch of sorts.
Ethiopian farmers will not receive royalty payments from the deal, but it is hoped that more effective distribution and marketing will help boost demand and, in time, lift prices....
"Having the commitment and support of Starbucks will help enhance the quality of Ethiopian fine coffees and improve the income of farmers and traders." [said Getachew Mengistie, director general of the Ethiopian Intellectual Property Office]
Looks like a deal that will lift traders profits, not farmers. But it's a start.
Labels: free trade
Wednesday, June 13, 2007
Brad DeLong Redefines "Seriousness" Beyond Recognition
by Ken Houghton
In this corner, PhD #1, J. Bradford DeLong, lets Sebastian Mallaby define "economic seriousness." The result is predictable, though not pretty:
One would hope that DeLong—who has previously documented (PDF) and podcast that the gains from NAFTA do not approach what was promised—would know better.
Out of the fear that he doesn't, we present Ph.D. #2, Duncan Black discussing the difference between Free Trade (the economic concept) and "free trade":
CAFTA makes NAFTA look "fair and balanced." If DeLong is seriously endorsing the idea that not objecting to CAFTA should be considered "economic seriousness," both his and Berkeley's reputations are going to take a serious hit.
The standard for the word seriousness has, apparently, become using a phrase that doesn't mean what you would think it does.
In this corner, PhD #1, J. Bradford DeLong, lets Sebastian Mallaby define "economic seriousness." The result is predictable, though not pretty:
In the 2004 election, the Kerry-Edwards ticket forfeited its claim to economic seriousness by opposing trade deals such as the Central American Free Trade Agreement.
One would hope that DeLong—who has previously documented (PDF) and podcast that the gains from NAFTA do not approach what was promised—would know better.
Out of the fear that he doesn't, we present Ph.D. #2, Duncan Black discussing the difference between Free Trade (the economic concept) and "free trade":
And, unlike the axis of Mallaby and Friedman, I understand that not every treaty with the words "free trade" on the cover has all that much to do with "free trade." Even if one is basically pro-free trade, one can object to such things on the grounds that they don't go far enough (still protecting Big Sugar), or that they include unrelated intellectual property protections. [link in original]
CAFTA makes NAFTA look "fair and balanced." If DeLong is seriously endorsing the idea that not objecting to CAFTA should be considered "economic seriousness," both his and Berkeley's reputations are going to take a serious hit.
Labels: Brad DeLong, CAFTA, Economics, free trade, NAFTA, Politics, WaPo
Monday, May 21, 2007
belated Blogging II: Fared Zakaria Wishes For a Pony, Too
by Ken Houghton
More later, but feel free to pile on.
Via AngryBear
What America needs is a new way to tackle trade. It is a C-and-T agenda: cushion and train. The government should help people to weather the shocks of this roller-coaster ride, and it should help train them to be better equipped for the next round of global competition. We do very little of this today. When someone loses his job in America, he loses his health care and pension. Imagine if that didn't happen—and it doesn't in other rich countries—would that worker be as terrified of change? And then imagine if he took a series of retraining and education courses to prepare him for a new job or career.
More later, but feel free to pile on.
Labels: Economics, free trade, Health Care, Journamalism, pension funds
