Economics is Fun, Part 13: International Trade

[Chris]

http://www.youtube.com/watch?v=MvvFwqeLCoE&list=PL06A6035D1EAF3D0E&index= 13&feature=plpp_video



Previous Economics is Fun topics...


Part 1: Value (http://thepoliticalforums.com/threads/1879-Economics-is-Fun-Part-1-Value)
Part 2: Price (http://thepoliticalforums.com/threads/1892-Economics-is-Fun-Part-2-Price)
Part 3: Specialization (http://thepoliticalforums.com/threads/1908-Economics-is-Fun-Part-3-Specialization)
Part 4: Trade (http://thepoliticalforums.com/threads/1922-Economics-is-fun-part-4-Trade)
Part 5: Time (http://thepoliticalforums.com/threads/1948-Economics-is-Fun-Part-5-Time)
Part 6: Money (http://thepoliticalforums.com/threads/1982-Economics-is-Fun-Part-6-Money)
Part 7: Middlemen (http://thepoliticalforums.com/threads/2021-Economics-is-Fun-Part-7-Middlemen)
Part 8: Speculators (http://thepoliticalforums.com/threads/2077-Economics-is-Fun-Part-8-Speculators)
Part 9: Joint Enterprise (http://thepoliticalforums.com/threads/2112-Economics-is-Fun-Part-9-Joint-Enterprise)
Part 10: Taxation (http://thepoliticalforums.com/threads/2207-Economics-is-Fun-Part-10-Taxation)
Part 11: Competition (http://thepoliticalforums.com/threads/2238-Economics-is-Fun-Part-11-Competition)
Part 12: Banking (http://thepoliticalforums.com/threads/2281-Economics-is-Fun-Part-12-Banking)

[Conley]

Governments don't trade, people do. :grin:

Great story of the attempt to price control on the candle makers. His description of the multinational jeans makes me think of our own domestic auto industry, with American cars being made in Mexico and Honda and Toyota having factories here in the U.S. There's no reason for us to emphasize and pay extra for our own auto industry when we can save money buy buying foreign, just like Adam Smith's point about making one's own wine or buying it from the French and pocketing the money one saved.

[Chris]

Right, people trade, governments try to manage trade.

Your second paragraph is about comparative advantage.

[Chris]

SO the question in light of this is what does it mean for the US to have a trade deficit?

[Peter1469]

If the US builds its own manufacturing base, then yes, trade as widely as possible.

But don't forsake your own manufacturing and piss on us while asserting that it is raining.

[Chris]

If the US builds its own manufacturing base, then yes, trade as widely as possible.

But don't forsake your own manufacturing and piss on us while asserting that it is raining.
Not real clear on your point, what do you mean "US builds"? Can't be government, right? So how sell individuals to do this?

[Conley]

If the US builds its own manufacturing base, then yes, trade as widely as possible.

But don't forsake your own manufacturing and piss on us while asserting that it is raining.

The U.S. is still the top manufacturer in the world by some measures and at worst number two. It isn't that we don't manufacture anymore, it's that we've become more efficient at it so there are fewer manufacturing jobs. The manufacturing is still happening here.

[Conley]

Not real clear on your point, what do you mean "US builds"? Can't be government, right? So how sell individuals to do this?

I take it to mean the nation, not the government.

Certainly though, government can make the environment much more conducive to the creation of manufacturing centers.

[Chris]

OK, so the nation of individuals, since there is no collective.

Agree, government can get out of the way by making the US a tax haven for investment and entrepreneurship in manufacturing here.

[Peter1469]

Not real clear on your point, what do you mean "US builds"? Can't be government, right? So how sell individuals to do this?

In the common sense of the term.

Of course it is businessmen building the businesses and government applying proper regulations and tariffs to allow our markets a chance to grow.

[Chris]

In the common sense of the term.

Of course it is businessmen building the businesses and government applying proper regulations and tariffs to allow our markets a chance to grow.
Right, businesses, not the US.

Tariffs only harm consumers.

[Peter1469]

Right, businesses, not the US.

Tariffs only harm consumers.


Generalities are usually not correct. I imagine that if you bought a house in Florida after the Hurricane Andrew rebuilding started you would have preferred that tariffs were in place to make it less likely that Chinese drywall was used in your new home. Of course the market corrects..., but it corrects after thousands of houses are full of toxic chemicals.

[Chris]

Generalities are usually not correct. I imagine that if you bought a house in Florida after the Hurricane Andrew rebuilding started you would have preferred that tariffs were in place to make it less likely that Chinese drywall was used in your new home. Of course the market corrects..., but it corrects after thousands of houses are full of toxic chemicals.
Your example has to do with health regulations not tariffs which you spoke of above.

And, no, I would prefer a free market choice of cheaper or more ex[ensive, lower or better quality.

[Peter1469]

And I would prefer that the US made its money to run the federal government via tariffs than taxes. That at least to keep the federal government small as intended.

[Chris]

Though we already agree the US does not run businesses, does not make money.

[Peter1469]

right to the first part.

The second part was true for much of the history of the US. That is how the federal government funded its activities.

[RollingWave]

Generalities are usually not correct. I imagine that if you bought a house in Florida after the Hurricane Andrew rebuilding started you would have preferred that tariffs were in place to make it less likely that Chinese drywall was used in your new home. Of course the market corrects..., but it corrects after thousands of houses are full of toxic chemicals.

Information transparency is one of the larger underlying problems of today's economy system , both in the sense that consumers are unaware if they are ripped off or not (quality or quantity wise) and also that the cost of acquiring the information often outweight the gains in difference.

[Peter1469]

Information transparency is one of the larger underlying problems of today's economy system , both in the sense that consumers are unaware if they are ripped off or not (quality or quantity wise) and also that the cost of acquiring the information often outweight the gains in difference.

Good points.

[Chris]

Information transparency is one of the larger underlying problems of today's economy system , both in the sense that consumers are unaware if they are ripped off or not (quality or quantity wise) and also that the cost of acquiring the information often outweight the gains in difference.
What you're talking about is generally called transaction costs. Peter's example of a tariff is a good example of such costs for there is what is seen, helping US businesses, and raising revenue, and there is what is unseen in arguments for tariffs, the increased costs to consumers and distortion of the main information available, pricing.

[Chris]

Let's tie some ideas together, the idea of comparative advantage and preserving a manufacturing base for example through tariffs. A good example of Schumpeter's creative-destruction, the following chart shows, among other things, the US has fallen in manufacturing but risen in education/health services.

http://i.snag.gy/stS1S.jpg

My source: New Commanding Heights Watch (http://econlog.econlib.org/archives/2012/03/new_commanding_3.html).

[Conley]

It stands to reason that manufacturing jobs would drop though. That's partly because of automation and increases in efficiency, and also due to the cyclical nature of the industry.

I hunted the original source of that chart:

http://research.stlouisfed.org/publications/review/12/03/135-152Andolfatto.pdf

"But there appear to be clear trends in at least two sectors: Manufacturing sector employment is in longrun decline, while employment in the education and health services sector is steadily on the rise—even through the most recent recession. In terms of cyclicality, there is no surprise. To take two extremes, construction sector employment is highly cyclical, while government sector employment is not. Roughly half of the industries in Figure 2 display employment levels that have leveled off during the past year, while most other industries experienced an increase."

(top of page 139)

[Peter1469]

Great chart; just remember that sectors like manufacturing and construction, mining and logging have dropped a lot in numbers of employees, but not as much in productivity (think automation).

[Conley]

Isn't that what I just said? :grin: We agree.

[Peter1469]

I think we posted at the same time. Yours was not up before I posted.

[Chris]

Well, yes, a lot of manufacturing jobs are being replaced by automation. But rise in automation creates new jobs designing, creating, running and maintaining those automated machines.

[Conley]

Well, yes, a lot of manufacturing jobs are being replaced by automation. But rise in automation creates new jobs designing, creating, running and maintaining those automated machines.

True, but those new jobs are still much fewer in number than would be needed for the same production a couple of decades ago.

[Peter1469]

If you want to employ a lot of people to build a road, give them shovels. If you want the road built quickly give them modern equipment.

[Chris]

Here's a surprisingly interesting article from NPR, What America Sells To The World (http://www.npr.org/blogs/money/2012/03/14/148460268/what-america-sells-to-the-world?ft=1&f=93559255)
It's a myth that the U.S. doesn't make anything anymore. It's a myth that we don't export anything to the rest of the world.

Yes, we import more than we export. Our trade deficit last year was $558 billion


But we export a lot. Last year, U.S. exports were worth $2.1 trillion. Which raises a simple question: $2.1 trillion worth of what?
The rest of the article visualizes the data on exported goods and services.

The most surprising to me was the following:

http://i.snag.gy/0lAFm.jpg

[Mister D]

The country by country breakdown is pretty interesting. A substantial amount of our oil comes from Mexico and Canada. It looks like we sell it back to them refined.

[Conley]

Here's a surprisingly interesting article from NPR, What America Sells To The World (http://www.npr.org/blogs/money/2012/03/14/148460268/what-america-sells-to-the-world?ft=1&f=93559255)
The rest of the article visualizes the data on exported goods and services.

The most surprising to me was the following:

http://i.snag.gy/0lAFm.jpg


Very interesting. I'll check out the link.