Monday , November 18 2019
Home / S. Sumner: Money Illusion / Trade: A reply to commenters

Trade: A reply to commenters

Summary:
I get certain comments quite often, so perhaps I should reply in one place. 1. “You should not say “we”, you should say “the US government”. Guilty as charged; it’s a habit that’s hard to shake. Thus when I say “I hope the US loses the trade war”, I actually mean I hope Trump loses the trade war, in which case the US will win. In my defense, lots of people make the same mistake. They’ll say “The US beat Uruguay in the World Cup”, not the US football team beat Uruguay’s team at the World Cup.” 2. “Why do you say public opinion polls are misleading, then cite them when it suits your interests?” When I cite public opinion polls, it’s generally to push back against the conventional wisdom on an issue. Thus if I cite polls showing that American’s increasingly support trade, it’s

Topics:
Scott Sumner considers the following as important:

This could be interesting, too:

Menzie Chinn writes Making America Great Again (in Indebtedness): Net International Investment Position

Scott Sumner writes Instrumental beliefs, prediction and reality

Tyler Cowen writes Friday assorted links

Scott Sumner writes Recessions in a post-inflation world

I get certain comments quite often, so perhaps I should reply in one place.

1. “You should not say “we”, you should say “the US government”.

Guilty as charged; it’s a habit that’s hard to shake. Thus when I say “I hope the US loses the trade war”, I actually mean I hope Trump loses the trade war, in which case the US will win.

In my defense, lots of people make the same mistake. They’ll say “The US beat Uruguay in the World Cup”, not the US football team beat Uruguay’s team at the World Cup.”

2. “Why do you say public opinion polls are misleading, then cite them when it suits your interests?”

When I cite public opinion polls, it’s generally to push back against the conventional wisdom on an issue. Thus if I cite polls showing that American’s increasingly support trade, it’s to push back against claims that Trump was elected because Americans increasingly oppose trade. The burden of proof is on those that make the original assertion.

Here’s another way of making the point. If you want to show that anti-trade feeling is on the rise, you must first find surveys that show that to be true, and then prove the surveys are not biased by the wording of the question. I simply pointed out that those fashionable Trump experts hadn’t even surmounted the first hurdle; the polls don’t even show what they claim. If they want to find alternative evidence they are free to do so (perhaps mind reading machines?), but thus far they’ve failed to find non-poll evidence for their claims.

3.  “Even if free trade is generally good, shouldn’t the US launch a trade war to stop the Chinese from stealing IP?”

Probably not, for a variety of reasons.  It’s almost inevitable that lower income places will steal IP from the rich.  American teenagers used to illegally download songs and movies.  They didn’t think they were doing anything seriously wrong—more like jaywalking.  They certainly didn’t view themselves as being the moral equivalent of burglars.

When America was young we stole lots of industrial secrets from the UK. Europe stole the compass, gunpowder, paper and printing, porcelain, etc., from the China.   That’s the way the world is.  It’s not just the Chinese; the Indians, the Vietnamese, and other developing countries do the same thing.

Even if it’s bad, the average American suffers very little harm.  Tech billionaires lose some profits, but if it helps China develop faster that actually helps average Americans, as we benefit in multiple ways from a world that moves from poor to middle class.

And even if we should retaliate, trade wars are a blunt instrument, unlikely to be effective and likely to hurt lots of innocent bystanders.  If there’s proof that a specific China company stole IP from a US tech firm, then you might want to blackball that specific Chinese firm, in the way we’ve gone after Huawei.  But not an all out trade war.  The Chinese government probably couldn’t even stop IP theft if it wanted to.

We’d be better off focusing on positive initiatives, such as reforming our IP laws.  How about reducing copyright protection from nearly 100 years to more like 10?  Hollywood makes plenty of money from songs and movies in the first 10 years, after that allow America consumers to benefits from cheap goods that can be produced at near zero marginal cost.  Remove IP protection from lots of dubious “business practices” that are far from the original vision of patent laws.

The trade war is hurting lots of people all over the world, including in America.  It’s rarely the case that a four cushion shot in billiards will work, and it’s rarely the case that the indirect effect of highly destructive policies will eventually offset the upfront costs.


Tags:

 
 
 
Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".

Leave a Reply

Your email address will not be published. Required fields are marked *