Are theories of free trade sound?

[FreedomPhilosophy]

Pop your free-market hat on, I'd appreciate any critique of this article:http://users.speakeasy.net/~peterc/wto/theory.htm

[dsayers]

Sorry, no.

 

 

After debating free trade with protestors at a recent forum in Seattle, World Trade Organization (WTO) Director-General Mike Moore lamented: "I thought the case had been made, but I guess we have to back up the truck and explain how we got here."

 

Riding shotgun on Moore's truck are the hordes of the dismal science. In the United States, at least, the benefits of free trade are virtually an article of faith for the economics profession. One study found that 97 percent of economists here agreed with the statement: “Tariffs and import quotas reduce general economic welfare.” Tariffs are taxes on imported goods and quotas are restrictions on the quantities of imports.

 

The theoretical underpinnings of free trade, however, may not be as rock-solid as that figure indicates. So far, no economic Luther has marched up to the Geneva cathedral and nailed heretical theses to the door. But in the wake of five years of crises in Latin America, East Asia and Russia, a growing number of voices are questioning the orthodoxies of bare-knuckle globalization.

 

Backing up a truck, riding shotgun, dismal science, article of faith, heretical theses, bare-knuckled globalization... I don't know what this guy is talking about. I suspect he doesn't know what he is talking about. It's hard to get three paragraphs into unsolicited oration without actually saying anything. I would read further to try and figure it out, but his choice of verbiage suggests he's not going to be providing anything honest or factual.

[FreedomPhilosophy]

Sorry, no.

 

 

Backing up a truck, riding shotgun, dismal science, article of faith, heretical theses, bare-knuckled globalization... I don't know what this guy is talking about. I suspect he doesn't know what he is talking about. It's hard to get three paragraphs into unsolicited oration without actually saying anything. I would read further to try and figure it out, but his choice of verbiage suggests he's not going to be providing anything honest or factual.

Sophistry then, just word salad?

[Euphoric]

Sophistry then, just word salad?

Yeah, it's basically just a way to avoid the fact that anything not free market is unethical.

 

"Is a free market for marriage really efficient? I had thought so but then I bucked the shot, quivered my throat and looked at the hard-fact data: when men and women freely chose to marry, neither were happy with their choices shown in several recent studies of marriage over the last 50 years. As humbling as it sounds, I decided to back down from my previously stone-settled position on the matter."

 

I didn't read the whole thing but it seems pretty stupid and the guy writing it probably knows it, he's just snickering to himself in joy as he waits for the people who will take his article seriously in the hopes of getting himself further/secure economically at some point in his life.

[TheRobin]

Idk, to me it seems like yet another person who uses the word "free trade" and completely misses the thousands of regulations and taxes and licencing etc that exists nowadays. Not to mention that msot of these huge corprations get enormous benefits from bribing the state for benefits.I guess if he wanted to make a good case here, he should start by clearly defining what he means wth "free trade" and where in the world that definition even applies. Else it's just either sophistry or lazyness to push an already held conclusion, in my opinion.

[Daniel Unplugged]

Since free trade is beneficial (I will not attempt to argue it here), you can be near certain that if people are becoming poorer, there is very little free trade going on. Did somebody say price controls in Venezuela?

[marius]

I just started delving deeper into the basics of economics, from an austrian perspective.

And my alarm bells of logical fallacies are constantly on.

 

First is the standard that for a person to trade, he must perceive the action as being beneficial (be it because of the object, his state of mind,etc). But this is true only for that exact moment.Either this is a tautology that adds nothing to knowledge. Or if you may understand the definition in a different way, how can it be falsified?

And we know for a fact that people are crap at making decisions, so whats the use of the idea that in the moment they felt it was good? How does this help explain anything?

 

Please let me know if i need to clarify further. Next i have problems with the concept of supply and demand and its uses or "utility".

[Daniel Unplugged]

I just started delving deeper into the basics of economics, from an austrian perspective.And my alarm bells of logical fallacies are constantly on. First is the standard that for a person to trade, he must perceive the action as being beneficial (be it because of the object, his state of mind,etc). But this is true only for that exact moment.Either this is a tautology that adds nothing to knowledge. Or if you may understand the definition in a different way, how can it be falsified?And we know for a fact that people are crap at making decisions, so whats the use of the idea that in the moment they felt it was good? How does this help explain anything?".

Somehow I missed the logical fallacy you were about to point out.People are actually very good at making economic decisions. Doing a cost benefit analysis is incredibly easy. The cost is just the price, measured in a currency of known value. The benefit is whatever utility you gain from the product in question, which is also, to a large degree, known. Who ever buys a product without knowing what it is? People trade if they believe the trade makes them better off. Sometimes people make mistakes, but thats life.Rather than being a logical fallacy, it is merely stating the bloody obvious. Note that the theory of gravity starts "things tend to fall", the knowledge of which is critical to developing the theory further.

[Mike Fleming]

 

 

"Is a free market for marriage really efficient? I had thought so but then I bucked the shot, quivered my throat and looked at the hard-fact data: when men and women freely chose to marry, neither were happy with their choices shown in several recent studies of marriage over the last 50 years. As humbling as it sounds, I decided to back down from my previously stone-settled position on the matter."

 

Back to arranged marriages, I guess then. 

 

And he says "neither were happy"  as if to intimate that nobody is happy with their marriage which is clearly false.  

 

I would tell the person that the solution to this problem would be to give people more information so that they can make better choices but I think it's likely he just wants an excuse to control people.

[greekredemption]

Perhaps it is worth differentiating between what is right and what is good.

[marius]

Daniel, how about the principle of falsifiability/verifiability? begging the question? opposing emprical evidence? tautology?

 

 

Somehow I missed the logical fallacy you were about to point out.

People are actually very good at making economic decisions. Doing a cost benefit analysis is incredibly easy. The cost is just the price, measured in a currency of known value. The benefit is whatever utility you gain from the product in question, which is also, to a large degree, known. Who ever buys a product without knowing what it is? People trade if they believe the trade makes them better off. Sometimes people make mistakes, but thats life.

Rather than being a logical fallacy, it is merely stating the bloody obvious. Note that the theory of gravity starts "things tend to fall", the knowledge of which is critical to developing the theory further.

 

And when you say this, i see that you have no idea how reality works. I am not talking in economics perfect world simulation exercises. In the real world things are more complicated.

People are actually very good at making economic decisions- i dont even know what to say. How about the people who never read a book after school? or those who cant think rationaly? those who hit their chlidren? those who watch the tv to get the truth?

 

And your analogy of gravity is weak, because the statement i used is not saying "people tend to trade/ people tend to do whats they prefer" (observation that is falsifiable)

Instead, It is trying to explain and its failing.

 

Seriously man get off the computer and walk outside.

[cynicist]

First is the standard that for a person to trade, he must perceive the action as being beneficial (be it because of the object, his state of mind,etc). But this is true only for that exact moment.

Either this is a tautology that adds nothing to knowledge. Or if you may understand the definition in a different way, how can it be falsified?

And we know for a fact that people are crap at making decisions, so whats the use of the idea that in the moment they felt it was good? How does this help explain anything?

 

Please let me know if i need to clarify further. Next i have problems with the concept of supply and demand and its uses or "utility".

 

Yeah, you failed to demonstrate how that is tautological, and it's not a fact that people are bad at making decisions. (If that were true the human race wouldn't exist) The idea that people don't make trades without perceiving a benefit is establishing a basic fact that you can build larger ideas on. So when someone comes along and presents economic theory X, based on human beings being completely irrational and not knowing their head from their ass, you can discard that theory because one of its basic premises is incorrect. 

 

How can it be falsified? Easy, nobody trades absolutely anything since what they have is always more valuable than what they would be trading it for. Try a little more humility and maybe ask some questions before you say people have no idea how reality works... 

[Cosmin]

And we know for a fact that people are crap at making decisions

 

So you were crap when you decided to participate in this thread, so you should stop.

[marius]

If people are so great at making decisions, why is there a need for philosophy or this show?

BTW did i insult you?

Why are you so hostile? im trying to understand something. looks like i was too optimistic of some members of this community. Did i attack your dogma so that you get so anxious?

 

So you were crap when you decided to participate in this thread, so you should stop.

 

...So when someone comes along and presents economic theory X, based on human beings being completely irrational and not knowing their head from their ass, you can discard that theory because one of its basic premises is incorrect. ..

[cynicist]

If people are so great at making decisions, why is there a need for philosophy or this show?

BTW did i insult you?

Why are you so hostile? im trying to understand something. looks like i was too optimistic of some members of this community. Did i attack your dogma so that you get so anxious?

 

Translation: I have no arguments against what you are saying, so I'm going to imply that you are irrational and dogmatic in your thinking.

 

I appreciate that you let me know early, saves us both time.

[Freedomain]

So you were crap when you decided to participate in this thread, so you should stop.

 

Cosmin - That's venturing into personal attack territory which goes against the forum rules.

[square4]

Pop your free-market hat on, I'd appreciate any critique of this article:

 

http://users.speakeasy.net/~peterc/wto/theory.htm

 

 

The article makes an argument against free trade based on a number of advantages of buying locally instead of abroad, such as: stimulation of local industries, better employment and larger wealth in the long run for that area, and environmental friendliness. The idea of buying more things locally might be a very good idea. The problem is the author of the article wants to force it using government, which is a bad idea.

 

Besides the mentioned advantages, there are also disadvantages of buying locally, when a competing product from abroad is less expensive. It increases the cost of living for the consumer. Also, if a product is more expensive than another product, this suggests its production took more resources from society.

 

Because there are both advantages and disadvantages for buying locally, people have to weigh these factors and then make a decision. People will choose to buy locally or abroad depending on which factors they consider more important. Politicians and economists are not the only ones that have the ability to consider long term social consequences. Ordinary people can do that too. We don't need enforced trade restrictions to promote local industry. People can do this themselves voluntary, and they will do so, if they consider it important enough.

 

The decision of people to buy local or remote products might be wise or unwise, but it is their money they are spending. They are not committing a crime, so other people have no right interfering with it through threats and sanctions. This implies free trade is the only ethical option.

 

First is the standard that for a person to trade, he must perceive the action as being beneficial (be it because of the object, his state of mind,etc). But this is true only for that exact moment.

Either this is a tautology that adds nothing to knowledge. Or if you may understand the definition in a different way, how can it be falsified?

And we know for a fact that people are crap at making decisions, so whats the use of the idea that in the moment they felt it was good? How does this help explain anything?

 

 

It is indeed only true at the exact moment of the decision, but this is also the moment when the coercion is active (if any). So if someone is unemployed because of enforced minimum wage laws, we know he would have preferred to work at the lower rate, compared to having no work at all.

 

Those that are not good at making decisions, might say afterwards: I wish I had made another decision. They usually don't say: I wish another person would have threatened me with sanctions. In other words, even if they make mistakes, people usually prefer to make their own decisions. And even if they prefer that someone else decides for them, this would be like voluntarily listening to advice.

 

The question whether a person was right in his evaluation of perceived benefit is a different subject altogether. It requires an objective theory about what is beneficial.

[Livemike]

"Comparative advantage originally meant that those who were “relatively most efficient in industrial production (by good fortune Britain) would continue to industrialize,” notes historian Douglas Dowd, “while the most relatively efficient hewers of wood and drawers of water would go on doing just that.” Not surprisingly, the theory has been most popular in the dominant economic powers: Britain in the 19th Century and the United States in the 20th."

Actually it didn't mean that at all.  All it meant was that those who were most efficient should do something.  That doesn't necessarily mean those are _currently_ doing it.  For instance if they hadn't found a way to use coal instead of wood Britain would have had to abandon steel-making as wood became practically non-existent in the Isles.

 

"In the 1840s, Ricardo's followers promoted the opening of British grain markets in part as a way to alleviate the Great Famine in Ireland. But Irish peasants remained too impoverished to buy even cheaper grain. In free trade's first collision with skewed income distribution, one million died of hunger and disease."

Except that Ireland in the 1830s and 40s wasn't anywhere near a free trade economy.  It was run by the British specifically to make it WEAKER.  The restrictions on economic activity were massive and deliberately designed to impoverish an ethnic group.  To blame this on free trade is at best utterly ignorant, at worst just dishonest.

 

"Even the paterfamilias of free-market economics, Adam Smith,"

He was nothing of the kind.  In fact he was considerably LESS free market than most economists at the time.  

 

"On the other hand, free-market nostrums indiscriminately applied have often wreaked havoc. In post-Soviet Russia, “reformers” relied on a draconian version of comparative advantage to eviscerate any industry that could not compete internationally. "

Actually what happened was that "reformers" simply allowed gangsters to take things over and didn't bother with the Rule of Law.  To use this against the free market when the former USSR never even came close to free markets, is absurd.  Those parts that were higher on the "Index of economic freedom" did best.  

 

"But the Pure Theory of Trade is based on a bevy of what Dominick Salvatore of Fordham University calls “magnificent assumptions.” It presumes, among other things, that competition is perfect, capital cannot move between countries, and all resources are fully employed."

 

The piece doesn't even try to support the claim that free trade theory requires perfect competition or that capital cannot move between countries, with good reason.  There was NEVER such an assumption.  In fact free trade theory includes the idea that it's a good idea for capital to move between countries.  Comparative advantage works whether or not the capital that contributes to it can move.  As for perfect competition that has nothing to do with free trade theory.  They are simply making things up.  

 

"The benefits of comparative advantage presuppose full employment, says Mark Weisbrot, research director of the Preamble Center in Washington, DC. Otherwise “you can no longer say that each country is made better off through further opening up of trade,” because too many workers displaced from losing industries will end up in worse shape"

Nope, whether or not there is full employment is IRRELEVANT for whether free trade works.  If there is unemployment that's because it's too expensive to employ people.  Free trade lowers the cost of living making it cheaper to employ people at the same real wages.  Yes a _change_ to free trade will cause temporary unemployment as people take time to switch jobs, but so will a _change_ to protectionism.  The thing causing the unemployment is a change in patterns of economic activity, which would occur regardless of the _direction_ of the change.

 

"And what economists call the “negative externalities” suffered by society—families torn apart, communities hollowed out—are not fully captured by the statistics."

Why would there be more "families torn apart, communities hollowed out" with free trade than without it?  Price's 1st rule of argumentation, if you pull it out of your ass, it's shit.

 

This guy also gives us a massive sob-story about how badly low-skilled workers are doing in the developed world due to free(ish) trade.  Hey doesn't that mean that low-skilled workers in the developing world are doing their work?  And that these people would logically be some of the "winners"?  He doesn't cover that because he doesn't want to face the question, who needs the money more, US or third world workers?

 

"Another important problem with comparative advantage is that it is static: it accepts the current balance of power and wealth between countries as a given."

Actually comparative advantage isn't necessarily static and indeed has changed many times in the last 20 years.  The "current balance of power and wealth" has changed drastically.

 

"The way comparative advantage is often applied to poor countries, says Weisbrot, "

Applied by who?  The whole point of free trade theory is that government doesn't decide how to apply it.  

 

" But relying exclusively on these sectors can be a trap, according to Richard Brinkman of Portland State University, stunting an economy's capacity to grow in more productive directions."

But free trade theory doesn't say to "rely exclusively" on anything.  It simply says that using government force to dictate what to rely on doesn't work, and it doesn't.

 

"The International Monetary Fund constrains many poor countries "

And has nothing to do with free trade.

 

"Brinkman asserts, is that it tends to equate simple statistical growth with development."

Actually it doesn't.  There is nothing in free trade theory that says anything about the validity or not of "simple statistical development".  Whether or not the benefits of trade would show up in the statistics has nothing to do with free trade theory.  The benefits of trade might for instance be taken in more leisure time for the people of both countries and the "economy" not growing at all.  

 

 "A more fundamental criticism levied against free trade is that it is not socially or environmentally sustainable."'

And it's also a stupider one.  Why would free trade be any less sustainable than inefficient production, which by definition uses MORE scarce resources?

 

"Critics like David Morris of the Institute for Local Self-Reliance argue for local self-sufficiency."

I see and is there ANY reason to think we should listen to him?  I mean simply saying critics argue isn't an argument.  

 

"They propose giving up some marginal economic efficiency in order to promote more basic human and ecological values."

I see, and why would producing within a country rather than outside it promote any of these values?  They don't say.  They just assume that there is an argument there, somewhere, that free trade damages these values.  Even if that were true, where is the evidence that _the best_ way to serve these values is through restricting free trade?  Where is the evidence that giving up the benefit of free trade is the cheapest way to gain these benefits?  This is a fundamentally dishonest way to argue.

 

"Theories aside, say some critics, the most powerful nations and corporations dominate world markets so much that, like high mountains, they make their own trade weather."

 

And why would that mean that free trade is a bad idea?

 

"And some of free trade's strongest proponents practice it only when it suits them. At the same time that the Clinton administration was selling the North American Free Trade Agreement (NAFTA) and the WTO, Greider observes, it was also helping to create a worldwide aluminum cartel that curtailed production and propped up prices."

Again, how does this invalidate free trade theory?

 

"But in the wake of the Asian crashes, prominent economists have singled out financial tsunamis as a contributing factor."

Said "tsunamis" were caused entirely by government monetary policy.  In fact without the combination of fiat money and central banks none of them could have happened.  None of this is covered of course because this isn't an article on economics, it's a collection of excuses for corruption.

 

" “Capitalism is a dynamic system, it produces productivity gains, and eventually people will capture some of those”, says Weisbrot. “The question is: do we want to make the rules of the game such that it takes half a century for them to do so like it did during the Industrial Revolution.” "

Actually the industrial revolution workers gained pretty much instantaneously.  In fact if it weren't for the enclosure movement, that massively increased wage labor supply by stealing the commons, it would have raised the wages as soon as it happened.  

 

"Is child labor a defensible edge in competitive labor markets or a violation of basic human rights? "

Which right would that be, the right to starve by age 10?
 

"Are restrictions on hormone-treated beef a restraint of trade or a legitimate consumer protection? "

Is anyone forcing people to eat said beef?  If the consumers want the beef they clearly don't want that "protection".

 

" they are about what root values should be incorporated into the trading system, and whether standards should be harmonized up or down."

Who says that everyone has to incorporate the same values?  Why do you get to "harmonize" your standards onto someone else's life?
 

"At the crux of the debate are conflicting conceptions of democracy, of how much power citizens should have to regulate their living conditions when they intersect with international trade."

Actually it goes deeper than that.  How much power should other people have to determine how I live my life?  Because when you control my trade you control my life.  Where do you get the right to do that?

"As Jeffrey Garten, former Under Secretary of Commerce for International Trade, asked recently in the New York Times: “How does a sovereign nation govern itself effectively when politics are national and business is global? When the answers start coming, they could be as radical and as prolonged as the backlash against unbridled corporate power that took place during the first 40 years of [the 20th century].” "

Actually in the first 40 years of 20th century saw a backlash against free trade that vastly increased corporate power.  In mean how ignorant must you be to call people like Hitler, Mussolini, Roosevelt (either one) or Churchill a "backlash" against corporate power?