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Do Tariffs Accelerate Growth In Poor Nations?

TheAtheistAllegiance
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12/24/2011 2:53:48 AM
Posted: 4 years ago
I was arguing with a friend about trade restrictions and their harm. For the time being, he admitted that lower tariffs are beneficial for established economies with strong/advanced industry, but he still thinks that free trade is harmful to the less developed economies since it's nearly impossible for a Nigerian entrepreneur to compete with someone like Microsoft, or whatever. However, through protectionism, Nigerian industry could at least get onto its feet and THEN compete in the global market, but not without tariffs being utilized FIRST.

This seems to make logical sense.

As for empirical evidence, he cited the history of the Asian Tigers, who implemented high tariffs on imports and subsidized exporting industries [Fair Trade], which supposedly accelerated the rise to economic prominence.

http://www.wordiq.com...

I still have my doubts as to whether or not this could serve as a wide-ranging prescription for rapid economic growth in less developed economies. I'm wondering what counter-evidence/arguments anyone might have - it would be very helpful.

Also, if someone happens to just know a lot about the topic, please lay out everything you got.
darkkermit
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12/24/2011 1:28:07 PM
Posted: 4 years ago
I actually got into a huge argument with sieben with this awhile back.

Overall, free trade is good. You can cite comparative advantage for that. Comparative advantage states that both parties benefit from trade, even If one society has an absolute advantage (better at everything) then the other nation.

However, this model above is just for the short run and requires a lot of assumptions to work. If a society wants a certain industry to overtake another, then tariffs are required due to the effects of networking effects and economics of scale. Networking effects are once a product becomes more valuable once more and more people start using it. Also economics of scale, a company can produce more output per input, the larger it grows.

An industry takes time to develop these networking effects and economics of scale, so tariffs can be good for long term economic growth for developing nations.

Not an expert on it though. If your really that interested, you can read Paul Krugman's "International Economics" book .
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TheAtheistAllegiance
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12/24/2011 1:56:51 PM
Posted: 4 years ago
Thanks for the info. That's why I'm sort of agreeing with him on that point, but because he's a little Commie retard, he's going to use that to push the general statement that "free trade is harmful" and then triumph how horrible Capitalism is, blah blah blah.

I would love to read a lot of books like that, especially The Wealth Of Nations, but I don't have the time or patience for books..
TheAtheistAllegiance
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12/24/2011 2:03:10 PM
Posted: 4 years ago
I am curious about how the time lapse factors into this. The Asian Tigers basically built up their own industry before allowing imports, which might be the only reason companies like Samsung exist.

BUT, in theory, I think that consumers in these less developed economies would have extra cash due to cheaper imports, which could be used for domestic investment. But like you said, even if barriers to entry could be overcome, economies of scale and the networking effects of foreign multinationals would basically clean house with any domestic company just starting out, which might leave a nation unable to really compete without tariffs.
TheAtheistAllegiance
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12/24/2011 2:51:40 PM
Posted: 4 years ago
I THINK I GOT IT.

I knew somehow that there was a problem with the Infant Industry Argument, the main one being that there is no guarantee that the nation in question's industrial base will ever overcome its foreign competitors. For instance, the US could slap tariffs on Japanese imports (cars), but what purpose is that gonna serve? Yes, domestic auto manufacturing may be somewhat revived, but in the meantime, consumers are dealing with crappier cars for a higher price, which may be exacerbated by the effects of having no foreign competition.

There's also an information gap, and as with any state regulation, the possibility of political corruption and manipulation. Not only does the state, or anyone for that matter, have a tough time knowing which industries to protect (Argentina was never able to compete with Microsoft despite its efforts, which = money wasted on a multitude of different levels), but the process is likely to get muddled by lobbyists, which isn't gonna be good for anyone. It's essentially picking winners and losers, which can get messy, as seen with some of Obama's "chosen" alternative energy bankruptcies.

Ironically though, I do support picking winners and losers in the form of subsidization, just not trade restrictions. An example would be the way Singaporean government invests in export industries, or whatever.

Plus, if developed economies are shifting manufacturing to less developed economies, then what difference does it make? The nation still has an industrial base that's employing people, it's just owned and operated from abroad. And on top of that, the wealth and wages generated from this form of free trade will allow for natives of the less developed countries to have money for education and investment. For instance, a Chinese businessman recently bought out a very large company in Portugal (investment), or theoretically, he could have used that money for an education in business administration, which could be utilized in a managerial position within one of these multinational companies operating within China.

You know more about economics in general than I do, so if you think there's anything wrong with my reasoning, or if history/reality isn't backing me up, tell me what you got.
Ragnar_Rahl
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12/25/2011 1:18:50 AM
Posted: 4 years ago
We cannot isolate factors for the Asian Tigers' success empirically-- empirically, the Asian Tigers mix a vast muddle of differences from one another and from other countries. Latin America tried the same approach to tariffs for a time with much less lauded results in any case (They even had a name for it, can't remember what the name was though).

Of course, the victims of government policies are often invisible, so even if we could confirm that Asian tariffs grew some industries, we'd never hear about the ones it destroyed (after all, they are ash on the heap of history).

Ironically though, I do support picking winners and losers in the form of subsidization
This is more likely to be successful in achieving visible results for the targeted industry than tariffs (as it doesn't alienate the customer base of the industry with high prices, leading to a potential for subsitution or reduced consumption). It also makes it explicit how much present value is being spent. Unfortunately, though, substitution is a safety valve that mitigates the harms of such policies-- taking it away means the harms are even bigger, even if they are more visible. Indeed, the reverse occurs, consumption increases, your "infant industry" eventually becomes a mammoth institution that is intertwined with the government, that the government cannot readily get rid of. Governments change tariffs all the time, but good luck getting the elimination of a subsidy through Congress.

So, in short:
Pro of subsidy vs tariff:
Subsidy makes it more obvious wtf you're doing.

Con of subsidy vs tariff:
Doesn't matter what you see, you won't be able to do anything about it, you're locked in.
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
Royaltee
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12/25/2011 1:53:11 AM
Posted: 4 years ago
At 12/24/2011 1:28:07 PM, darkkermit wrote:
If a society wants a certain industry to overtake another
You start off with a rather silly if-then statement. There isn't really any collective society that makes decisions. Consumers make decisions on an individual basis. And for the most part, consumers prefer low-priced, high-quality goods to highly-priced, low-quality goods. By saying that consumers can't buy from [international] firms that offer low-priced, high-quality goods unless that firm increases its prices due to tariffs, then you are necessarily hurting consumers (and thus "society").

then tariffs are required due to the effects of networking effects and economics of scale. Networking effects are once a product becomes more valuable once more and more people start using it. Also economics of scale, a company can produce more output per input, the larger it grows.
Here you define networking effects and economics [sic] of scale. No justifications for the Infant Industry argument are forwarded.

An industry takes time to develop these networking effects and economics of scale, so tariffs can be good for long term economic growth for developing nations.
Non-sequitur. In what world does the latter part of the sentence follow from the former?

Not an expert on it though. If your really that interested, you can read Paul Krugman's "International Economics" book .
Krugman is generally incompetent on almost all matters of economics, though his positions on international trade are somewhat more sane. I wouldn't recommend that book, or anything by Krugman for that matter. Economics in One Lesson by Henry Hazlitt is a generally sound introduction to economics. (Chapters eleven-fourteen touches on international trade/tariffs and the book is available free online).
TheAtheistAllegiance
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12/25/2011 10:20:14 PM
Posted: 4 years ago
At 12/25/2011 1:18:50 AM, Ragnar_Rahl wrote:
We cannot isolate factors for the Asian Tigers' success empirically-- empirically, the Asian Tigers mix a vast muddle of differences from one another and from other countries. Latin America tried the same approach to tariffs for a time with much less lauded results in any case (They even had a name for it, can't remember what the name was though).

From what I know, Latin American nations were much less open to international markets in general, and that might be why many are still lagging behind. However, the Asian Tigers all did have similar approaches to tariffs and subsidies, so I think they can be somewhat isolated, given a few exceptions in some cases.

Of course, the victims of government policies are often invisible, so even if we could confirm that Asian tariffs grew some industries, we'd never hear about the ones it destroyed (after all, they are ash on the heap of history).

Yeah, probably true.

Ironically though, I do support picking winners and losers in the form of subsidization
This is more likely to be successful in achieving visible results for the targeted industry than tariffs (as it doesn't alienate the customer base of the industry with high prices, leading to a potential for subsitution or reduced consumption). It also makes it explicit how much present value is being spent. Unfortunately, though, substitution is a safety valve that mitigates the harms of such policies-- taking it away means the harms are even bigger, even if they are more visible. Indeed, the reverse occurs, consumption increases, your "infant industry" eventually becomes a mammoth institution that is intertwined with the government, that the government cannot readily get rid of. Governments change tariffs all the time, but good luck getting the elimination of a subsidy through Congress.

So, in short:
Pro of subsidy vs tariff:
Subsidy makes it more obvious wtf you're doing.

Con of subsidy vs tariff:
Doesn't matter what you see, you won't be able to do anything about it, you're locked in.

Well, corruption is always going to be a present possibility when the state intervenes in the economy, but if the intervention sets up an exporting industrial base for the said country, which effectively establishes long-term growth, then it can be argued that the benefits far outweigh the costs.

To get at the heart of the issue, I need to better understand the theoretical framework and find some corresponding empirical data that demonstrate who's right in this debate - the latter being more important I think.
TheAtheistAllegiance
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12/25/2011 10:27:52 PM
Posted: 4 years ago
At 12/25/2011 1:53:11 AM, Royaltee wrote:
At 12/24/2011 1:28:07 PM, darkkermit wrote:
If a society wants a certain industry to overtake another
You start off with a rather silly if-then statement. There isn't really any collective society that makes decisions. Consumers make decisions on an individual basis. And for the most part, consumers prefer low-priced, high-quality goods to highly-priced, low-quality goods. By saying that consumers can't buy from [international] firms that offer low-priced, high-quality goods unless that firm increases its prices due to tariffs, then you are necessarily hurting consumers (and thus "society").

He was likely using that in vague terms. What he was probably trying to get at is what would benefit a country in the long term. In the short-term, consumers will obviously go for cheaper goods, but that might be to the ailment of their economy in the long-term if it causes their exporting industries to be wiped out.

then tariffs are required due to the effects of networking effects and economics of scale. Networking effects are once a product becomes more valuable once more and more people start using it. Also economics of scale, a company can produce more output per input, the larger it grows.
Here you define networking effects and economics [sic] of scale. No justifications for the Infant Industry argument are forwarded.

An industry takes time to develop these networking effects and economics of scale, so tariffs can be good for long term economic growth for developing nations.
Non-sequitur. In what world does the latter part of the sentence follow from the former?

The world with the Asian Tigers..?

Not an expert on it though. If your really that interested, you can read Paul Krugman's "International Economics" book .
Krugman is generally incompetent on almost all matters of economics, though his positions on international trade are somewhat more sane. I wouldn't recommend that book, or anything by Krugman for that matter. Economics in One Lesson by Henry Hazlitt is a generally sound introduction to economics. (Chapters eleven-fourteen touches on international trade/tariffs and the book is available free online).

I might actually check that out since it's online. Thanks for the info.
16kadams
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12/25/2011 10:54:22 PM
Posted: 4 years ago
If I was president I would abolish all taxes and pay for everything with tariffs
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"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross
Ragnar_Rahl
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12/26/2011 4:25:12 AM
Posted: 4 years ago
At 12/25/2011 10:20:14 PM, TheAtheistAllegiance wrote:
At 12/25/2011 1:18:50 AM, Ragnar_Rahl wrote:
We cannot isolate factors for the Asian Tigers' success empirically-- empirically, the Asian Tigers mix a vast muddle of differences from one another and from other countries. Latin America tried the same approach to tariffs for a time with much less lauded results in any case (They even had a name for it, can't remember what the name was though).

From what I know, Latin American nations were much less open to international markets in general
That's what tariffs do.

Well, corruption is always going to be a present possibility when the state intervenes in the economy, but if the intervention sets up an exporting industrial base for the said country, which effectively establishes long-term growth, then it can be argued that the benefits far outweigh the costs.
By definition, however, trade is two way. If you were importing things, you were therefore exporting things, else someone would be giving you something for nothing, which is good for you and unlikely.


To get at the heart of the issue, I need to better understand the theoretical framework and find some corresponding empirical data that demonstrate who's right in this debate - the latter being more important I think.
There is and can be no conclusive empirical data in economics.
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
Royaltee
Posts: 114
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12/26/2011 5:57:23 AM
Posted: 4 years ago
At 12/25/2011 10:27:52 PM, TheAtheistAllegiance wrote:
At 12/25/2011 1:53:11 AM, Royaltee wrote:
At 12/24/2011 1:28:07 PM, darkkermit wrote:
If a society wants a certain industry to overtake another
You start off with a rather silly if-then statement. There isn't really any collective society that makes decisions. Consumers make decisions on an individual basis. And for the most part, consumers prefer low-priced, high-quality goods to highly-priced, low-quality goods. By saying that consumers can't buy from [international] firms that offer low-priced, high-quality goods unless that firm increases its prices due to tariffs, then you are necessarily hurting consumers (and thus "society").
He was likely using that in vague terms. What he was probably trying to get at is what would benefit a country in the long term. In the short-term, consumers will obviously go for cheaper goods, but that might be to the ailment of their economy in the long-term if it causes their exporting industries to be wiped out.

http://www.fee.org...
Chapter Twelve: THE DRIVE FOR EXPORTS
"Exceeded only by the pathological dread of imports that affects all nations is a pathological yearning for exports."

I know what he was trying to say, he's just wrong though. Domestic production and foreign production are purely arbitrary distinctions. Political borders don't change the laws of economics.

Boston doesn't produce any cars; Detroit does. Would you argue that the Mayor of Boston should place tariffs on Detroit-imported cars so that Boston can finally make some cars that can compete with Detroit cars?

It should be obvious who benefits in this situation. Politically propped up Boston car-makers essentially get subsidized as Boston consumers have to pay through the nose for cars from this new car-maker in Boston. Boston businesses will be hit hard as well. Businessmen will be spending money on expensive cars instead of on entrepreneurial activities like investing in capital or labor.

Do you really think that Boston will be better off in the long-term? (What is the long term by the way? Who determines when an industry is finally "competitive" and how long will that take?)

With comparative advantage and division of labor factored in, the results are even more obvious. Japan does consumer electronics, the US does medicine and technology, China does consumer goods, Denmark does Christmas trees, etc. There's no reason for a country to force the production of X through tariffs just because another country produces X more competitively.

An industry takes time to develop these networking effects and economics of scale, so tariffs can be good for long term economic growth for developing nations.
Non-sequitur. In what world does the latter part of the sentence follow from the former?
The world with the Asian Tigers..?

Post hoc. (How are the protectionist policies of Cuba and North Korea working out?) Secure private property rights, high savings rates, low taxation, and low government intrusion were the main reasons for the economic success of the Asian Tigers. The tariffs stilted their economic progress if anything.
Royaltee
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12/26/2011 5:59:43 AM
Posted: 4 years ago
At 12/25/2011 10:54:22 PM, 16kadams wrote:
If I was president I would abolish all taxes and pay for everything with tariffs

A tariff is a tax.
DaveElectric
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12/26/2011 6:13:23 PM
Posted: 4 years ago
"There is and can be no conclusive empirical data in economics."

Painfully true words. Of course, most people cannot grasp what a corellation fallacy is and thus why it makes no sense for economics to be based on "empiricism".
TheAtheistAllegiance
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12/27/2011 12:26:49 AM
Posted: 4 years ago
At 12/26/2011 4:25:12 AM, Ragnar_Rahl wrote:
At 12/25/2011 10:20:14 PM, TheAtheistAllegiance wrote:
At 12/25/2011 1:18:50 AM, Ragnar_Rahl wrote:
We cannot isolate factors for the Asian Tigers' success empirically-- empirically, the Asian Tigers mix a vast muddle of differences from one another and from other countries. Latin America tried the same approach to tariffs for a time with much less lauded results in any case (They even had a name for it, can't remember what the name was though).

From what I know, Latin American nations were much less open to international markets in general
That's what tariffs do.

Yea...I'm aware of that..

Well, corruption is always going to be a present possibility when the state intervenes in the economy, but if the intervention sets up an exporting industrial base for the said country, which effectively establishes long-term growth, then it can be argued that the benefits far outweigh the costs.
By definition, however, trade is two way. If you were importing things, you were therefore exporting things, else someone would be giving you something for nothing, which is good for you and unlikely.

Or, there's just a trade deficit.

To get at the heart of the issue, I need to better understand the theoretical framework and find some corresponding empirical data that demonstrate who's right in this debate - the latter being more important I think.
There is and can be no conclusive empirical data in economics.

I agree that it can't be conclusive, but it's better than running blind.
TheAtheistAllegiance
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12/27/2011 12:54:47 AM
Posted: 4 years ago
At 12/26/2011 5:57:23 AM, Royaltee wrote:
At 12/25/2011 10:27:52 PM, TheAtheistAllegiance wrote:

He was likely using that in vague terms. What he was probably trying to get at is what would benefit a country in the long term. In the short-term, consumers will obviously go for cheaper goods, but that might be to the ailment of their economy in the long-term if it causes their exporting industries to be wiped out.

http://www.fee.org...
Chapter Twelve: THE DRIVE FOR EXPORTS
"Exceeded only by the pathological dread of imports that affects all nations is a pathological yearning for exports."

I know what he was trying to say, he's just wrong though. Domestic production and foreign production are purely arbitrary distinctions. Political borders don't change the laws of economics.

Well, we're talking from the perspective of a country, not the planet as a whole. The US could just let Saudi Arabia pump ALL the oil instead of just some, and that wouldn't be a problem for the world as a whole, but the US would be better off with domestic production.

Boston doesn't produce any cars; Detroit does. Would you argue that the Mayor of Boston should place tariffs on Detroit-imported cars so that Boston can finally make some cars that can compete with Detroit cars?

It should be obvious who benefits in this situation. Politically propped up Boston car-makers essentially get subsidized as Boston consumers have to pay through the nose for cars from this new car-maker in Boston. Boston businesses will be hit hard as well. Businessmen will be spending money on expensive cars instead of on entrepreneurial activities like investing in capital or labor.

Do you really think that Boston will be better off in the long-term? (What is the long term by the way? Who determines when an industry is finally "competitive" and how long will that take?)

This is why I'm leaning toward not supporting tariffs for infant industries. I'm mostly playing Devil's Advocate here.

With comparative advantage and division of labor factored in, the results are even more obvious. Japan does consumer electronics, the US does medicine and technology, China does consumer goods, Denmark does Christmas trees, etc. There's no reason for a country to force the production of X through tariffs just because another country produces X more competitively.

Well, if a country has little to export, it might have problems with long-term growth, which is the argument behind why tariffs should be placed on infant industries in developing economies.

The world with the Asian Tigers..?

Post hoc. (How are the protectionist policies of Cuba and North Korea working out?) Secure private property rights, high savings rates, low taxation, and low government intrusion were the main reasons for the economic success of the Asian Tigers. The tariffs stilted their economic progress if anything.

Also post hoc and an assertion that doesn't have any evidence. I could just as easily assert that tariffs are behind the success. I don't believe that, but I'm looking for ways to *demonstrate* the cause one way or the other.
mongoose
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12/27/2011 1:18:50 AM
Posted: 4 years ago
At 12/27/2011 12:54:47 AM, TheAtheistAllegiance wrote:
At 12/26/2011 5:57:23 AM, Royaltee wrote:
At 12/25/2011 10:27:52 PM, TheAtheistAllegiance wrote:

He was likely using that in vague terms. What he was probably trying to get at is what would benefit a country in the long term. In the short-term, consumers will obviously go for cheaper goods, but that might be to the ailment of their economy in the long-term if it causes their exporting industries to be wiped out.

http://www.fee.org...
Chapter Twelve: THE DRIVE FOR EXPORTS
"Exceeded only by the pathological dread of imports that affects all nations is a pathological yearning for exports."

I know what he was trying to say, he's just wrong though. Domestic production and foreign production are purely arbitrary distinctions. Political borders don't change the laws of economics.

Well, we're talking from the perspective of a country, not the planet as a whole. The US could just let Saudi Arabia pump ALL the oil instead of just some, and that wouldn't be a problem for the world as a whole, but the US would be better off with domestic production.

The US's domestic production would have a comparative advantage to most Saudi production, for all that the government allows businesses to drill for, so there isn't a need for tariffs.

Boston doesn't produce any cars; Detroit does. Would you argue that the Mayor of Boston should place tariffs on Detroit-imported cars so that Boston can finally make some cars that can compete with Detroit cars?

It should be obvious who benefits in this situation. Politically propped up Boston car-makers essentially get subsidized as Boston consumers have to pay through the nose for cars from this new car-maker in Boston. Boston businesses will be hit hard as well. Businessmen will be spending money on expensive cars instead of on entrepreneurial activities like investing in capital or labor.

Do you really think that Boston will be better off in the long-term? (What is the long term by the way? Who determines when an industry is finally "competitive" and how long will that take?)

This is why I'm leaning toward not supporting tariffs for infant industries. I'm mostly playing Devil's Advocate here.

With comparative advantage and division of labor factored in, the results are even more obvious. Japan does consumer electronics, the US does medicine and technology, China does consumer goods, Denmark does Christmas trees, etc. There's no reason for a country to force the production of X through tariffs just because another country produces X more competitively.

Well, if a country has little to export, it might have problems with long-term growth, which is the argument behind why tariffs should be placed on infant industries in developing economies.

So you use a tariff to make it easier to export? Tariffs hurt exports, because you import less.

The world with the Asian Tigers..?

Post hoc. (How are the protectionist policies of Cuba and North Korea working out?) Secure private property rights, high savings rates, low taxation, and low government intrusion were the main reasons for the economic success of the Asian Tigers. The tariffs stilted their economic progress if anything.

Also post hoc and an assertion that doesn't have any evidence. I could just as easily assert that tariffs are behind the success. I don't believe that, but I'm looking for ways to *demonstrate* the cause one way or the other.
It is odd when one's capacity for compassion is measured not in what he is willing to do by his own time, effort, and property, but what he will force others to do with their own property instead.
Ragnar_Rahl
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12/27/2011 9:13:40 PM
Posted: 4 years ago
At 12/27/2011 12:26:49 AM, TheAtheistAllegiance wrote:

Well, corruption is always going to be a present possibility when the state intervenes in the economy, but if the intervention sets up an exporting industrial base for the said country, which effectively establishes long-term growth, then it can be argued that the benefits far outweigh the costs.
By definition, however, trade is two way. If you were importing things, you were therefore exporting things, else someone would be giving you something for nothing, which is good for you and unlikely.

Or, there's just a trade deficit.
Classically, a trade deficit meant you were exporting gold and hence not having a trade deficit at all unless you were a mercantilist who considered nothing but gold to have any value. Nowadays it means you're exporting expectations. If they are true expectations you are exporting future goods, if they are false expectations you are receiving a gift.


To get at the heart of the issue, I need to better understand the theoretical framework and find some corresponding empirical data that demonstrate who's right in this debate - the latter being more important I think.
There is and can be no conclusive empirical data in economics.

I agree that it can't be conclusive, but it's better than running blind.
It's not better than logic.
It came to be at its height. It was commanded to command. It was a capital before its first stone was laid. It was a monument to the spirit of man.
Royaltee
Posts: 114
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12/27/2011 10:56:07 PM
Posted: 4 years ago
At 12/27/2011 12:54:47 AM, TheAtheistAllegiance wrote:
At 12/26/2011 5:57:23 AM, Royaltee wrote:
I know what he was trying to say, he's just wrong though. Domestic production and foreign production are purely arbitrary distinctions. Political borders don't change the laws of economics.
Well, we're talking from the perspective of a country, not the planet as a whole. The US could just let Saudi Arabia pump ALL the oil instead of just some, and that wouldn't be a problem for the world as a whole, but the US would be better off with domestic production.

"Just as different wage rates exist between the United States and Mexico, Haiti, or China, for instance, such differences also exist between New York and Alabama, or between Manhattan, the Bronx, and Harlem. Thus, if it were true that international protectionism could make an entire nation prosperous and strong, it must also be true that interregional and interlocal protectionism could make regions and localities prosperous and strong. In fact, one may even go one step further. If the protectionist argument were right, it would amount to an indictment of all trade and a defense of the thesis that everyone would be the most prosperous and strongest if he never traded with anyone else and remained in self-sufficient isolation. Certainly, in this case no one would ever lose his job, and unemployment due to "unfair" competition would be reduced to zero. In thus deducing the ultimate implication of the protectionist argument, its complete absurdity is revealed, for such a "full-employment society" would not be prosperous and strong; it would be composed of people who, despite working from dawn to dusk, would be condemned to poverty and destitution or death from starvation" - Hans-Hermann Hoppe

Protectionism is an argument against all trade, not just trade between nations. Borders are only arbitrary. Try to remember that.

Boston doesn't produce any cars; Detroit does. Would you argue that the Mayor of Boston should place tariffs on Detroit-imported cars so that Boston can finally make some cars that can compete with Detroit cars?

It should be obvious who benefits in this situation. Politically propped up Boston car-makers essentially get subsidized as Boston consumers have to pay through the nose for cars from this new car-maker in Boston. Boston businesses will be hit hard as well. Businessmen will be spending money on expensive cars instead of on entrepreneurial activities like investing in capital or labor.

Do you really think that Boston will be better off in the long-term? (What is the long term by the way? Who determines when an industry is finally "competitive" and how long will that take?)

This is why I'm leaning toward not supporting tariffs for infant industries. I'm mostly playing Devil's Advocate here.

With comparative advantage and division of labor factored in, the results are even more obvious. Japan does consumer electronics, the US does medicine and technology, China does consumer goods, Denmark does Christmas trees, etc. There's no reason for a country to force the production of X through tariffs just because another country produces X more competitively.

Well, if a country has little to export, it might have problems with long-term growth, which is the argument behind why tariffs should be placed on infant industries in developing economies.

I just refuted the nonsense of the infant industry argument above with the Boston/Detroit example. Local exporters will likely be hit by retaliatory tariffs. Local consumers will have less to spend on local goods. Tariffs only benefits the local producer whose industry the tariff restricts.

The world with the Asian Tigers..?

Post hoc. (How are the protectionist policies of Cuba and North Korea working out?) Secure private property rights, high savings rates, low taxation, and low government intrusion were the main reasons for the economic success of the Asian Tigers. The tariffs stilted their economic progress if anything.

Also post hoc and an assertion that doesn't have any evidence. I could just as easily assert that tariffs are behind the success. I don't believe that, but I'm looking for ways to *demonstrate* the cause one way or the other.

Oh, so you're looking for some fancy statistics to prove your argument? I can provide numbers that support each side of the argument, but that doesn't prove anything. Economics is an objective science. Tariffs are either good or bad, there's no subjective empirical differences between general tariffs for rich countries and tariffs targeting infant industries in poor countries.
darkkermit
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12/28/2011 12:53:30 AM
Posted: 4 years ago
At 12/27/2011 10:56:07 PM, Royaltee wrote:

Oh, so you're looking for some fancy statistics to prove your argument? I can provide numbers that support each side of the argument, but that doesn't prove anything.

Yes, correlation does not imply causation. There are many variables that can influence change. However, sound theory, econometrics, natural experiment and regression analysis can be used to establish inductively that one side is more likely to be correct.

Economics is an objective science.

For a studier of austrian economics, you should realize that they don't consider economics to be a science. The Austrian school departs from positivism, which is the bases of all other sciences.

Tariffs are either good or bad

It depends on the situation. One can't say that drugs are either good or bad, since drugs for medication purposes are good or recreational purposes.

there's no subjective empirical differences between general tariffs for rich countries and tariffs targeting infant industries in poor countries.

According to economist Ha-Joon Chang:

"Almost all NDCs [Newly Developed Countries] had adopted some form of infant industry promotion strategy when they were in catching-up positions. In many countries, tariff protection was a key component of this strategy, but was neither the only nor even necessarily the most important component in the strategy."
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darkkermit
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12/28/2011 1:14:52 AM
Posted: 4 years ago
At 12/25/2011 1:53:11 AM, Royaltee wrote:
You start off with a rather silly if-then statement. There isn't really any collective society that makes decisions. Consumers make decisions on an individual basis. And for the most part, consumers prefer low-priced, high-quality goods to highly-priced, low-quality goods.

Society makes decisions for us everyday whether we think so or not. Our actions and decisions are not really are "own" but by-products of our constant interactions with our environment. We are constantly being shaped based on the actions of others. There's nothing special about individuals. Its just a collection of cells, and the cells are just a collection of atoms. All interacting with one another.

By saying that consumers can't buy from [international] firms that offer low-priced, high-quality goods unless that firm increases its prices due to tariffs, then you are necessarily hurting consumers (and thus "society").

I acknowledge that comparative advantage exists. However the model is static. It does not take into account dynamic growth.

Here you define networking effects and economics [sic] of scale. No justifications for the Infant Industry argument are forwarded.

Do you believe that markets are in perfect competition? They aren't. Corporations in which there are high barriers to entry have high profit margins. One of the barriers to entry is the networking effect. In other words, it takes customers to increase the value of a product. For example, Facebook's value comes from the fact that it has many people on it.

If tariffs exists, then these barriers to entry our reduces and the company can obtain its economic of scales, in which it can obtain high profit margins and increased economic growth through higher production and making the market more efficient (the closer the market is to perfect competition the more efficient it is).

Also note that tariffs also increase revenue to the government which can be used to build defenses, roads and infrastructure that improve economic growth.

Non-sequitur. In what world does the latter part of the sentence follow from the former?


Analysis given above.

Krugman is generally incompetent on almost all matters of economics

A disagree about ideology does not make him incompetent. He has a pHD in economics and a noble prize. It amazes me that people who have barely touched the surface of economics believe themselves to be superior.

though his positions on international trade are somewhat more sane. I wouldn't recommend that book, or anything by Krugman for that matter.

I'll agree that anything written post 2000 has quite the liberal slant to it, but If you read some of his pre-2000 stuff, they're pretty interesting.

Economics in One Lesson by Henry Hazlitt is a generally sound introduction to economics. (Chapters eleven-fourteen touches on international trade/tariffs and the book is available free online).

Haven't read his book, but it seems quite simplistic. I've read some Austrian economics books: Lessons for the Young Economist by Robert Murphy was one of them. It's an interesting read and good read, but its very simplistic.

The book I recommended is a college textbook. I haven't personally read it, but I read samples of it and does not seem to have the bias that his blog has.
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TheAtheistAllegiance
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12/28/2011 1:34:11 AM
Posted: 4 years ago
At 12/27/2011 10:56:07 PM, Royaltee wrote:
At 12/27/2011 12:54:47 AM, TheAtheistAllegiance wrote:

Well, we're talking from the perspective of a country, not the planet as a whole. The US could just let Saudi Arabia pump ALL the oil instead of just some, and that wouldn't be a problem for the world as a whole, but the US would be better off with domestic production.

"Just as different wage rates exist between the United States and Mexico, Haiti, or China, for instance, such differences also exist between New York and Alabama, or between Manhattan, the Bronx, and Harlem. Thus, if it were true that international protectionism could make an entire nation prosperous and strong, it must also be true that interregional and interlocal protectionism could make regions and localities prosperous and strong. In fact, one may even go one step further. If the protectionist argument were right, it would amount to an indictment of all trade and a defense of the thesis that everyone would be the most prosperous and strongest if he never traded with anyone else and remained in self-sufficient isolation. Certainly, in this case no one would ever lose his job, and unemployment due to "unfair" competition would be reduced to zero. In thus deducing the ultimate implication of the protectionist argument, its complete absurdity is revealed, for such a "full-employment society" would not be prosperous and strong; it would be composed of people who, despite working from dawn to dusk, would be condemned to poverty and destitution or death from starvation" - Hans-Hermann Hoppe

Protectionism is an argument against all trade, not just trade between nations. Borders are only arbitrary. Try to remember that.

No, protectionism doesn't have to be taken to its logical end. The argument is whether protectionism between NATIONS is beneficial, not states or individuals. There may be a consistency issue in the reasoning, but if the pragmatic effects mean increased economic growth and jobs, then it doesn't really matter.

Well, if a country has little to export, it might have problems with long-term growth, which is the argument behind why tariffs should be placed on infant industries in developing economies.

I just refuted the nonsense of the infant industry argument above with the Boston/Detroit example. Local exporters will likely be hit by retaliatory tariffs. Local consumers will have less to spend on local goods. Tariffs only benefits the local producer whose industry the tariff restricts.

Actually, developing economies have little chance of being slammed with retaliatory tariffs. And as mentioned before, if it results in powerful exporting power, as seen in the Asian Tigers, then it would hypothetically mean LONG-TERM benefits.

Also post hoc and an assertion that doesn't have any evidence. I could just as easily assert that tariffs are behind the success. I don't believe that, but I'm looking for ways to *demonstrate* the cause one way or the other.

Oh, so you're looking for some fancy statistics to prove your argument? I can provide numbers that support each side of the argument, but that doesn't prove anything. Economics is an objective science. Tariffs are either good or bad, there's no subjective empirical differences between general tariffs for rich countries and tariffs targeting infant industries in poor countries.

Or a preponderance of data supporting one argument or the other could be provided, but I guess there's a chance that won't back up your preferred ideology. And how can you say that tariffs would yield the SAME effects for two totally different variables? Comparing protectionism between France and the US with Kenya and the US is comparing apples and oranges, which is why I made this thread in the first place.
TheAtheistAllegiance
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12/28/2011 1:41:05 AM
Posted: 4 years ago
At 12/27/2011 9:13:40 PM, Ragnar_Rahl wrote:
At 12/27/2011 12:26:49 AM, TheAtheistAllegiance wrote:

Or, there's just a trade deficit.
Classically, a trade deficit meant you were exporting gold and hence not having a trade deficit at all unless you were a mercantilist who considered nothing but gold to have any value. Nowadays it means you're exporting expectations. If they are true expectations you are exporting future goods, if they are false expectations you are receiving a gift.

Am I missing something here..? I imagine the US just has other industries being drained by having to pay for imported oil (without American wages making up for it in demand), rather than exports making up the deficit in the future. Like, wouldn't companies be paying for oil that sends wages outside of the US, which means less domestic demand, thus less growth, or whatever? This is obviously assuming there isn't huge comparative advantage at play.

I agree that it can't be conclusive, but it's better than running blind.
It's not better than logic.

It might not be as a substitute, but it is when being complimentary. If a preponderance of data can be put behind economic logic, then you have a really solid conclusion. I just don't feel comfortable jumping full fledged to a conclusion on just logic or empiricism alone.
Royaltee
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12/28/2011 2:12:37 AM
Posted: 4 years ago
At 12/28/2011 12:53:30 AM, darkkermit wrote:
At 12/27/2011 10:56:07 PM, Royaltee wrote:
Oh, so you're looking for some fancy statistics to prove your argument? I can provide numbers that support each side of the argument, but that doesn't prove anything.
Yes, correlation does not imply causation. There are many variables that can influence change. However, sound theory, econometrics, natural experiment and regression analysis can be used to establish inductively that one side is more likely to be correct.

No, they can't. Prove your assertion.

Economics is an objective science.
For a studier of austrian economics, you should realize that they don't consider economics to be a science. The Austrian school departs from positivism, which is the bases of all other sciences.

Wrong. Of course the Austrian school considers economics to be a science, I don't know why would think otherwise. There are objective laws of economics just like there are objective laws of physics, it doesn't make a difference that the laws of economics can't be proven in a lab. Praxeology holds that economics is a purely deductive science. Positivism is useful in most natural sciences, but it can't be used to study human action. Mindless behavior (physics/natural sciences) can be controlled, purposeful action by humans (economics/social sciences) can not be controlled for. The Austrian school rejects the scientific method as legitimate in economics, but Austrians still consider economics a science.

Tariffs are either good or bad
It depends on the situation. One can't say that drugs are either good or bad, since drugs for medication purposes are good or recreational purposes.

What? This isn't even a complete sentence. I don't understand the analogy you're trying to make.

there's no subjective empirical differences between general tariffs for rich countries and tariffs targeting infant industries in poor countries.
According to economist Ha-Joon Chang:

"Almost all NDCs [Newly Developed Countries] had adopted some form of infant industry promotion strategy when they were in catching-up positions. In many countries, tariff protection was a key component of this strategy, but was neither the only nor even necessarily the most important component in the strategy."

Chang's statement is perfectly compatible with my statement. Chang simply stated the tariff strategies of NDCs, he never made the claim that tariff strategies yield different results in NDCs than in more developed countries.
Royaltee
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12/28/2011 2:41:45 AM
Posted: 4 years ago
At 12/28/2011 1:14:52 AM, darkkermit wrote:
At 12/25/2011 1:53:11 AM, Royaltee wrote:
You start off with a rather silly if-then statement. There isn't really any collective society that makes decisions. Consumers make decisions on an individual basis. And for the most part, consumers prefer low-priced, high-quality goods to highly-priced, low-quality goods.
Society makes decisions for us everyday whether we think so or not. Our actions and decisions are not really are "own" but by-products of our constant interactions with our environment. We are constantly being shaped based on the actions of others.
...Ok. Different individuals in society make decisions that affects decisions of other individuals, I never said anything to the contrary. That's different than saying there's a Mr. Society that makes decisions for people who make up a society.
There's nothing special about individuals. Its just a collection of cells, and the cells are just a collection of atoms. All interacting with one another.
Wut.
By saying that consumers can't buy from [international] firms that offer low-priced, high-quality goods unless that firm increases its prices due to tariffs, then you are necessarily hurting consumers (and thus "society").
I acknowledge that comparative advantage exists. However the model is static. It does not take into account dynamic growth.
Explain. (The Austrian school never assumes perfect competition.)
Here you define networking effects and economics [sic] of scale. No justifications for the Infant Industry argument are forwarded.
Do you believe that markets are in perfect competition?
No, when did I ever say anything to the contrary? Any model that assumes perfect competition operates on false assumptions.

If tariffs exists, then these barriers to entry our reduces and the company can obtain its economic of scales, in which it can obtain high profit margins and increased economic growth through higher production and making the market more efficient (the closer the market is to perfect competition the more efficient it is).
This whole paragraph was incoherent.
Also note that tariffs also increase revenue to the government which can be used to build defenses, roads and infrastructure that improve economic growth.
Tehe. Taxes don't improve economic growth.
Krugman is generally incompetent on almost all matters of economics
A disagree about ideology does not make him incompetent. He has a pHD in economics and a noble prize. It amazes me that people who have barely touched the surface of economics believe themselves to be superior.

Having a diploma and awards doesn't make someone competent. There are plenty of people with PhDs who are devout believers in creationism.

though his positions on international trade are somewhat more sane. I wouldn't recommend that book, or anything by Krugman for that matter.
I'll agree that anything written post 2000 has quite the liberal slant to it, but If you read some of his pre-2000 stuff, they're pretty interesting.

I wouldn't say he's more interesting pre-2000, he's just more correct more of the time.

Economics in One Lesson by Henry Hazlitt is a generally sound introduction to economics. (Chapters eleven-fourteen touches on international trade/tariffs and the book is available free online).
Haven't read his book, but it seems quite simplistic. I've read some Austrian economics books: Lessons for the Young Economist by Robert Murphy was one of them. It's an interesting read and good read, but its very simplistic.
Obviously not simplistic enough. Pretty sure Murphy explained that economics is a science on the very first page. Either you're lying that you read the book or you didn't absorb any of the material.
The book I recommended is a college textbook. I haven't personally read it, but I read samples of it and does not seem to have the bias that his blog has.
Lol.
Royaltee
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12/28/2011 2:50:10 AM
Posted: 4 years ago
At 12/28/2011 1:34:11 AM, TheAtheistAllegiance wrote:
No, protectionism doesn't have to be taken to its logical end.
Yes it does. It's called a reductio ad absurdum.
The argument is whether protectionism between NATIONS is beneficial, not states or individuals. There may be a consistency issue in the reasoning
There is a consistency issue in the reasoning, I'm glad you noticed. Nations don't trade, individuals trade. Bob in England trading with Ming in China is no different than Bob in England trading with Rick in England. Taken to its logical end, you can see that protectionism is absurd, but you're just saying "la la la logic doesn't matter."

And as mentioned before, if it results in powerful exporting power, as seen in the Asian Tigers, then it would hypothetically mean LONG-TERM benefits.
You keep repeating assertions that you made in the OP as if these hypothetical assertions you're making are fact. Correlation =/= causation.

Oh, so you're looking for some fancy statistics to prove your argument? I can provide numbers that support each side of the argument, but that doesn't prove anything. Economics is an objective science. Tariffs are either good or bad, there's no subjective empirical differences between general tariffs for rich countries and tariffs targeting infant industries in poor countries.
Or a preponderance of data supporting one argument or the other could be provided, but I guess there's a chance that won't back up your preferred ideology. And how can you say that tariffs would yield the SAME effects for two totally different variables? Comparing protectionism between France and the US with Kenya and the US is comparing apples and oranges, which is why I made this thread in the first place.

Pierre in France trading with Mike in the US is different than Barack in Kenya trading with Mike in the US? Explain.
TheAtheistAllegiance
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12/28/2011 4:03:56 AM
Posted: 4 years ago
At 12/28/2011 2:50:10 AM, Royaltee wrote:
At 12/28/2011 1:34:11 AM, TheAtheistAllegiance wrote:
No, protectionism doesn't have to be taken to its logical end.
Yes it does. It's called a reductio ad absurdum.

Lol, not in real-world scenarios. If this assumption was even remotely true, then we wouldn't be using the internet since that involved some division of labor. In reality, the only place tariffs largely take place is between borders.

The argument is whether protectionism between NATIONS is beneficial, not states or individuals. There may be a consistency issue in the reasoning
There is a consistency issue in the reasoning, I'm glad you noticed. Nations don't trade, individuals trade. Bob in England trading with Ming in China is no different than Bob in England trading with Rick in England. Taken to its logical end, you can see that protectionism is absurd, but you're just saying "la la la logic doesn't matter."

By nations, I obviously mean individuals trading across borders since we're not a part of a hive mind. It doesn't change that the argument is focused on what will benefit the individuals on the less developed side of the border. Getting muddled up in the definition and use of the term nation is pointless. And, protectionism is absurd only on a logical level if the practical benefits end up being real.

And as mentioned before, if it results in powerful exporting power, as seen in the Asian Tigers, then it would hypothetically mean LONG-TERM benefits.
You keep repeating assertions that you made in the OP as if these hypothetical assertions you're making are fact. Correlation =/= causation.

Bolded. The sentence assumes that there are long-term benefits tied to tariffs as part of a hypothetical argument.

Oh, so you're looking for some fancy statistics to prove your argument? I can provide numbers that support each side of the argument, but that doesn't prove anything. Economics is an objective science. Tariffs are either good or bad, there's no subjective empirical differences between general tariffs for rich countries and tariffs targeting infant industries in poor countries.
Or a preponderance of data supporting one argument or the other could be provided, but I guess there's a chance that won't back up your preferred ideology. And how can you say that tariffs would yield the SAME effects for two totally different variables? Comparing protectionism between France and the US with Kenya and the US is comparing apples and oranges, which is why I made this thread in the first place.

Pierre in France trading with Mike in the US is different than Barack in Kenya trading with Mike in the US? Explain.

Barack does not have the access to capital or infrastructure that Pierre does, nor is Barack's business established, so without tariffs, his Kenyan-based company will hypothetically never get onto its feet. With tariffs, and also hypothetically, Barack would at least be shielded from foreign competition, which will enable him to develop a domestic customer base and eventually grow to a point that his company can compete with global firms.

In short, the asymmetries between the developed economy and non-developed economy make up the difference.

A more helpful example would be Pierre trading with Mike AND John in the US, while little Barack gets left out because his company went bankrupt. But with tariffs and some time, Barack might be able to steal Customer John from Pierre, which creates global competition and an exporting company/industry for Kenya.

In other words, Barack wouldn't even be trading with John in the US (assuming free trade), but because there's at least someone in Kenya trading with the US, and I was referring to the Kenyan economy as a whole, I assumed trading would be taking place. Nonetheless, the differences in the variables are there.
darkkermit
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12/28/2011 1:31:21 PM
Posted: 4 years ago
At 12/28/2011 2:12:37 AM, Royaltee wrote:
At 12/28/2011 12:53:30 AM, darkkermit wrote:
At 12/27/2011 10:56:07 PM, Royaltee wrote:
Oh, so you're looking for some fancy statistics to prove your argument? I can provide numbers that support each side of the argument, but that doesn't prove anything.
Yes, correlation does not imply causation. There are many variables that can influence change. However, sound theory, econometrics, natural experiment and regression analysis can be used to establish inductively that one side is more likely to be correct.

No, they can't. Prove your assertion.

You want me to prove inductive reasoning?

Wrong. Of course the Austrian school considers economics to be a science, I don't know why would think otherwise. There are objective laws of economics just like there are objective laws of physics,

The objective laws of physics were derived through experimentation.

it doesn't make a difference that the laws of economics can't be proven in a lab. Praxeology holds that economics is a purely deductive science.

Then where are the proofs? Why doesn't any of the austrian economics show logical syllogisms or mathematical proofs to demonstrate its deductive? I've never found them.

Also, how do you know if the initial premises are true if they've never been tested. Even the idea that preference behavior exists has been questioned by the money illusion. Basically the money illusion states that we think more in terms of nominal rather than real terms. For example, a study was done whether a person which option was more fair: 2% raise with 4% inflation or a 2% wage cut with no inflation. The second option was seen as unfair while the first one was, even though the person is left with the same amount of purchasing power.

Positivism is useful in most natural sciences, but it can't be used to study human action. Mindless behavior (physics/natural sciences) can be controlled, purposeful action by humans (economics/social sciences) can not be controlled for.

Sure it can. Why not? There are some experiments that we can't run, but using natural experiments and statistics can help better our understanding.

The Austrian school rejects the scientific method as legitimate in economics, but Austrians still consider economics a science.

Science without the scientific method is like calling something chocolate cake just without a chocolate.

What? This isn't even a complete sentence. I don't understand the analogy you're trying to make.

It doesn't make sense to say that all tariffs are good or that all tariffs are bad. Some tariffs are good and some tariffs are bad. It depends on the situation.

Chang's statement is perfectly compatible with my statement. Chang simply stated the tariff strategies of NDCs, he never made the claim that tariff strategies yield different results in NDCs than in more developed countries.

Yes, but then while make the distinction?
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DaveElectric
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12/28/2011 8:34:05 PM
Posted: 4 years ago
"Sure it can. Why not?"

Uh because you cannot be a dictator that can plan the economy and control every variable. All statistical evidence for economic theories are correlation fallacies. The only thing you can do with empirical data give yourself a setting. It cannot however help you come to conclusions.

Let's take for example theories on the minimuim wage. Let's say the government sets a minimuim wage and unemployment does not go up. Does this prove
a) minimuim wage does not effect full employment and therefore can increase wages
or
b) the minimuim wage wasn't set high enough to affect employment/wages period?

If you rely purely on empiricism how are you supposed to come to the right conclusion? You can't. Only logical a priori reasoning can help you come to a conclusion and the only correct conclusion to come to is the minimuim wage wasn't set high enough to affect employment.

Unemployment = Minimuim wage > Marginal Revenue Product
Unemployment did not increase
So therefore MW must be < MRP

Let's talk about the Great Depression. All the economists agree on the empirical facts of the Great Depression. When it started, approximately when it ended, what the unemployment numbers were, what the Presidents during the time we doing to try to help the economy, etc. They do however have radically different conclusions about how it occured and who hurt the people's chances of getting out it. This is where empiricism fails and logic begins.
mongoose
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12/28/2011 10:38:04 PM
Posted: 4 years ago
If an industry in the third world country will eventually be profitable, it should absorb the costs while it isn't. If it isn't willing to take the risk of doing so, then the nation shouldn't be forced to shoulder the burden. Also, once a tariff is placed it won't be taken off, even if the industry takes off, or doesn't.
It is odd when one's capacity for compassion is measured not in what he is willing to do by his own time, effort, and property, but what he will force others to do with their own property instead.