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Utopia and trade

from David Ruccio

Donald Trump’s decision to impose import tariffs—on solar panels and washing machines now, and perhaps on steel and aluminum down the line—has once again opened up the war concerning international trade.

It’s not a trade war per se (although Trump’s free-trade opponents have invoked that specter, that the governments of other countries may retaliate with their import duties against U.S.-made products), but a battle over theories of international trade. And those different theories are related to—as they inform and are informed by—different utopian visions.

In one sense, Trump and his supporters are right. Capitalist free trade has destroyed cities, regions, livelihoods, and industries. The international trade deals the United States has signed in recent decades have been rigged for the wealthy and have cheated workers. They are replete with marketing scams, hustles, and shady deals, to the advantage of large corporations and a small group of individuals at the top.

But Trump, like all right-wing populists, as I explained recently, offers a utopian vision that looks backward, conjuring up and then offering a return to a time that is conceived to be better. For Trump, that time is the 1950s, when a much larger share of U.S. workers was employed in manufacturing and American industry successfully competed against businesses in other countries. The turn to import tariffs is a way of invoking that nostalgia, the selective vision of a utopia that was exceptional, in terms of both U.S. and world history, and that conveniently conceals or overlooks many other aspects of that lost time, such as worker exploitation, Jim Crow racism, and widespread patriarchy inside and outside households. 

It should come as no surprise that mainstream economists, today and in a tradition that goes back to Adam Smith and David Ricardo, oppose Trump’s tariffs and hold firmly to the gospel of free international trade. Once again, Gregory Mankiw has stepped forward to articulate the neoclassical view (buttressed by classical antecedents) that everyone benefits from free international trade:

Ricardo used England and Portugal as an example. Even if Portugal was better than England at producing both wine and cloth, if Portugal had a larger advantage in wine production, Portugal should export wine and import cloth. Both nations would end up better off.

The same principle applies to people. Given his athletic prowess, Roger Federer may be able to mow his lawn faster than anyone else. But that does not mean he should mow his own lawn. The advantage he has playing tennis is far greater than he has mowing lawns. So, according to Ricardo (and common sense), Mr. Federer should hire a lawn service and spend more time on the court.

That’s the basis of neoclassical utopianism—the gains from trade: when international trade is unregulated, and every country specializes according to its comparative advantage, more commodities can be produced at a lower cost and as a result average living standards around the world are improved.

IGM-trade

Like Mankiw, most mainstream economists, who are the only ones represented in the IGM Economic Experts panel, oppose import tariffs (as seen in the chart above) and celebrate the utopianism of free international trade.

That’s true even among mainstream economists who have argued that, in reality, the causes and consequences of international trade may not coincide with the rosy picture produced within the usual textbook versions of neoclassical economic theory.

For example, Paul Krugman was awarded the Nobel Prize in economics for his work demonstrating that the relative advantages most neoclassical economists take as given are in fact products of history. Thus, it is possible for countries to enhance their trade advantages (through creating internal economies of scale) by regulating international trade. But Krugman was also quick to belittle “a steady drumbeat of warnings about the threat that low-wage imports pose to U.S. living standards” and, then, in his first New York Times column, to denounce the critics of the World Trade Organization.

A few years later Paul Samuelson, widely recognized as the dean of modern mainstream economics, published an article in the Journal of Economic Perspectives in which he challenged the presumed universal benefits of free trade. It is quite possible, Samuelson argued, that if enough higher-paying jobs were lost by American workers to outsourcing, then the gains from the cheaper prices may not compensate for the losses in U.S. purchasing power. In other words, the low wages at the big-box stores do not necessarily make up for their bargain prices. And then Samuelson was immediately taken to task by other mainstream economists, most notably Jagdish Bhagwati (along with his coauthors, Arvind Panagariya and T.N. Srinivasan [pdf]), who argued that “that outsourcing is fundamentally just a trade phenomenon [and] leads to gains from trade.”

Finally, Dani Rodrick, the mainstream economist who has been most critical of the role his colleagues have played as “cheerleaders” for capitalist globalization, still defends the standard models of international trade:

It has long been an unspoken rule of public engagement for economists that they should champion trade and not dwell too much on the fine print. This has produced a curious situation. The standard models of trade with which economists work typically yield sharp distributional effects: income losses by certain groups of producers or worker categories are the flip side of the “gains from trade.” And economists have long known that market failures – including poorly functioning labor markets, credit market imperfections, knowledge or environmental externalities, and monopolies – can interfere with reaping those gains.

But Rodrick, like Krugman, Samuelson, and other mainstream economists who have identified problems with the story told by Mankiw, Bhagwati, and other free-traders—who have “consistently minimized distributional concerns” and “overstated the magnitude of aggregate gains from trade deals”—still holds to the neoclassical utopianism that, with “all of the necessary distinctions and caveats,” more international trade can and should be promoted. Thus, as Rodrickargued just last week,

If our economic rules empower corporations and financial interests excessively, then the correct response is to rewrite those rules — at home as well as abroad. If trade agreements serve mainly to reshuffle income to capital and corporations, the answer is to rebalance them to make them friendlier to labor and society at large.

The goal is to make sure everyone, not just “corporations and financial interests,” benefits from international trade.

But recent criticisms of trade deals from within mainstream economics still don’t include the possibility that capitalism itself, with or without free international trade and multinational trade agreements, however the rules are written, privileges one class over another. Capital gains at the expense of workers because it is able to extract a surplus for literally doing nothing. That kind of social theft occurs—both when international trade is regulated and controlled and when it is allowed to operate free of any such interventions.

That’s why Karl Marx ironically came out in support of free trade in his famous speech to the Democratic Association of Brussels at its public meeting of 9 January 1848:

If the free-traders cannot understand how one nation can grow rich at the expense of another, we need not wonder, since these same gentlemen also refuse to understand how within one country one class can enrich itself at the expense of another.

Do not imagine, gentlemen, that in criticizing freedom of trade we have the least intention of defending the system of protection.

One may declare oneself an enemy of the constitutional regime without declaring oneself a friend of the ancient regime.

Moreover, the protectionist system is nothing but a means of establishing large-scale industry in any given country, that is to say, of making it dependent upon the world market, and from the moment that dependence upon the world market is established, there is already more or less dependence upon free trade. Besides this, the protective system helps to develop free trade competition within a country. Hence we see that in countries where the bourgeoisie is beginning to make itself felt as a class, in Germany for example, it makes great efforts to obtain protective duties. They serve the bourgeoisie as weapons against feudalism and absolute government, as a means for the concentration of its own powers and for the realization of free trade within the same country.

But, in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade.

That’s because Marx’s critique of political economy embodied a utopian horizon radically different from the utopianism of classical and neoclassical economics. He sought to transform economic and social institutions in order to eliminate capitalist exploitation. And if free trade was the quickest way of getting to the point when workers revolted and changed the system, then he would vote against protectionism and in favor of free trade.

As it turns out, as Friedrich Engels explained forty years later, both protectionism and free trade serve, in different ways, to produce more capitalist producers and thus to produce more wage-laborers. In our own time, Trump’s protective tariffs may do that in the United States, just as free trade has accomplished that in other countries that have increased their exports to the United States.

e4

But neither protectionism nor free trade can succeed in undoing the “elephant curve” of global inequality, which in recent decades has shifted the fortunes of workers in the United States and Western Europe and those in “emerging” countries and still left all of them falling further and further behind the top 1 percent in their own countries and globally.

Reversing that trend is a goal, a utopian horizon, worth fighting for.

  1. March 2, 2018 at 1:55 am

    To argue the political remedy for what has happened is one thing. Ruccio is doing it beautifully. To analyze what is happening is another. This is a question of economics. We can criticize neoclassical trade theory and Ricardo. However, we need our own economic theory to understand what is happening in the free trade system. Globalization is one aspect of it.

    The trouble with (neoclassical or mainstream) international trade theory is that it is the framework which cannot analyze unemployment. It is because it excludes unemployment by assumption. If I borrow Professor Taich Tabuchi’s words, Keynesian revolution never arrived in the trade theory.

    Indeed all traditional trade theories assumed full employment as a part of assumptions of the model. They can analyze questions of income redistribution effect like that argued by Rodrik: income losses by certain groups of producers or worker categories are the flip side of the “gains from trade”. This is one serious problem and economists should pay much more attention on it. But this analysis still lacks most important problem with trade liberalization. It is the question of unemployment. Rodrik is still a slave of neoclassical theory and does not talk about this most important question.

    All arguments against free trade (or better trade liberalization) accuse trade theories but have no alternative theory of its own. Without having a true theory and analyses based on it, one cannot argue the problem correctly. Good news is that a new theory is now available. It is named the new theory of international values. It can analyze the situation where unemployment is inevitably caused by trade liberalization.

    See my paper:
    The New Theory of International Values: An Overview
    In A New Construction of Ricardian Theory of International Values, Springer, chapter1, pp.3-73. See in particular Theorem 4.3 in Section 4 Gains from Trade and Possibility of Trade Conflicts. You can download the draft version of the paper in my contribution page in ResearchGate.

    • Jorge Buzaglo
      March 2, 2018 at 6:03 pm

      Keynes on trade:

      I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel–these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national. Yet, at the same time, those who seek to disembarrass a country of its entanglements should be very slow and wary. It should not be a matter of tearing up roots but of slowly training a plant to grow in a different direction. (“National Self-Sufficiency,” The Yale Review, Vol. 22, no. 4 (June 1933), pp. 755-769.)

      • Rob Reno
        March 2, 2018 at 7:39 pm

        Very good quote, thanks Jorge.

      • Craig
        March 2, 2018 at 8:08 pm

        This is largely a good assessment, however, Keynes like everyone else apparently, thought finance was a legitimate private business model. It isn’t. It isn’t a legitimate public one either unless its based on, and its primary ethic is monetary grace as in gifting. That doesn’t mean that you should give business start ups money as a gift, but as a new publicly administered paradigm that ends private finance’s monopoly paradigm of Debt ONLY and enables the economy to become integratively free flowing….it’s a no brainer…when you look at it just a little…..so if you want to evolve economics and the money system….don’t you dare look at it.

      • March 3, 2018 at 12:09 pm

        I very much agree with Rob: thank you, Jorge, for a splendid quote which given its date must almost have disappeared into the mists of time. Craig, on this I disagree with you. Read what Keynes has to say about Gesell’s system of finance, in which those who hold money have to pay interest on it.

    • Rob Reno
      March 2, 2018 at 8:09 pm

      To argue the political remedy for what has happened is one thing. Ruccio is doing it beautifully. To analyze what is happening is another. This is a question of economics. ~ Yoshinori Shiozawa

      Critical Realism accepts that we can never demonstrate that we have discovered the truth, even if we have (fallibilism), but does not reject the idea of there being an underlying objective reality. The description under critical realism is of an ordered hierarchy of sciences at the structural level. There is real (ontological) difference in the strata, so they are not regarded as just cognitively (epistemologically) convenient. The real distinctions between the strata and their irreducibility of one to another (contra reductionism) are used to explain differences between the various sciences and the reason for a plurality of sciences to exist. So, for example, because everything is governed by the laws of physics, all biological entities are physical but not vice versa. Therefore biological sciences are embedded within the physical and, likewise, the social within the biological, and the formal economy within the social. At the level of structural mechanisms there is a one-way hierarchy. This type of embeddedness is one of the key messages Ecological Economists have been at pains to communicate, and especially that the economy is embedded in the Natural environment and subject to the Laws of Thermodynamics. Yet, embeddedness should not be confused with reductionism. Biology cannot be understood from physics, nor a human from studying cells, nor the social from the economic (Spash, 2012, 2015). (Fischer, Lilian et. al. 2018, 127)

      Social science, including economics, can be differentiated on a substantive basis from the natural sciences because it involves (contra Hume) an inseparability of facts and values. Understanding social phenomena (e.g., unemployment) requires addressing the real structural causes (e.g., financial institutions, government policy, world markets) and prevalent ideas. Those ideas appear as social attitudes and political behaviour. Thus, explanations arising from a social scientific study entail criticism of some ideas in society. Furthermore, there is often a functional relationship between organisations that cause false beliefs and beliefs about those organisations. False beliefs may be spread in order to preserve an organisation, its power and associated institutions. Thus, the rhetoric of the liberating character of ‘free-markets’ and benefits of material growth may be used by corporations and governments extracting resources, dislocating indigenous populations and creating environmental destruction. In such cases, to propound the truth is not just to criticise, but to undermine the institution. Explanations of social institutions are a precondition of criticising and changing them, and sometimes the critique will begin the work of their subversion. Open realisation and acceptance of this position makes [heterodox] Economics far more radical than orthodox economics, which pretends to give objective, value-free advice while actually supporting the existing institutional structures. (Fischer, Lilian et. al., eds. 2018, 127-128. In Rethinking Economics. London: Routledge.)

      Economics is a social science and is embedded within human social networks and societies social institutions — which includes the political realm. It is a false dichotomy that thinks economics can be separated from the political and that somehow doing so is true “science.” This is really scientism masquerading as science and attempting to treat the social science of economics with the same assumptions of methodologies as those used in the physical sciences. It is referred to within the literature as physics envy (p-envy) for short ;-) Such naïve philosophical reductionism won’t sit well with the younger generation I suspect.

      • Craig
        March 2, 2018 at 10:39 pm

        The paradigm change I advocate in economics and the money system would not be physics envy, but it would be a huge stabilization and evolution of both systems by virtue of the fact that it would resolve the economy’s chronic problem of inflation and the money system’s monopoly paradigm of Debt Only…at the same time. The realization that the natural concept of grace denotes and is by definition a fundamental integration of the static and dynamic, of philosophy-thought and policy-action ends the arrogance of the mindsets of both science Only and religion Only, but there will be no end to history and change may succeed that paradigm…..hopefully by further acculturating into the ethic-zeitgeist of grace.

      • Rob Reno
        March 2, 2018 at 11:06 pm

        The paradigm change I advocate in economics and the money system would not be physics envy, but it would be a huge stabilization and evolution of both …

        I was not referring to your vision at all. I find your ideas clearly transcending current paradigms.

      • Craig
        March 2, 2018 at 11:51 pm

        Ah, yes, I should have understood that with your use of the words “philosophical reductionism” which indeed tends to be a problem, at least until one fully understands the natural philosophical concept of grace in its many aspects probably the highest of which is unity-oneness, and others which are aligned with economic thinking like dynamic balance, integration and flow/free flowingness.

      • Rob Reno
        March 3, 2018 at 1:01 am

        More succinctly:

        Economics is a social science. It is neither a branch of mathematics nor the study of nature. It is, instead, analysis of humans by humans…. Economics is difficult, because it does not study a demarcated sphere of behaviour. What we consider to be economic behaviour is but a part of the totality of human action. Psychologists, sociologists, anthropologists, geographers and historians also analyse the phenomena considered by economists. The assumption that it is possible to separate out economic behaviour and objectives from other forms of human behaviour and objectives is an heroic simplification and, like all such simplifications, it is fundamentally false. (Rethinking Economics: An Introduction to Pluralist Economics, p. xiii, emphasis added)

        The desire to separate out economic behaviour from its wider human context so as to make it amenable to grand totalizing theoretical/mathematical constructions is more utopian than pragmatic; more pseudo-science than science. No “theory” into human economic behaviour that dismisses real human behaviour that substantively impacts economic outcomes and future economic behaviour simply because it is not mathematically tractable (e.g., politics, interest-group lobbying, et.) or because it doesn’t fit into one’s stereotyped understanding of what it means to be “scientific” (scientists across diverse fields have differing views) will likely offer pragmatic real world solutions to humanities pressing problems.

      • March 3, 2018 at 1:49 pm

        Thank you Rob for the quote outlining Critical Realism, and for the following one which, (as you cite the same page) I assume is probably from the same source. In this latest comment, “What we consider to be economic behaviour is but a part of the totality of human action” can be interpreted as requiring economic behaviour to be considered as a special case of everything else, basing macro economic theory on showing what is common to it and everything else, and in what way the behaviour can be bounded (i.e. how sequential activities can be channelled and thereby directed). That is what I attempted in the part of my paper I didn’t send you. I am currently studying Fritjof Capra’s “The Tao of Physics”, which confirms my own understanding of mainstream physics, but while accepting Ken’s mainstream interpretation of it (Bohr’s Copenhagen version) is contentious and problematic, it fails to see the form of channelling and communication of human purposes which is obvious to anyone whose paradigm has been electric circuits rather than atom smashing.

        Regarding Craig’s “the natural philosophical concept of grace in its many aspects probably the highest of which is unity-oneness”, that (as I suggested earlier) has echoes of Capra. But Capra is set on that highest unity being the focus of Hindu, Buddhist, Confucian and related philosophies,apparently not understanding (so not mentioning) how the price of the Big Bang was played out for real by the living Word of Christianity.
        In any case, having been brought up as a Catholic to be grateful to God, my first serious essay back in 1967 argued against Utilitarianism that the condition of happiness is gratitude. “Happiness is a chain reaction: a gift gratefully received is reciprocated in graceful giving”.

  2. March 2, 2018 at 1:58 am

    When asked how I would describe the overall product of my economic analysis I have said that it often takes the form of a Hegelian synthesis, i.e., a resolution of seemingly opposed thesis/antithesis positions. As example of that is my analysis re: Free Trade.

    Like all rational critics of unbridled Free Trade, I agree that there are real economic benefits to be gained from it by even common working people. In terms of the real economy (ignoring money) simply freeing up domestic labor supplies via outsourcing makes it possible to employ those idles resources in other productive activities which will increase the total product available for consumption in the domestic economy.

    Everything that was consumed before would continue to be consumed (some of it being produced from without) plus that which is produced by those who were at one time displaced by the outsourcing. In real terms, there’s no disputing the net gain that would be realized IF wise arrangements are made in advance to make the transition as painless as possible for those who lose their good-paying jobs.

    So a raw opportunity exists for improvement for all, but the problem is that there is no “natural market mechanism” which facilitates such a transition in a relatively painless manner.
    But if we use our minds just a little bit, and look at the change in money flows that occurs when jobs are outsourced, we can see a path forward that would enable us to largely obviate the otherwise painful consequences of Free Trade.

    We should notice that when jobs are outsourced, money that was once given to displaced domestic employees is no longer recycled back into the demand side of the economy. Where did that money go? Well, some of it went to the workers in other countries, but the ‘extra profits’ that outsourcing companies reap are not used to create new jobs in the host country, but are typically used instead to inflate the asset markets (pure economic waste).

    Governments can fix this disruption in the ‘circular flow’ of money by taxing all those extra profits from outsourcing companies and then spending the money on real economic INVESTMENTS: good-paying jobs modernizing the nation’s infrastructure, reducing class sizes to maybe 8-10 students (to improve the quality of education), improved health care, etc.

    So I don’t see Free Trade as necessarily a threat to the Working Class. If the potential benefits of Free Trade are fully exploited by governments, by increasing the tax burdens of the companies that outsource, then there is really nothing for wage-earners to fear, and they’d be able to warmly embrace the concept of Free Trade overall.

    (OK, the individuals who lose their good-paying jobs to outsourcing would have something to fear, but it is one of those potentialities in an evolving economy that all consumers, employees, and firms—that are fortunate enough to be able to enjoy favorable market conditions for a while—face over time. The employees who used to work for Kodak and Xerox had a great employment situation for several decades, and then technological advances changed everything.)

  3. Craig
    March 2, 2018 at 4:14 am

    Trade wars historically rhyme with actual war. Second rate conservative and neo-liberal thinking about trade is…second rate, and third rate populist “intellects” like Trump do not have a clue of course either.

    If you implemented a 50% discount/rebate at the point of retail sale and a sufficient universal dividend to everyone 18 years of age and older you’d be able to eliminate the transfer taxes that both individuals and enterprises pay for welfare, unemployment insurance and probably quite quickly Social Security, and their associated bureaucracies as well…and you wouldn’t have to worry about unemployment either which means you could dispel the financial wet dream of globalization, re-industrialize America in the most efficient and ecologically sane way possible and thus have no need for tariffs and trade wars.

    The heterodox had better quickly rise above the nit witery of Trumpism and the coalescing power of finance dominated neo-liberalism…or the war that destroys modern economy’s productive potential may “happen” and then in the pain and confusion Finance will be happy to lend us the money to re-build.

    • March 3, 2018 at 4:32 pm

      Hey Craig…

      I thought I’d make another attempt to explain to you why your gifting proposal would be far more inflationary than you’ve been hoping it would be.

      I base my argument on the observation that suppliers in most markets will charge the highest price that the market will bear, period. In contrast, you are arguing that sellers will not do this, but will for some unexplained reason choose to limit their price increases to only a 2%-3% rate of increase.

      How is it possible to tell if the sellers in a limited-quantity-available market are selling their product at the highest price the market will bear? You simply look to see if there are any lines/queues/waiting lists that buyers in that market must deal with.

      If there is a l/q/wl associated with some market, it is only because that seller is choosing to keep his price lower than the market will actually bear. More people can afford the thing being sold than there are things available. The seller ‘sells out’ quickly and cannot obtain sufficient quantities to satisfy the demand at the chosen price.

      Only if/when the seller then raises her prices sufficiently to the point where the l’s/q’s/wl’s disappear, then we can say that the seller is charging the highest price that the market will bear. It’s really quite simple.

      You advertise that your gifting proposal will increase the purchasing power of individual demanders, but that can only be true if those individuals are able to buy items that they could not afford to buy previously.

      The day before your proposal gets enacted, the BMW dealer will have a certain quantity of autos available for sale. If the day after the gifting initiative takes affect, the same number of BMW’s will be available for sale, but many more people will believe they can now afford them IF the price that is being charged for them has not been changed.

      The dealer will quickly sell out if she has not increased her prices sufficiently to price all the extra buyers out of the market. Being advised that it would be best for the economy if the price increases are limited to a 2%-3% range would be meaningless.

      The only other possibility that could limit the price increases is if only a few of the beneficiaries of the gift choose to try to buy any of the things they previously could not afford. Such a possibility would be in defiance of everything we know from observation of human economic behavior.

      I’m afraid that your hopes that inflation as a consequence of the gift would be limited in the medium- to long-run are ultimately unrealistic.

      It is true that at the first iteration, when the purchasing power gift is first ‘bestowed’ on buyers and sellers, prices would not increase (since the government would be paying/subsidizing to keep them low)…but thereafter, buyers would find themselves with more disposable dollars/pounds/euros to spend and that is what sellers would respond to, when the rather dramatic burst of inflation would kick in…

      • March 3, 2018 at 5:15 pm

        Hence, Craig, the need for the Copernican revolution of making it costly to make or hold money. Sellers or financiers ripping folk off gives them no reason to be grateful and hence react gracefully, but ssafeguarding the ecology by living economically, and having your debts written off because you’ve done your job, gives you at least satisfaction.

      • Craig
        March 3, 2018 at 7:07 pm

        Some of what you say may well occur….if you allow the paradigms of profit, power, control and “free” markets ONLY to remain in force. I reject that idiocy. The wise realize that in the temporal universe there is only freedom amongst known barriers, and that the above paradigms are a fundamental confusing of freedom with chaos wherein nothing resembling a genuine sense of ethics is enforceable and even recognizable.

        As I have said certain regulations and structural changes will need to be made in addition discovering the new paradigm of monetary gifting and the significance of monetary policy tied to the point of retail sale.

        Grace as in benevolent monetary and economic policy, but utterly just and ethical power to reward and punish would be the conscious expression of sovereign political and economic authority…and the leaders and owners of enterprise would need to bow to that paradigm and ethic….and despite the fact that they would greatly benefit from the policies of gifting and grace they would be FREE to reject or try to undermine it…until they were forced to get their best competitive price without the benefit of the 50% discount/rebate.

      • Craig
        March 3, 2018 at 8:13 pm

        @davetaylor1

        Yes, the idiotic private monopoly on credit creation must end….after 500 years of trying to make it work and behave it’s getting to the point where we must recognize that effort as the definition of insanity. Public monopoly of course is potentially equally dumb…unless it’s guided by the new paradigm of direct to the individual gifting and the ethic-zeitgeist of grace.
        Also, a public monetary utility and authority has no need for profit as it creates money ex nihilo. As finance for large assets like mortgages, autos etc. is post retail sale which is the terminal end of traditionally productive economics it exposes the fact that that private finance is fundamentally parasitical and anti-economic.

        I don’t really care very much whether people would hold money because the Gordian Knot of inflation (supposedly) being tied to the supply of money will have been exposed as not the operative reason for such, and would be cut and resolved by tying monetary policy to retail sale with the discount/rebate.

        Hence, the more people save the less they’ll need to borrow, even from the sovereign monetary authority, when they inevitably want to purchase a large asset, and so finance rather than the government guided by graciousness will tend to “wither away”. Of course investing in something actually productive is always an option for them. Pooling it in a savings account at 0% would still be available…just not profitable and no longer an economic vice.

  4. March 2, 2018 at 1:27 pm

    As I said on your blog, consider turning Protectionism backwards: Instead of import tariffs to protect the revenue of western firms, demand that poor countries enact *export taxes* which share the gains of trade more broadly in their economies. Or let them have labor rights, environmental standards, welfare states, and other such good things and not threaten them or undermine their governments when they attempt to do so.

    Heck, not just poor countries. If Germany would agree to set itself higher taxes and wages, and share the gains entirely domestically, it would solve Europe’s trade imbalance, debt, and currency problems without the need for cross-border transfers. Admonishing people to be more generous to themselves, I know, radical.

  5. March 3, 2018 at 3:48 pm

    As I understand, the HOS theory does not apply to intermediate goods traded between nations. So I do not see how anybody knowledgable can invoke the supposed gains from trade described by the theory of comparative advantage in arguing against tariffs on steel and aluminum.

    • March 4, 2018 at 1:58 am

      Robert,

      Have you seen my “comment” at the top? The new theory of international values is just such theory that can treat trade of intermediate goods (or input trade). In the mainstream economics, there are four generations of trade theories: (textbook) Ricardo theory, HOS theory, New trade theory (Krugman), and New new trade theory (Melitz). However, none of four theories can treat input trade. Ronald Jones and others treated fragmentation (a form of causes of input trade) in an ad hoc way but they have no general theory of input trade.

      Thus, traditional trade theories have two crucial defects: (1) exclusion of unemployment by assumption, and (2) inability to comprise input trade in their theory. These two defects shows that mainstream trade theories are now completely out of date, because they have no framework to analyze the process of globalization.

      In the comment above cited, I have given a reference to the published version, but it is sufficient to read the following draft version in the ResearchGate.
      https://www.researchgate.net/publication/304717720_The_New_Theory_of_International_Values_An_Overview?

      • March 9, 2018 at 8:26 pm

        I have read your work and find it interesting. I have a paper on my SSRN site less sophisticated. I was more unoriginal in it than I thought. If I absorbed another chapter in a Steedman book that I reference, I would have seen a model much like my own.

      • March 10, 2018 at 6:58 am

        Dear Robert Vienneau

        Is the paper you talked about the one entitled “On the Loss from Trade”?
        https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2237279

        I have read the paper and thought you are an earnest thinker and a serious researcher, although you writes you are doing economics as a hobby. Amid many commentators who repeat criticisms on economics without having deep knowledge on it, I thought that you are a precious person among amateurs and supporters of economics. You may engender a good atmosphere for the renovation of economics.

        The loss of trade that Ian Steedman and others (including you) have argued is concerned with the allocation efficiency. However, I think more serious problem of traditional (hence mainstream) trade theories lies in the fact that they cannot treat unemployment, because those theories excludes unemployment by the very assumption of their models. In such a framework, it is natural that there is no problem of unemployment but it is a simple fallacy known as assumptio non probata. My paper on international values (2007, 2017) treats the unemployment directly and this is the biggest difference from papers by Steedman and others.

        I have to admit that the concept of regular value in Shiozawa (2017) is still dependent on the maximal frontier of production possibility set. As the frontier is the set of points of full employment, the concept of regular value is not well defined yet there. But, I am now developing a new theory by which I can define regular value without characterizing it on the production frontier. A tentative paper will be uploaded soon in my contribution page in ResearchGate.

  6. Edward Ross
    March 5, 2018 at 5:36 am

    On Utopia and trade my first comment relates to Yoshinora Shiozawa, “(The trouble with neoclassical or mainstream) international trade theory is the framework which cannot analyse unemployment. It is because it exclude unemployment by assumption. If I borrow Professor Tabuchi’s words , Kenesian revolution never arrived in the trade theory.)

    Here in my simple understanding it is important to remember that the reason the Keynesian concept of trade was never implemented was because it was always blocked by the political servants of the elite wealthy who saw Keynes ideas as a limiting factor in their scramble for greater wealth and power. The reason I raise this issue is because it highlights the difficulty of introducing methods , rules to limit the piracy of the elite. At the same time on behalf of the unemployed I thank Yoshinora Shiozawa for raising the issue of the unemployed. If I rember correctly during the great depression it was Keynes belief that the way out of the depression was to keep as many people as possible gainfully employed those earning a wage could spend their income and stimulate the economy.

    Next I wish to thank Dave Taylor for his encouraging comment on Stock Ownership on February 21, 2018at 12:22pm
    Regarding his request for comments on an alternative economic theory my problem was and is that i have never seriously examined an alternative system. Therefore I do not think I am in a position to comment on the subject.
    However I can say that from experience my belief is that democracy is being seriously subverted and diminished by the elite extremely greedy capitalist who use the political neoliberal economic rationalist system to achieve their wealth and power. Thus I have to agree with Dave Taylor that there are many areas that need to be discussed and that includes identifying the cause of the problem and then examine a variety of solutions in order to find the best workable solution to the problem.

    Finally on the observation that all the theoretical navel gazing has not managed to achieve any real reform of the ruling neoliberal economic ideology. I would like to remind the reader of Ken Zimmerman’s comments February 21, 2018 at 2:57pm

    “Thatcher and Reagan didn’t begin by changing stock markets or any other markers. They began by changing the culture. The foundations for those changes had all ready been laid in the US and UK since the 1950s through newspapers, think tanks , and PR firms carrying the new classical economics and neoconservative cultural messages. This all accelerated when Reagan and Thatcher came into political power. In a little more than two generations massive cultural changes were created. Read a little modern history and consider the dozens of policies and action items that became routine under these two politicians that 25 years prior would have been considered strange, uncouth, and definitely unacceptable. Perhaps even inhumane . Conservatives and reactionaries knew how to shape culture and the economics that grew from it. We could do worse than follow their example in recreating the cultures in the UK and the US to end the new classical and neoconservative ways of life.”
    Although my understanding of anthropology began in the workplace and PNG I Sometimes wonder how much field work Ken Zimmerman may have done am in complete agreement with his above description and tend to regard the above as a key to preparing the ground for meaningful support for meaningful support for reorienting economics. Ted

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