If you country has nothing but costlier form of production for everything than you have no choice but to have tariffs. The implied point is that free trade eliminates higher-cost supplier thus allocating resources to production of other products that may have more efficient production within the country. However, if 100% efficiency means you will become a deserted island, are you content with that? Another point these static charts miss is that world is dynamic. You may not have low-cost production, but if you give time the domestic supply chain might mature enough to be more cost efficient as they learn, deploy new technologies, and get economies of scale. Possible scenarios: Without tariff ------------------------ 1. Market price fall 2. Local suppliers are out priced 3. Consumer enjoy savings 4. Local supplier infrastructure crumbles and loses economies of scale 5. Local supply curve shifts left, thus local supply falls off more. 6. Country becomes dependent on external countries. 7. Influence of external countries start dictating politics. 8. External countries change laws giving international organizations more edge. 9. Local supply is eliminated. 10. Now all profits flow out, outflow, we get huge trade deficit. 11. With unlimited money supply, other local service businesses are defeated. 12. Now politicians consult to foreign companies before the people of that country. 13. Due to trade deficit currency starts to devalue. 14. Necessities continue being imported, inelastic, thus now costing more. Imports for certain things do fall. But not enough to make any difference. 15. Cost of living go up 16. More service businesses disappear as they can't function as minimum wage is too high to due to high cost of living 17. Quality of products go down due to people being broke, leading to more expenditure cheap = high cost in long run. End Result: higher cost of living, shitty products, corrupt govt. Nice!!! With tariffs: ------------------------ 1. Market price rise. 2. Consumers are unable to buy many products. 3. Over time supply curve shifts right due to improvements in the industry. 4. Govt is able to stand on moral grounds and reject nefarious govts without much hit. 5. Domestic supply keep profit inside the country, creating more jobs, decrease trade deficit. 6. Increasing currency value. 7. Increasing consumer buying power. 8. Increasing quality of Goods. End Result: Morally upstanding Govt, Low cost-of-living, and High Quality products. I propose microeconomics add two more dimensions to their tools. - Time - Product Quality Line (you can get same product for $50 or $5000 with very different ROI, buying for life results in best ROI)
Coming from a South American country, I can tell you that massive tariff on imports and extensive protectionism is a well-paved highway to poverty. People think that Americans would know better, but is never too late to start going in the wrong direction. Being rich, it would take longer to reach to the bottom. But you can do it, step by step. The reasons are many, not only those described in the video but I simply don´t have enough energy today to make a long list. Hope I'll do it in the future.
One thing he didn't quite call out... The tariff revenue that goes to the government is *only* on the imported goods. Thus, the price paid for the imported good partly goes to the government, and partly to the foreign company (and its local distributors). However, for the domestic producer, the entire price goes to the domestic seller because there is no tariff on domestic production..
He actually made that clear right away at the beginning. It’s not something to “call out” like a rap battle, it’s something to merely state and he did do that right away, saying tariffs are taxes only on imported goods and that the policy often is a key part of “Protectionism” policies that burden foreign companies and are meant to benefit domestic ones.
I have some questions which are as follows 1) derive the formula for optimum tariff 2)explain - the effect of barriers to Trade is to validate the presumption that an international transfer worsens the donor's term s of Trade 3) justify the following statement - the effective rate of protection is expected to decrease under globalization.
There is no “optimum tariff”. If you are in a free market, one can argue 0% is optimum. If you have a niche product that naturally is produced efficiently domestically, and a foreign company is underselling you at a loss just to try to get an international monopoly, then the optimum tariff on that one nation’s competing product that is competing in bad faith might be incredibly high.
Good point at 9:03 as I thought that since tariff would result in domestic supplier producing more goods that this would be a benefit and you are showing that it could be a waste . But other hand even if tariff could be waste, , producers need to stay in business and elected officials have to answer to workers want to keep their jobs.
If you disagree with this video, read this: 🧠 "Confirmation bias is the tendency to search for, interpret, favor, and recall information that confirms or support one's prior personal beliefs or values. It is an important type of cognitive bias that has a significant effect on the proper functioning of society by distorting evidence-based decision-making. People display this bias when they gather or remember information selectively, or when they interpret it in a biased way. For example, a person may cherry-pick empirical data that supports one's belief, ignoring the remainder of the data that is not supportive. The effect is strongest for desired outcomes, for emotionally charged issues, and for deeply entrenched beliefs." - source: en.wikipedia.org/wiki/Confirmation_bias
Another way to look at protectionism: 1) A nation state's self-sufficiency grows which means it becomes less dependent on foreign nations who may pose a future threat from conventional war/trade war. 2) The so-called 'wasted resources' also go towards ensuring the high wage of people within your own country while disincentivising de-facto slave labour abroad.
@Elias Håkansson and if one particular country has been out-playing one country in particular that introduced it to the concept of free trade? Using its huge population pool that could be paid much low wages relative to the rest of the industrialized world and especially that other particular country, to the point where it now controls almost all of its vital Industries in one area or another, products, and medicines. Meaning that country, who is a rising power and wishes to overtake the other country as top dog, has created a road to doing so without firing a single shot or ever having to going to war with that other country. Essentially being able to dictate more and more of the economic and policy decisions of that country by infiltrating all its major businesses and money hungry leaders that want a piece of its ever-growing pie. In case you haven't figured it out, I'm talking about China and the US increasingly over the past several decades.
If the tariff revenue were given to the consumers (e.g. divided up equally every year and paid out tax free to all adult citizens) then domestic consumption would not fall as much and domestic production would rise more than otherwise. In addition there would be more tax revenue from a higher GDP (from higher revenue from more domestic profits and from more paid in wages) and a lesser amount being needed to be paid out in welfare payments. Theoretically, this higher tax revenue and lower welfare payment savings by the govt. could also be given out also to the consumers thus increasing both domestic consumption and production even more....although with less effect than paying the tariff revenue out.
In the graph at 12:32 of the video, Government have imposed tariff. So what will be the tariff revenue for the government in this case. I am not able to figure out from the graph. I am not able to figure out the region of the tariff revenue. Thanks for the video !!!!
+shashank gupta The tax revenue is simply $0.This is because the diagram is made simple to analyse the cost and benefit to producer and consumer only. And the government does not make money out of the tax because it is simply to expensive (above the world supply) to import the good and hence it is fully provided by domestic firms.
I found odd that or economy professors discarded the money that go to government as not affecting welfare. AFAIK government normally is less economically efficient then the private sector, that is, for each dolar that goes to the government instead of staying in people's pockets we will overall have a less value in society then otherwise. Once that is the case, then the extra revenue that goes to gov's pockets instead of to buying more of that product in global trade means a decrease in overall welfare.
Nice explanation, however the graphs are hypothetical. Ideally, everything is expensive to make in the US (from manufacturing to software services), considering this theory, we can virtually import all of the items because we will be wasting resources and there will be dead weight loses. The important point to note is that we import for consumers and the companies here must sell the item for a price which is the world price. The other half of the equation is the consumer, in order for the consumer to buy these imported goods, they need money. Where does the consumer get the money from, they have to earn which means they need to have a job. Without job and money, the demand is going to shrink, to compensate for the shrink in demand, the supply shrinks, this cycle continues and the demand curve move slowly towards the Y-axis and the saturation point, it no longer slopes and becomes a straight line exactly perpendicular to the X-axis which means that the quantity demanded is the same regardless of the supply. In practical terms, this means that only the wealthy few can afford to buy the imported item.
Well explained. But ... In your discussion you miss out the impact on the environment, I.e. externalities. Take palm oil for example. Food producers like it because it is cheap, so reducing food prices. However, producing palm oil causes deforestation and climate change. The deforestation and climate change externality doesn’t appear in the import cost so an import tariff or carbon tax should be applied. Similarly, your sugar example where the imported sugar is produced in Brazil. This leads to massive deforestation and therefore contributes to climate change. Another example is the increased transportation cost and carbon impact of this. Another issue is, from a climate change perspective, it is not desirable to maximise consumption. Global GDP growth is closely correlated with climate change. Conventional economics does not cost in externalities and this is a huge issues. Not just for the environment, but increasingly individual wellbeing. Poor working conditions in producing countries and declining health in the home market. US life expectancy is falling and poverty and inequality increasing.
Great video. Every politician should be required to watch. I have a couple of questions about taxes in general. Could the same argument be made about a sales tax? For example, a good sells for $1, with a ten cent sales tax. The consumer demands less at $1.10 than at $1, so domestic trade is reduced. It may even be possible that the tax prohibits the transaction (the buyer values the good at $1.05, so would pay $1, but not $1.10). Income tax. A worker values his time at $50/hour and produces $60/hour benefit to the employer. So maybe they settle on a wage of $55 and they're both happy. But if the employee is taxed at 20%, he receives only $44, below where he values his time, so no employment agreement is reached.
+J Virgo People employed in industries that are less efficient than it needs to be - so yes, wasted resources. Those resources would have to be spent on something else if unused (assuming a free market; regulations etc prevents that from happening) You are arguing for protectionism because your government screwed up the domestic economy.
***** Ah, so you mean workers don't voluntarily engage in employment? If a job that matches your skill level doesn't provide you with the wages you desire, you are free to not accept it. Just as producers are free not to produce if a product's price is not high enough to justify his costs. Your perspective on efficiency is archaic. The books you've read probably assumes that wages are equal across all areas. They are evidently not.
***** Tariffs do increase domestic production of the protected product, because domestic prices rise. If prices rise, there are going to be some producers who will produce it because that thing suddenly becomes profitable. "increase domestic production of protected product" is key here. A steel tariff will increase domestic production of steel (I picked this because it is arguably one of the most protected industry in the US). What we don't see is the decrease in the production of manufacturing equipment. This serves to increase the price of manufactured goods. Producers/Entrepreneurs can't afford new equipment -> can't create a new firm to produce or have to stick with older, more wasteful machines -> supply is lower than what it should be -> prices are higher than what it should be. "but are forced into it voluntarily" What? o_O "lack of opportunity as a result of laisez-faire government economic policy." And why did letting things be create reduced opportunity? Are you saying heavy regulations, like almost every industry in the US, is a laissez-faire policy? One has to ask why aren't people producing (either as an entrepreneur or an incumbent producer), not why aren't jobs being created. Is it government projects that resulted in wages being artificially pushed up (government demand is demand nonetheless), preventing entrepreneurs from creating long term (government projects don't last forever), profitable businesses? Government pushed up labour cost (by employing people for whatever stupid projects they can think of), resulting in people not producing, resulting in jobs not being created in the private market, thus government needs to push up labour cost again (by employing people for whatever stupid projects they can think of). It's a self-fulfilling prophecy. And another thing - nominal wages (or "wages" for you) is different from real wages.
🧠 Keith L. Thank you for sharing your thoughts. I would like to bring the following to your attention: "Confirmation bias is the tendency to search for, interpret, favor, and recall information that confirms or support one's prior personal beliefs or values. It is an important type of cognitive bias that has a significant effect on the proper functioning of society by distorting evidence-based decision-making. People display this bias when they gather or remember information selectively, or when they interpret it in a biased way. For example, a person may cherry-pick empirical data that supports one's belief, ignoring the remainder of the data that is not supportive. The effect is strongest for desired outcomes, for emotionally charged issues, and for deeply entrenched beliefs." source: en.wikipedia.org/wiki/Confirmation_bias Thank you for your valuable time, Keith L.
Good info! :) just a question to the authors of the video. Do you have a video that also addresses foreign tariffs and how tarrif wars between the US and Foreign Nations effect the economy both US and global? Also how tariffs on one industry may save some jobs in that industry but cause a loss of jobs in other industries indirectly etc. thanks
The wasted resources is to pay domestic workers more than foreign labor, as well as other domestic businesses that may arise to help in the production of sugar (in this example). It seems that Tariffs have a nominal zero net effect but have a real effect that it protects national interest.
🧠 "Confirmation bias is the tendency to search for, interpret, favor, and recall information that confirms or support one's prior personal beliefs or values. It is an important type of cognitive bias that has a significant effect on the proper functioning of society by distorting evidence-based decision-making. People display this bias when they gather or remember information selectively, or when they interpret it in a biased way. For example, a person may cherry-pick empirical data that supports one's belief, ignoring the remainder of the data that is not supportive. The effect is strongest for desired outcomes, for emotionally charged issues, and for deeply entrenched beliefs." source: en.wikipedia.org/wiki/Confirmation_bias
Please help me understand this better,... I feel like the term "wasted resources" is inaccurate. It seems true in your "sugar" example but what if in another example, rather than land, irrigation, and fertilizer, the "wasted resource" is merely increased labor costs? It seems the "wasted resources" triangle could also be called "increased welfare for domestic laborers". Here's what i mean: when domestic supply increases due tariffs, domestic companies invest in labor, infrastructure, SG&A, etc... thereby providing salaries for employees who then spend their paychecks on products/services. Therefore, why is this increase to domestic supply as a result of Tariffs NOT a good thing?
This is a bogus anti protectionist piece and I'm finding they almost all are. This is a manipulation that goes back hundreds of years. Protectionism is the only way. Tariff what you can produce and don't tariff what you can't. His arguments are bogus.,
Too bad our elected leader(s) didn't have a better understanding of macro-economics. The fact is based on pure economics (and capitalism) tariffs and protectionism is bad. Only when you mix in political ideology and personal gain can you say tariffs/protectionism is good. In other words, if you are connected to domestic production or you are on the same team as the elected official that introduces the tariff then you personally like it but that doesn't make it good from a economic stand point.
I'm not much of an economist, so maybe take my opinion with a grain of salt, but i'm not really sure that i'm for free trade. I think i understand that tariff free trading allows the world as a whole to produce a whole lot more stuff, but i'm not sure i like the stuff we're making considering the environmental and social cost. It's like yeah, sure, the cost of a t-shirt has never been lower, but i would rather see local crafty people being able to sell them for a living wage than having to compete with children from far-far-away-astan. And maybe we would then decide we don't need as many stupid little plastic toys (Bratz Dolls and the like) as we currently make if we had to manufacture them in our own backyard. Or maybe i'm naive
I get what you say. But that really falls in the hands of the consumer. Deciding on what we spend our money is a big responsibility. Even if something is stupid, or unnecessary, if people are buying it, its going to create incentives to produce more of that. I think all schools should have basic economy classes, where they teach about their power and responsibilities as consumers and producers to society. In our days we hear lots of criticism towards the producers (big corporations mainly), but we hear little criticism towards the consumers, whom are the ones that give that power to the big producers in the first place.
In talking about "The cost of protectionism" (in this video), when talking about the "wasted resources", have you guys taken in acount the wasted resources of the transportation of the imported goods so that it more than makes up for the "wasted" resources in producing the good domestically?
Transportation costs have the same effect on trade as tariffs. I'm not sure what you're asking. If transportation costs make imports more expensive than domestically produced goods, then there wouldn't be any reason to trade.
only if people in india are better at producing the videos. but it's certainly a good thing that there is international competition in creating educational ressources. i would be much worse of if all my education would come from germany.
I have a question . I can't quite understand why we allowed trade in this model ? because even after putting traiffs we are not on a higher level than the initial equilibrium supply and demand ?
This is very oversimplified. I agree that tariffs have some negative effects. But there are so many welfare costs that aren't being considered. When people buy and eat too much sugar that negatively impacts their health, which means more visits to the doctor, which means insurance becomes more expensive. People are sicker and excessive sugar impacts people cognitively as well so people are less productive and also less likely to go as far as they otherwise would have in college, creating less workers in fields that are more brain-intensive. Also workers not working on a sugar plantation in the foreign country will be pressured to find other jobs. What if these other jobs give them better pay or better skills and experience that makes them more well off over time? Then they will have more money to spend and will buy more of our imports. Of course the opposite could also happen and they could end up poorer but we don't know which it would be without more data. Another thing to consider is that if the tariff is understood to be a reaction to unfair conditions such as low wages, sweatshop labor, lack of certain regulations (all of which create an unfair advantage for the foreign producer) then a tariff can be used to apply pressure on other countries to address these issues. That can lead to more pay and a better quality of life for foreign workers who can then afford to pay for our imports. In a perfect world where conditions for workers, conditions for environmental protection, consumer protection, education, and a couple of others are similar between countries I would support free trade. And I believe someday a long ways off from now it will happen. I'm all in favor of globalization, but it needs to happen fairly with the interests of all taken into account, and not just the wealthy few.
sorry, i think you are so wrong..nobody forces people to buy and eat sugar..please just think about it. If what you write is true, then it should be better to ban the sugger. It is nonsens. People like sugar, they dont care if they will be less productive and more ill, they are more happy a they prefer it. Worker on sugar plantations can work elsewhere. If they have oportunity to take a better job, they will do it. So tariffs make them poorer. It can be said without data. Do you really belive that pressure on other countries make living there better? I think that free market makes better world.
@@DominikMaxima You assume that people are rational actors, which very often they are not. Most people do not realize that sugar is making their life worse, or if they do they lack the ability to self-regulate. The argument could very easily be made that people are happier when they eat less sugar, and that free trade exploits human instinct for the sake of maximizing the profit margin, whereas a sugar tax would at least counter-balance the hit of dopamine someone gets from eating sugar and therefore encourage self-regulation.
CobaltBW I agree that some people do not realize that sugar is making their life worse, but i do not asume anything. I really do not know if sugar is making their life better or worse, i assume that they would not buy it if the sugar make their life worse BUT who am i to ban the sugar or regulate it for their good. It is their lives. I do not like people which think that they know to live other peoples lives better and therefore may or even have duty to force them to something. free market do only what peoples want. If some companies exploits human instincts then there is hole in market for other companies that show it to people and offer solution. Freedom is bound together with responsibility. I think that a whole range of drugs are dangerous, even alkohol, tabbaco, even coffea and what about extreme dangerous sports.. should we ban all of this? Live and let live. It would be great if everybody live this way. Simple with no expections. Unfortunately every single state is violent to their citizens, tax almost everything, makes milions of orders or regulations. Lots of problems people have cause states and then they offer some solutions which only causes other problems and so on.
This is inaccurate, consumption is not an inherent gain from trade. That presupposes that what I buy is worth it. Also, just because it's more expensive to produce doesn't mean that it's a waste. That presupposes that a worker's wage is a waste, and throws that inside the bag with the theoretical possibility that a land has a richer soil (which can be conceptually reduced to the fact that it posseses a capital advantage, because soil can theoretically be improved with enough money).
Wasted resources is a piss poor argument. Here's why... 1)Those resources go to support the USA. They support the government, the people and the businesses involved. Foreign corporations selling in the US dodoot provide that same support. A flat across the board tariff mitigates the real and potential loss from open trade. 2) Another benefit of tariffs is in the potential to make up government revenue. There was a time when the US got all its funding from tariffs and there was no income tax. A true conservative would want to return to a world like that. Instead cuckservatives push free trade as the gold standard. To me, Free trade is tantamount to treason. Do not sell out your country for a bag full of cash. 3) A free trade agreement entangles the US with foreign governments and destroys our sovereign rights as a nation. The TPP for example adds a protection mechanism for the Investor class. This opens the US up to potential liability if we change laws that impact investor profit. Cuckservatives again step aside and let foreign interests have their way with America. It's absolutely disgusting. 4) Tariffs and a government willing to use them to stop domestic companies from abandoning the US, adds enough uncertainty to keep businesses here. The government should be actively working with business to promote greater efficiency. We should be pushing competition within the US ecosystem not adding it from outside.
I agree with you but let's not make tariffs too high. If I'm not mistaken doesn't free trade make a country more dependant on foreign nations. if I'm not mistaken. just wondering I'm a teenager that desires to learn about the real world.
Isn't it better to have a free market where the government doesn't force themselves on companies. And are you completely against the domestic tax or are you willing to a low tax
So tariffs hurt the investor class and help the working class. They make domestic labor competitive with exploited foreign labor. Tariffs protect the "American way of life." Simple economics teaches us that when there is an abundance of something it is cheap. There are now almost 7 billion people in the world so worldwide, labor is dirt cheap. How can a minimum wage US garment worker compete with a Bangladeshi sewing for 45 cents a day. Don't tell US that those jobs are outdated and gone when thousands and thousands of workers in cheap labor markets are working those jobs. Free trade skews the distribution of income to the investor class. Tariffs support the "pursuit of happiness" for all in the US. Tariffs should adjust for the difference in the standard of living in the source country.
this video doesn't address how other industries are affected. For every job "saved" by protectionism in one industry many more may be lost in other industries that are indirectly or directly connected to that one industry.
The consumers pay the tariffs so it is NOT good for the working class. It benefits the wealthy that own domestic production but not all of them. Many of the domestic producers still use the goods being taxed in production. That is why the Koch brothers opposed the tariffs.
I can see how one could reach this conclusion, but they are missing something. Now that disintermediation is possible. You can open a brokerage account and buy non-u.s. companies, we are all both consumer and producer. What would be worth fighting for is free access to capital markets, like in China and other developing nations. Plus, foreign surpluses are invested in american capital assets, which increases productivity. Imagine paying 20% on a car note. No one is getting a free lunch. Things could be better, but globalization, has improved our standard of living, on the whole.
It actually benefits domestic investors a lot, lol. If an investor has a stake in a zombie industry doing well, they're going to support tariffs as it restricts international competition. It's not a "working class" issue at all.
For sugar this makes sense due to the advantages climate have on production. But I’m not sure it works with manufactured goods especially with the advances in AI. Basically why would you invest in robots that can replace humans and might be more competitive in the long run, if you know you can invest in a sweet shop in China and make a profit instantly.
MERLE CELESTE BROWNLEE so instead let people who run for office that have no idea how economics work make decisions instead? I’m confused at to who we should be deferring decision making to if it’s no longer in the hand of economists?
LoL so wanted resources? Wasted how? Meaning we waste everyone elses resources instead of our own? Yes things are cheaper to buy in other countries, why though? Well mainly because they pay very low wages. From the brilliant minds that moved out production to China and India since the 70s. The question. Are Americans better off today then they were in the 90s 80s 70s? I would say no. The jobs today in America are mostly service jobs. Low skilled jobs because we manufactured very little here. Not good for a country.
What they mean by wasted resources, is that the comparative cost to produce domestically will be more expensive. Also real Household income has almost doubled since the 70s. This means the median household can buy twice as much shit today. There are gains from trade such as comparative advantage which you should look up. Of course, there will be losers and winners when a country opens up to trade, but in the end the aggregate welfare increases.
@@woodenfloor3131 since 2000 the wages for everyday jobs have stayed stagnant. Buying a house since the 2000s has become harder and harder every year. Life hasn't become better. We have outsourced so much that the major jobs today are retail. The middle class is shrinking and becoming poorer. This is real world.
+J Virgo So you would buy the same number of goods even if the price of said goods go up? Falling consumption is not the assumption, it is the conclusion.
***** The increased price of foreign goods will cause previously inefficient domestic producers to produce said product. At the end of the day, the price goes up. Cost is subjective from producer to producer. Some domestic producers may be able to produce at a competitive price, some won't. Pushing producers to produce at above world price is taking them away from more efficient industries - essentially wasting resources.
***** " actual wasted resources are when men sit at home unemployed when there is work to be done and physical resources available to do them" They are sitting at home precisely because there isn't work to be done! One has to ask why the markets are slow to adjust (not all countries weather shocks at the same rate). Regulations increase the cost of a product without adding value, try looking there instead of proposing more non-value adding costs. Full production cannot happen without full employment, but the reverse isn't true. Are you really using the Pyramids, which uses slave labour, as an example for not wasting human lives?
***** RE: Pyramids. Interesting, never knew that. However, I must say that government projects are generally not going to be as profitable as private businesses (too high risk or too high cost). This can be seen through the many ghost towns in China, and Olympic stadiums around the world. "Yes, the sources I read are very archaic" LOL, you're funny. "what happens to the workers who aren't needed to achieve "full production"?" If you have unemployment, you don't have full production. I was saying that full production cannot happen unless everyone is working. However, if everyone is working, that doesn't mean we have full production. If "Full Production", then "Full employment" is true. The reverse statement, If "Full Employment", then "Full Production" is not equivalent, and not necessarily true. Like If "Dog", then "Mammal" is true. If "Mammal", then "Dog" is false.
***** "The big exception where market forces can't operate effectively is in "natural monopolies," for example water utilities" Nope, "market monopolies" is a made up concept. mises.org/library/myth-natural-monopoly "I'm arguing for tariffs that are applied across the board" That will increase the price of everything that uses anything. The ripple effect is not going to be as mild as a mere steel tariff. "The biggest benefit, however, would be the decrease in wage competition. If there were 30% tariffs across the board, quality foreign items would still be purchased by those who could afford them - German cars, Italian handbags, Swiss watches etc" That's the problem, now is it? The people most reliant on imports are the ones who can least afford to buy local products. It's not about quality, anyone who wants quality will buy it at any cost. It's about affordability. "would be the decrease in wage competition" Would you favour a ban on any new products that is potentially a competitor of incumbent industries? What about if other countries retaliate, resulting in a decrease in demand for American goods? You are back to square one, where people are hired because of an increase in local demand, but fired again because of a decrease in foreign demand. "Export goods would be forced to compete more on quality of the goods themselves and less on the wages paid to the people who produce them." Higher prices across the board, which harms the poor the most, due to lower purchasing power, but somehow it's supposed to be a good thing. "High wages are actually a good thing for economic development" Higher REAL wages, which result from increased productivity is a good thing. Higher nominal wages can result from an inflation. In the best case scenario, people are in the same place they were before the tariffs. "Imagine the extreme alternative case, where there are an effectively limitless supply of workers who are willing to work basically for free" Why did this phenomenon happen in the first place? Is it because entrepreneurship is too costly, and therefore no one is willing to produce? Such a phenomenon can only result in a heavily regulated industry. Fix that. "invest in labor-saving machines, otherwise known as capital" The best way to increase investment is to encourage saving. Not many people are going to be able to invest if there isn't enough savings to lend out. That's not going to happen with interest rates at 0.5%. "keeping wages down" keeping NOMINAL wages down. REAL wages increased due to lower prices. "ending around the 1970s with the elimination of tariffs through mechanisms like GATT and the WTO." The reduction in tariffs and the lower importance of American exports on world trade had nothing to do with each other. the 1970s were the time when socialist countries were starting to free up their economies. America became dominant only because it was one of the freest economies (domestically). With the freeing of socialist societies, America became less free (in a relative sense). Now with heavy regulations on American and European markets, the relatively freer Asia is catching up. On a final note, environmental regulations are, to some extent, a good thing. So what if China is suffering from smog or whatnot? They are the ones suffering because they have to spend more on healthcare. They don't have a good legal system to counteract polluters. Even so, China is now the biggest investor in green energy. A better solution would be to allow people to sue polluters (for damaging their property), but I don't see that happening soon.
Wow graphs , are cool geometric art, but anyone who lives in America and still believes that Laissez faire free trade is good for america, should really race to the nearest mental health center and have a IQ check.
free trade creates dependency. also free trade ,I'm sure, will also add to the trade deficit. free trade is not always good. There are longterm effects that can create severe outcomes. free trade is actually currently having a severe effect on the countries local economy as we speak. It is as if everyone thinks that NAFTA was a great idea, when the long-term effects suggest otherwise. The country's economy is deteriorating. Raising minimum wages will not help as companies will start going into automation and hiring less workers to offset their cost and to sustain their profit margins.
There are almost no vedio with such detailed quick explanation on youTube. Good job. Keep the good work doing.
👍 I agree
If you country has nothing but costlier form of production for everything than you have no choice but to have tariffs. The implied point is that free trade eliminates higher-cost supplier thus allocating resources to production of other products that may have more efficient production within the country. However, if 100% efficiency means you will become a deserted island, are you content with that?
Another point these static charts miss is that world is dynamic. You may not have low-cost production, but if you give time the domestic supply chain might mature enough to be more cost efficient as they learn, deploy new technologies, and get economies of scale.
Possible scenarios:
Without tariff
------------------------
1. Market price fall
2. Local suppliers are out priced
3. Consumer enjoy savings
4. Local supplier infrastructure crumbles and loses economies of scale
5. Local supply curve shifts left, thus local supply falls off more.
6. Country becomes dependent on external countries.
7. Influence of external countries start dictating politics.
8. External countries change laws giving international organizations more edge.
9. Local supply is eliminated.
10. Now all profits flow out, outflow, we get huge trade deficit.
11. With unlimited money supply, other local service businesses are defeated.
12. Now politicians consult to foreign companies before the people of that country.
13. Due to trade deficit currency starts to devalue.
14. Necessities continue being imported, inelastic, thus now costing more. Imports for certain things do fall. But not enough to make any difference.
15. Cost of living go up
16. More service businesses disappear as they can't function as minimum wage is too high to due to high cost of living
17. Quality of products go down due to people being broke, leading to more expenditure cheap = high cost in long run.
End Result: higher cost of living, shitty products, corrupt govt. Nice!!!
With tariffs:
------------------------
1. Market price rise.
2. Consumers are unable to buy many products.
3. Over time supply curve shifts right due to improvements in the industry.
4. Govt is able to stand on moral grounds and reject nefarious govts without much hit.
5. Domestic supply keep profit inside the country, creating more jobs, decrease trade deficit.
6. Increasing currency value.
7. Increasing consumer buying power.
8. Increasing quality of Goods.
End Result: Morally upstanding Govt, Low cost-of-living, and High Quality products.
I propose microeconomics add two more dimensions to their tools.
- Time
- Product Quality Line (you can get same product for $50 or $5000 with very different ROI, buying for life results in best ROI)
Coming from a South American country, I can tell you that massive tariff on imports and extensive protectionism is a well-paved highway to poverty. People think that Americans would know better, but is never too late to start going in the wrong direction. Being rich, it would take longer to reach to the bottom. But you can do it, step by step. The reasons are many, not only those described in the video but I simply don´t have enough energy today to make a long list. Hope I'll do it in the future.
@@ryanwilliams9466 Cares.
@@maxwellcraig302 Who made who, ain't nobody told you?
@UCGQYRaaTp0h2DJHu0Pd8S-Q "Deez"
@@davidzubiria3783 Who?
@@maxwellcraig302 Cares.
You make the content understandable which is amazing.
Understandable yes, but the economic assumptions a floored.
Top top top video. this is the best video on the YT. intelligently put together. Thanks.
One thing he didn't quite call out... The tariff revenue that goes to the government is *only* on the imported goods. Thus, the price paid for the imported good partly goes to the government, and partly to the foreign company (and its local distributors). However, for the domestic producer, the entire price goes to the domestic seller because there is no tariff on domestic production..
Who?
@@maxwellcraig302 What do you mean "Who?" Him. He. Alex Tabarrok. The only person in the entire video.
He actually made that clear right away at the beginning. It’s not something to “call out” like a rap battle, it’s something to merely state and he did do that right away, saying tariffs are taxes only on imported goods and that the policy often is a key part of “Protectionism” policies that burden foreign companies and are meant to benefit domestic ones.
I have some questions which are as follows 1) derive the formula for optimum tariff 2)explain - the effect of barriers to Trade is to validate the presumption that an international transfer worsens the donor's term s of Trade 3) justify the following statement - the effective rate of protection is expected to decrease under globalization.
There is no “optimum tariff”. If you are in a free market, one can argue 0% is optimum. If you have a niche product that naturally is produced efficiently domestically, and a foreign company is underselling you at a loss just to try to get an international monopoly, then the optimum tariff on that one nation’s competing product that is competing in bad faith might be incredibly high.
thanks for making economics so interesting.
Good point at 9:03 as I thought that since tariff would result in domestic supplier producing more goods that this would be a benefit and you are showing that it could be a waste . But other hand even if tariff could be waste, , producers need to stay in business and elected officials have to answer to workers want to keep their jobs.
If you disagree with this video, read this:
🧠 "Confirmation bias is the tendency to search for, interpret, favor, and recall information that confirms or support one's prior personal beliefs or values. It is an important type of cognitive bias that has a significant effect on the proper functioning of society by distorting evidence-based decision-making. People display this bias when they gather or remember information selectively, or when they interpret it in a biased way.
For example, a person may cherry-pick empirical data that supports one's belief, ignoring the remainder of the data that is not supportive.
The effect is strongest for desired outcomes, for emotionally charged issues, and for deeply entrenched beliefs."
- source: en.wikipedia.org/wiki/Confirmation_bias
If you agree with this video, read this too.
👍
Another way to look at protectionism:
1) A nation state's self-sufficiency grows which means it becomes less dependent on foreign nations who may pose a future threat from conventional war/trade war.
2) The so-called 'wasted resources' also go towards ensuring the high wage of people within your own country while disincentivising de-facto slave labour abroad.
Good points. But these are political arguments for tariffs, not economic ones.
@Elias Håkansson and if one particular country has been out-playing one country in particular that introduced it to the concept of free trade? Using its huge population pool that could be paid much low wages relative to the rest of the industrialized world and especially that other particular country, to the point where it now controls almost all of its vital Industries in one area or another, products, and medicines. Meaning that country, who is a rising power and wishes to overtake the other country as top dog, has created a road to doing so without firing a single shot or ever having to going to war with that other country. Essentially being able to dictate more and more of the economic and policy decisions of that country by infiltrating all its major businesses and money hungry leaders that want a piece of its ever-growing pie. In case you haven't figured it out, I'm talking about China and the US increasingly over the past several decades.
If the tariff revenue were given to the consumers (e.g. divided up equally every year and paid out tax free to all adult citizens) then domestic consumption would not fall as much and domestic production would rise more than otherwise.
In addition there would be more tax revenue from a higher GDP (from higher revenue from more domestic profits and from more paid in wages) and a lesser amount being needed to be paid out in welfare payments.
Theoretically, this higher tax revenue and lower welfare payment savings by the govt. could also be given out also to the consumers thus increasing both domestic consumption and production even more....although with less effect than paying the tariff revenue out.
In the graph at 12:32 of the video, Government have imposed tariff. So what will be the tariff revenue for the government in this case. I am not able to figure out from the graph. I am not able to figure out the region of the tariff revenue.
Thanks for the video !!!!
+shashank gupta The tax revenue is simply $0.This is because the diagram is made simple to analyse the cost and benefit to producer and consumer only. And the government does not make money out of the tax because it is simply to expensive (above the world supply) to import the good and hence it is fully provided by domestic firms.
I found odd that or economy professors discarded the money that go to government as not affecting welfare. AFAIK government normally is less economically efficient then the private sector, that is, for each dolar that goes to the government instead of staying in people's pockets we will overall have a less value in society then otherwise. Once that is the case, then the extra revenue that goes to gov's pockets instead of to buying more of that product in global trade means a decrease in overall welfare.
If we were to evaluate an ad-valorem tariff, do you use a normal tariff diagram or would it be completely different?
Nice explanation, however the graphs are hypothetical. Ideally, everything is expensive to make in the US (from manufacturing to software services), considering this theory, we can virtually import all of the items because we will be wasting resources and there will be dead weight loses. The important point to note is that we import for consumers and the companies here must sell the item for a price which is the world price. The other half of the equation is the consumer, in order for the consumer to buy these imported goods, they need money. Where does the consumer get the money from, they have to earn which means they need to have a job. Without job and money, the demand is going to shrink, to compensate for the shrink in demand, the supply shrinks, this cycle continues and the demand curve move slowly towards the Y-axis and the saturation point, it no longer slopes and becomes a straight line exactly perpendicular to the X-axis which means that the quantity demanded is the same regardless of the supply. In practical terms, this means that only the wealthy few can afford to buy the imported item.
Well explained. But ... In your discussion you miss out the impact on the environment, I.e. externalities. Take palm oil for example. Food producers like it because it is cheap, so reducing food prices. However, producing palm oil causes deforestation and climate change. The deforestation and climate change externality doesn’t appear in the import cost so an import tariff or carbon tax should be applied. Similarly, your sugar example where the imported sugar is produced in Brazil. This leads to massive deforestation and therefore contributes to climate change. Another example is the increased transportation cost and carbon impact of this.
Another issue is, from a climate change perspective, it is not desirable to maximise consumption. Global GDP growth is closely correlated with climate change.
Conventional economics does not cost in externalities and this is a huge issues. Not just for the environment, but increasingly individual wellbeing. Poor working conditions in producing countries and declining health in the home market. US life expectancy is falling and poverty and inequality increasing.
Another question how is the capital stock of an open economy is different from an closed economy?
Holy shit, Tyler Cowen's in here. What a legend!
Great video. Every politician should be required to watch. I have a couple of questions about taxes in general.
Could the same argument be made about a sales tax? For example, a good sells for $1, with a ten cent sales tax. The consumer demands less at $1.10 than at $1, so domestic trade is reduced. It may even be possible that the tax prohibits the transaction (the buyer values the good at $1.05, so would pay $1, but not $1.10).
Income tax. A worker values his time at $50/hour and produces $60/hour benefit to the employer. So maybe they settle on a wage of $55 and they're both happy. But if the employee is taxed at 20%, he receives only $44, below where he values his time, so no employment agreement is reached.
Not wasted resources, if it means flow on effect, people employed, no crime, less money spent on healthcare.
+J Virgo People employed in industries that are less efficient than it needs to be - so yes, wasted resources. Those resources would have to be spent on something else if unused (assuming a free market; regulations etc prevents that from happening) You are arguing for protectionism because your government screwed up the domestic economy.
***** Nope, that's not the definition. Look it up.
***** Ah, so you mean workers don't voluntarily engage in employment? If a job that matches your skill level doesn't provide you with the wages you desire, you are free to not accept it.
Just as producers are free not to produce if a product's price is not high enough to justify his costs.
Your perspective on efficiency is archaic. The books you've read probably assumes that wages are equal across all areas. They are evidently not.
***** Tariffs do increase domestic production of the protected product, because domestic prices rise. If prices rise, there are going to be some producers who will produce it because that thing suddenly becomes profitable.
"increase domestic production of protected product" is key here. A steel tariff will increase domestic production of steel (I picked this because it is arguably one of the most protected industry in the US). What we don't see is the decrease in the production of manufacturing equipment. This serves to increase the price of manufactured goods. Producers/Entrepreneurs can't afford new equipment -> can't create a new firm to produce or have to stick with older, more wasteful machines -> supply is lower than what it should be -> prices are higher than what it should be.
"but are forced into it voluntarily" What? o_O
"lack of opportunity as a result of laisez-faire government economic policy." And why did letting things be create reduced opportunity? Are you saying heavy regulations, like almost every industry in the US, is a laissez-faire policy? One has to ask why aren't people producing (either as an entrepreneur or an incumbent producer), not why aren't jobs being created. Is it government projects that resulted in wages being artificially pushed up (government demand is demand nonetheless), preventing entrepreneurs from creating long term (government projects don't last forever), profitable businesses?
Government pushed up labour cost (by employing people for whatever stupid projects they can think of), resulting in people not producing, resulting in jobs not being created in the private market, thus government needs to push up labour cost again (by employing people for whatever stupid projects they can think of). It's a self-fulfilling prophecy.
And another thing - nominal wages (or "wages" for you) is different from real wages.
🧠 Keith L. Thank you for sharing your thoughts. I would like to bring the following to your attention:
"Confirmation bias is the tendency to search for, interpret, favor, and recall information that confirms or support one's prior personal beliefs or values. It is an important type of cognitive bias that has a significant effect on the proper functioning of society by distorting evidence-based decision-making. People display this bias when they gather or remember information selectively, or when they interpret it in a biased way.
For example, a person may cherry-pick empirical data that supports one's belief, ignoring the remainder of the data that is not supportive.
The effect is strongest for desired outcomes, for emotionally charged issues, and for deeply entrenched beliefs."
source:
en.wikipedia.org/wiki/Confirmation_bias
Thank you for your valuable time, Keith L.
Good info! :)
just a question to the authors of the video. Do you have a video that also addresses foreign tariffs and how tarrif wars between the US and Foreign Nations effect the economy both US and global? Also how tariffs on one industry may save some jobs in that industry but cause a loss of jobs in other industries indirectly etc.
thanks
Excellent video.
Excellent !!!!
The wasted resources is to pay domestic workers more than foreign labor, as well as other domestic businesses that may arise to help in the production of sugar (in this example).
It seems that Tariffs have a nominal zero net effect but have a real effect that it protects national interest.
Elias Håkansson , thank you for spending your valuable time explaining economics.
🧠 "Confirmation bias is the tendency to search for, interpret, favor, and recall information that confirms or support one's prior personal beliefs or values. It is an important type of cognitive bias that has a significant effect on the proper functioning of society by distorting evidence-based decision-making. People display this bias when they gather or remember information selectively, or when they interpret it in a biased way.
For example, a person may cherry-pick empirical data that supports one's belief, ignoring the remainder of the data that is not supportive.
The effect is strongest for desired outcomes, for emotionally charged issues, and for deeply entrenched beliefs."
source:
en.wikipedia.org/wiki/Confirmation_bias
Please help me understand this better,... I feel like the term "wasted resources" is inaccurate. It seems true in your "sugar" example but what if in another example, rather than land, irrigation, and fertilizer, the "wasted resource" is merely increased labor costs? It seems the "wasted resources" triangle could also be called "increased welfare for domestic laborers". Here's what i mean: when domestic supply increases due tariffs, domestic companies invest in labor, infrastructure, SG&A, etc... thereby providing salaries for employees who then spend their paychecks on products/services. Therefore, why is this increase to domestic supply as a result of Tariffs NOT a good thing?
This is a bogus anti protectionist piece and I'm finding they almost all are. This is a manipulation that goes back hundreds of years. Protectionism is the only way. Tariff what you can produce and don't tariff what you can't. His arguments are bogus.,
Amazing videos
Too bad our elected leader(s) didn't have a better understanding of macro-economics. The fact is based on pure economics (and capitalism) tariffs and protectionism is bad. Only when you mix in political ideology and personal gain can you say tariffs/protectionism is good. In other words, if you are connected to domestic production or you are on the same team as the elected official that introduces the tariff then you personally like it but that doesn't make it good from a economic stand point.
I'm not much of an economist, so maybe take my opinion with a grain of salt, but i'm not really sure that i'm for free trade. I think i understand that tariff free trading allows the world as a whole to produce a whole lot more stuff, but i'm not sure i like the stuff we're making considering the environmental and social cost. It's like yeah, sure, the cost of a t-shirt has never been lower, but i would rather see local crafty people being able to sell them for a living wage than having to compete with children from far-far-away-astan. And maybe we would then decide we don't need as many stupid little plastic toys (Bratz Dolls and the like) as we currently make if we had to manufacture them in our own backyard. Or maybe i'm naive
I get what you say. But that really falls in the hands of the consumer. Deciding on what we spend our money is a big responsibility. Even if something is stupid, or unnecessary, if people are buying it, its going to create incentives to produce more of that. I think all schools should have basic economy classes, where they teach about their power and responsibilities as consumers and producers to society. In our days we hear lots of criticism towards the producers (big corporations mainly), but we hear little criticism towards the consumers, whom are the ones that give that power to the big producers in the first place.
Lost gains from trade is for the developed countries. It is in best interest of developing countries.
@Marginal Revolution University
The subtitles interfere with the view of the graph
Hi Cornel,
Unfortunately, there's not much we can do about that. You can pause the subtitles to get a better view of the graph.
Cheers,
Meg
You can turn off the sub by clicking cc button, subtitle has been helpful for non-english speaker like me
too good sir
In talking about "The cost of protectionism" (in this video), when talking about the "wasted resources", have you guys taken in acount the wasted resources of the transportation of the imported goods so that it more than makes up for the "wasted" resources in producing the good domestically?
Transportation costs have the same effect on trade as tariffs. I'm not sure what you're asking. If transportation costs make imports more expensive than domestically produced goods, then there wouldn't be any reason to trade.
We need to have someone in India make these videos as, apparently, it's a "waste of resources" to make them here.
only if people in india are better at producing the videos.
but it's certainly a good thing that there is international competition in creating educational ressources. i would be much worse of if all my education would come from germany.
Only if the guy in India has a comparative advantage in making them (they don't) :)
Tariffs on foreign goods are powerful GINI boosters
In the final slides, "waste" should be "wastes."
I have a question . I can't quite understand why we allowed trade in this model ? because even after putting traiffs we are not on a higher level than the initial equilibrium supply and demand ?
+Noura Ebrahim What do you mean? Higher level of what?
Bc at the equilibrium point means there is no free trade. Even with tariffs, there would still be some sort of world trade.
This is very oversimplified. I agree that tariffs have some negative effects. But there are so many welfare costs that aren't being considered.
When people buy and eat too much sugar that negatively impacts their health, which means more visits to the doctor, which means insurance becomes more expensive. People are sicker and excessive sugar impacts people cognitively as well so people are less productive and also less likely to go as far as they otherwise would have in college, creating less workers in fields that are more brain-intensive.
Also workers not working on a sugar plantation in the foreign country will be pressured to find other jobs. What if these other jobs give them better pay or better skills and experience that makes them more well off over time? Then they will have more money to spend and will buy more of our imports. Of course the opposite could also happen and they could end up poorer but we don't know which it would be without more data.
Another thing to consider is that if the tariff is understood to be a reaction to unfair conditions such as low wages, sweatshop labor, lack of certain regulations (all of which create an unfair advantage for the foreign producer) then a tariff can be used to apply pressure on other countries to address these issues. That can lead to more pay and a better quality of life for foreign workers who can then afford to pay for our imports.
In a perfect world where conditions for workers, conditions for environmental protection, consumer protection, education, and a couple of others are similar between countries I would support free trade. And I believe someday a long ways off from now it will happen. I'm all in favor of globalization, but it needs to happen fairly with the interests of all taken into account, and not just the wealthy few.
very good analysis
sorry, i think you are so wrong..nobody forces people to buy and eat sugar..please just think about it. If what you write is true, then it should be better to ban the sugger. It is nonsens. People like sugar, they dont care if they will be less productive and more ill, they are more happy a they prefer it.
Worker on sugar plantations can work elsewhere. If they have oportunity to take a better job, they will do it. So tariffs make them poorer. It can be said without data.
Do you really belive that pressure on other countries make living there better?
I think that free market makes better world.
@@DominikMaxima You assume that people are rational actors, which very often they are not. Most people do not realize that sugar is making their life worse, or if they do they lack the ability to self-regulate. The argument could very easily be made that people are happier when they eat less sugar, and that free trade exploits human instinct for the sake of maximizing the profit margin, whereas a sugar tax would at least counter-balance the hit of dopamine someone gets from eating sugar and therefore encourage self-regulation.
CobaltBW I agree that some people do not realize that sugar is making their life worse, but i do not asume anything. I really do not know if sugar is making their life better or worse, i assume that they would not buy it if the sugar make their life worse BUT who am i to ban the sugar or regulate it for their good. It is their lives. I do not like people which think that they know to live other peoples lives better and therefore may or even have duty to force them to something. free market do only what peoples want. If some companies exploits human instincts then there is hole in market for other companies that show it to people and offer solution. Freedom is bound together with responsibility. I think that a whole range of drugs are dangerous, even alkohol, tabbaco, even coffea and what about extreme dangerous sports.. should we ban all of this? Live and let live. It would be great if everybody live this way. Simple with no expections. Unfortunately every single state is violent to their citizens, tax almost everything, makes milions of orders or regulations. Lots of problems people have cause states and then they offer some solutions which only causes other problems and so on.
"This is very oversimplified....let me lead my argument with an analogy..." aaaaaand, no thanks, I'm out.
This is inaccurate, consumption is not an inherent gain from trade. That presupposes that what I buy is worth it. Also, just because it's more expensive to produce doesn't mean that it's a waste. That presupposes that a worker's wage is a waste, and throws that inside the bag with the theoretical possibility that a land has a richer soil (which can be conceptually reduced to the fact that it posseses a capital advantage, because soil can theoretically be improved with enough money).
Wasted resources is a piss poor argument. Here's why...
1)Those resources go to support the USA. They support the government, the people and the businesses involved. Foreign corporations selling in the US dodoot provide that same support. A flat across the board tariff mitigates the real and potential loss from open trade.
2) Another benefit of tariffs is in the potential to make up government revenue. There was a time when the US got all its funding from tariffs and there was no income tax. A true conservative would want to return to a world like that. Instead cuckservatives push free trade as the gold standard. To me, Free trade is tantamount to treason. Do not sell out your country for a bag full of cash.
3) A free trade agreement entangles the US with foreign governments and destroys our sovereign rights as a nation. The TPP for example adds a protection mechanism for the Investor class. This opens the US up to potential liability if we change laws that impact investor profit. Cuckservatives again step aside and let foreign interests have their way with America. It's absolutely disgusting.
4) Tariffs and a government willing to use them to stop domestic companies from abandoning the US, adds enough uncertainty to keep businesses here. The government should be actively working with business to promote greater efficiency. We should be pushing competition within the US ecosystem not adding it from outside.
I agree with you but let's not make tariffs too high.
If I'm not mistaken doesn't free trade make a country more dependant on foreign nations. if I'm not mistaken.
just wondering I'm a teenager that desires to learn about the real world.
Isn't it better to have a free market where the government doesn't force themselves on companies.
And are you completely against the domestic tax or are you willing to a low tax
is this for only a level ? i got gcse’s soon so idk
So tariffs hurt the investor class and help the working class.
They make domestic labor competitive with exploited foreign labor. Tariffs protect the "American way of life." Simple economics teaches us that when there is an abundance of something it is cheap. There are now almost 7 billion people in the world so worldwide, labor is dirt cheap. How can a minimum wage US garment worker compete with a Bangladeshi sewing for 45 cents a day. Don't tell US that those jobs are outdated and gone when thousands and thousands of workers in cheap labor markets are working those jobs. Free trade skews the distribution of income to the investor class. Tariffs support the "pursuit of happiness" for all in the US. Tariffs should adjust for the difference in the standard of living in the source country.
this video doesn't address how other industries are affected. For every job "saved" by protectionism in one industry many more may be lost in other industries that are indirectly or directly connected to that one industry.
The consumers pay the tariffs so it is NOT good for the working class. It benefits the wealthy that own domestic production but not all of them. Many of the domestic producers still use the goods being taxed in production. That is why the Koch brothers opposed the tariffs.
I can see how one could reach this conclusion, but they are missing something. Now that disintermediation is possible. You can open a brokerage account and buy non-u.s. companies, we are all both consumer and producer. What would be worth fighting for is free access to capital markets, like in China and other developing nations. Plus, foreign surpluses are invested in american capital assets, which increases productivity. Imagine paying 20% on a car note. No one is getting a free lunch. Things could be better, but globalization, has improved our standard of living, on the whole.
It actually benefits domestic investors a lot, lol. If an investor has a stake in a zombie industry doing well, they're going to support tariffs as it restricts international competition. It's not a "working class" issue at all.
Trump didn’t watch this video
It hillarious doesn't he have a degree in economics.😂
@ right? Penn state looking kinda sus rn
Rezourzes
I recently lost a $17 million, 6 year manufacturing job to Chinese imports. The Chinese product was only taxed 3%. I must charge 8.7%.
For sugar this makes sense due to the advantages climate have on production. But I’m not sure it works with manufactured goods especially with the advances in AI. Basically why would you invest in robots that can replace humans and might be more competitive in the long run, if you know you can invest in a sweet shop in China and make a profit instantly.
It's hilarious that a bunch of trump and Bernie supporters in the comments think their smarter than an actual economist
Like all the economist that told us the subprime housing market couldn't cause an economic collapse?
ZDriver1996 experts make mistakes, bruh.
Still doesn’t diminish their expertise over an average nose picker
It always cracks me up when economists act as if they have the capability to make actual predictions. They should leave that to the natural sciences.
MERLE CELESTE BROWNLEE so instead let people who run for office that have no idea how economics work make decisions instead? I’m confused at to who we should be deferring decision making to if it’s no longer in the hand of economists?
tarriffs
LoL so wanted resources? Wasted how? Meaning we waste everyone elses resources instead of our own? Yes things are cheaper to buy in other countries, why though? Well mainly because they pay very low wages. From the brilliant minds that moved out production to China and India since the 70s. The question. Are Americans better off today then they were in the 90s 80s 70s? I would say no. The jobs today in America are mostly service jobs. Low skilled jobs because we manufactured very little here. Not good for a country.
What they mean by wasted resources, is that the comparative cost to produce domestically will be more expensive. Also real Household income has almost doubled since the 70s. This means the median household can buy twice as much shit today. There are gains from trade such as comparative advantage which you should look up. Of course, there will be losers and winners when a country opens up to trade, but in the end the aggregate welfare increases.
@@woodenfloor3131 since 2000 the wages for everyday jobs have stayed stagnant. Buying a house since the 2000s has become harder and harder every year. Life hasn't become better. We have outsourced so much that the major jobs today are retail. The middle class is shrinking and becoming poorer. This is real world.
total nerdy bs, see korea's protectionism and the rise of samsung.
There is an assumption domestic consumption will fall, in many cases domestic consumption will continue.
+J Virgo So you would buy the same number of goods even if the price of said goods go up? Falling consumption is not the assumption, it is the conclusion.
***** The increased price of foreign goods will cause previously inefficient domestic producers to produce said product. At the end of the day, the price goes up.
Cost is subjective from producer to producer. Some domestic producers may be able to produce at a competitive price, some won't. Pushing producers to produce at above world price is taking them away from more efficient industries - essentially wasting resources.
***** " actual wasted resources are when men sit at home unemployed when there is work to be done and physical resources available to do them" They are sitting at home precisely because there isn't work to be done! One has to ask why the markets are slow to adjust (not all countries weather shocks at the same rate). Regulations increase the cost of a product without adding value, try looking there instead of proposing more non-value adding costs.
Full production cannot happen without full employment, but the reverse isn't true.
Are you really using the Pyramids, which uses slave labour, as an example for not wasting human lives?
***** RE: Pyramids. Interesting, never knew that. However, I must say that government projects are generally not going to be as profitable as private businesses (too high risk or too high cost). This can be seen through the many ghost towns in China, and Olympic stadiums around the world.
"Yes, the sources I read are very archaic" LOL, you're funny.
"what happens to the workers who aren't needed to achieve "full production"?" If you have unemployment, you don't have full production. I was saying that full production cannot happen unless everyone is working. However, if everyone is working, that doesn't mean we have full production.
If "Full Production", then "Full employment" is true. The reverse statement, If "Full Employment", then "Full Production" is not equivalent, and not necessarily true.
Like If "Dog", then "Mammal" is true. If "Mammal", then "Dog" is false.
***** "The big exception where market forces can't operate effectively is in "natural monopolies," for example water utilities" Nope, "market monopolies" is a made up concept.
mises.org/library/myth-natural-monopoly
"I'm arguing for tariffs that are applied across the board" That will increase the price of everything that uses anything. The ripple effect is not going to be as mild as a mere steel tariff.
"The biggest benefit, however, would be the decrease in wage competition. If there were 30% tariffs across the board, quality foreign items would still be purchased by those who could afford them - German cars, Italian handbags, Swiss watches etc" That's the problem, now is it? The people most reliant on imports are the ones who can least afford to buy local products. It's not about quality, anyone who wants quality will buy it at any cost. It's about affordability.
"would be the decrease in wage competition" Would you favour a ban on any new products that is potentially a competitor of incumbent industries?
What about if other countries retaliate, resulting in a decrease in demand for American goods? You are back to square one, where people are hired because of an increase in local demand, but fired again because of a decrease in foreign demand.
"Export goods would be forced to compete more on quality of the goods themselves and less on the wages paid to the people who produce them." Higher prices across the board, which harms the poor the most, due to lower purchasing power, but somehow it's supposed to be a good thing.
"High wages are actually a good thing for economic development" Higher REAL wages, which result from increased productivity is a good thing. Higher nominal wages can result from an inflation. In the best case scenario, people are in the same place they were before the tariffs.
"Imagine the extreme alternative case, where there are an effectively limitless supply of workers who are willing to work basically for free" Why did this phenomenon happen in the first place? Is it because entrepreneurship is too costly, and therefore no one is willing to produce? Such a phenomenon can only result in a heavily regulated industry. Fix that.
"invest in labor-saving machines, otherwise known as capital" The best way to increase investment is to encourage saving. Not many people are going to be able to invest if there isn't enough savings to lend out. That's not going to happen with interest rates at 0.5%.
"keeping wages down" keeping NOMINAL wages down. REAL wages increased due to lower prices.
"ending around the 1970s with the elimination of tariffs through mechanisms like GATT and the WTO." The reduction in tariffs and the lower importance of American exports on world trade had nothing to do with each other. the 1970s were the time when socialist countries were starting to free up their economies. America became dominant only because it was one of the freest economies (domestically). With the freeing of socialist societies, America became less free (in a relative sense). Now with heavy regulations on American and European markets, the relatively freer Asia is catching up.
On a final note, environmental regulations are, to some extent, a good thing. So what if China is suffering from smog or whatnot? They are the ones suffering because they have to spend more on healthcare. They don't have a good legal system to counteract polluters. Even so, China is now the biggest investor in green energy.
A better solution would be to allow people to sue polluters (for damaging their property), but I don't see that happening soon.
Wow graphs , are cool geometric art, but anyone who lives in America and still believes that Laissez faire free trade is good for america, should really race to the nearest mental health center and have a IQ check.
free trade creates dependency. also free trade ,I'm sure, will also add to the trade deficit. free trade is not always good. There are longterm effects that can create severe outcomes. free trade is actually currently having a severe effect on the countries local economy as we speak. It is as if everyone thinks that NAFTA was a great idea, when the long-term effects suggest otherwise. The country's economy is deteriorating.
Raising minimum wages will not help as companies will start going into automation and hiring less workers to offset their cost and to sustain their profit margins.