Today’s Quote of the Day…

…is from pages 101-102 of Paul Krugman’s 1997 book Pop Internationalism:

There is no question that in many cases comparative advantgae arises from self-reinforcing external economies rather than as a result of underlying national resources.  In such cases international competition may exclude a country from an industry in which it could have established a comparative advantage, or drive a country from an industry in which comparative advantage could have been maintained.  In these cases, a [sic] intellectually respectible argument can be made for government policies to create or preserve advantage.

The fact that an argument is intellectualy respectible does not mean it is right.  Concerns over competitiveness that are valid in principle can be and have been misused or abused in practice.  Competitiveness is both a subtler and a more problematic issue than is generally understood.

Absolutely.  Some folks like to justify Trump’s economic policies based on obscure or particular economic arguments: optimal tariffs, or increasing terms of trade, or forcing other nations to lower tariffs and subsidies, or national defense.  All of these arguments are intellectually respectable (if not consistent with one another).  The internal logic of them holds.

But just because something is possible does not mean it is probable.  It is possible that a tariff could improve the well-being of a nation (subject to some key caveats).  But how probable is it that government could effectively create and enforce such a tariff and not face public choice concerns?  How probable is it that there would be no additional costs to the process, or that it won’t get hijacked for self-interested uses?

It’s trivially easy to come up with some theoretical reason why something can happen.  Translating that into reality, however, is a totally different beast.

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