Sunday, December 10, 2006

What's Important

Many Libertarians have begun to lean democrat. Those who don't point to the poor democratic record on trade and the minimum wage. However, they have overestimated what matters. The United States itself is the largest free trade block in the world and quite frankly most of our non-NAFTA trading partners are far away. Even in the modern world distance does still matter.

What matters most is right now is foreign policy and there is little evidence that many on the right have gotten the right message


Bill Smith said...

Hi Karl,

First off, I love the blog.

I'm pretty hardcore about free trade and that's why I view Democrats with a wary eye.

I take it that your point is that most of our economic interaction is domestic and therefore we shouldn't worry so much about free trade. Even if free trade is a positive, you argue, the effect size is small.

I've got two problems with that.

(1) When I think of agricultural subsidies, it's not that I'm sad that I'm paying 3x the world price of sugar. I can afford it! But when I think about poor countries in Southeast Asia or Africa where they would have a comparative advantage at either agricultural production or textile manufacture, etc., etc. but for our stupid trade laws, it breaks my heart. I am under the impression that there are people starving in the world who would be somewhat less poor if we would just change these stupid laws. And that drives me nuts. And breaks my heart.

Am I overestimating the effect that free trade could have as efficient poverty alleviation?

(2) What if Toyota, Nissan, Honda, etc. had been kept out of the American car market? What kind of car would I be driving today? I'm thinking I'd be spending $35 K on something that would be in the shop every week. (My parents used to own a '79 Nova; I know of what I speak.)


Once again, I love the blog. Keep up the good work.

Karl Smith said...

Bill, thanks for you nice words about my blog. I am on the academic job market right now, so my blogging has been slow. I hope to speed up when I get settled.

You make an excellent point about agricultural subsidies and quotas. However, it seems that they are sacrosanct to both parties.

I am not sure what it will take to get significant progress on farm subsidies either here or in the EU.