BusterAg said:

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MemphisAg1 said:

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Zobel said:

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I think there are two missing ingredients.

One is qualifying "good". Lower prices are not the only good for the American consumer.

The other is adding the element of time. What is good in a short time frame can be very bad in a longer one.

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All valid points. And you would want to be strategic about it. Those industries that are critical to national survival should have a bias toward in-sourcing (defense, steel, shipbuilding, chips, etc.). Those that are more transactional in nature (tennis shoes, clothes, cell phones, etc.) could quite possibly make more sense to outsource most of it.

My issue with Trump's approach on this is he always uses the same tool in his toolkit... the hammer.

The hammer is very good for things like securing our borders, supporting law enforcement, defunding NGO groups that feed on the government teat, etc.

Other issues like this are more complex and require a different tool with some finesse. A scalpel instead of a chainsaw.

But with him it's always the hammer, and he's starting to accumulate some painful lessons from over-relying on it.

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If you give this congress a scalpel, the only people that win are congressmen and their buddies.

A hammer impacts everyone. There are some unintended consequences, but they are worth the squeeze when DC is filled to the brim with corruption.

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His hammer hasn't fixed anything in DC. We are running deficits of 6% annually and blowing out our national debt.

Zobel said:

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I don't think it is so terribly hard. Start with this rule:

- import raw materials
- export finished good

And you'll probably be in a pretty good place.

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Except there's that piece in the middle which is labor. Ours is much higher than much of the world. Unless an industry can innovate and achieve high levels of productivity to offset the disadvantage, we won't be competitive for those exports. That typically requires a lot of capital. Sometimes it''s more efficient to deploy that capital elsewhere and outsource the other stuff. It's why companies use contractors instead of employees for some functions. Trade-offs... they are real. There's no one-size fits all rule here.

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Except there's that piece in the middle which is labor.

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And regulatory costs and taxes and trade unions and transportation costs and etc etc etc etc etc

Going from Raw Material to Exported Product amounts to this thinking.

Right. Which is why private industry when left to follow its own course will not always promote the prosperity and power of its own nation.

Because, as Adam Smith noted, a merchant is not necessarily a citizen of any particular country, and it is indifferent to him from what place he carries on his trade. A "trifling disgust" will make him remove his capital and all the industry from which it supports from one country to another. No part of it can be said to belong to any country until it exists in building or lasting improvement of the lands (and today, even that doesn't cause it to stick).

You want capital efficiency? Or do you want your country to be strong?

MemphisAg1 said:

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Zobel said:

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I don't think it is so terribly hard. Start with this rule:

- import raw materials
- export finished good

And you'll probably be in a pretty good place.

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Except there's that piece in the middle which is labor. Ours is much higher than much of the world. Unless an industry can innovate and achieve high levels of productivity to offset the disadvantage, we won't be competitive for those exports. That typically requires a lot of capital. Sometimes it''s more efficient to deploy that capital elsewhere and outsource the other stuff. It's why companies use contractors instead of employees for some functions. Trade-offs... they are real. There's no one-size fits all rule here.

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GUT regulations, not the mamby pamby bull**** done so far, REAL regs.

we've regulated our way out of competition

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You want capital efficiency? Or do you want your country to be strong?

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The American Consumer wants capital efficiency over some meaningless and vague term like "strength".

Windy City Ag said:

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It worked for them, didn't it?

You never see homeless gnomes!

Great. Then when our nation falls like every one in the past that optimized for short term price, they will suffer the consequences.

Edit to add: instead we optimize for a meaningless and rigged term like "GDP".

Zobel said:

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No but in engineering or physics you have to state the assumptions for your model clearly.

The assumptions for Smith, Say, Ricardo were all the same. At the simplest level, they assume:

• Peace
• Common commercial rules
• Voluntary exchange
• Economic rationality
• Limited mobility between countries (especially Ricardo)
• No strategic value to self sufficiency
• No major security externalities
• Absolute gains matter (ie trade is good if your country gets richer even if the other benefits more)
• and the big one - that national wealth is the same as material prosperity

That last one means money matters more than state power.

This is kind of like the old physics joke, imagine the chicken is a sphere.

None of those hold up in any way in the real world, yet the conclusions (given all these) of "free trade maximal good" is never questioned.

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Remember when you posted every 5 seconds on here about how super serious COVID was while quoting a bunch of garbage "peer reviewed" papers.

Zobel said:

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Right. Which is why private industry when left to follow its own course will not always promote the prosperity and power of its own nation.

Because, as Adam Smith noted, a merchant is not necessarily a citizen of any particular country, and it is indifferent to him from what place he carries on his trade. A "trifling disgust" will make him remove his capital and all the industry from which it supports from one country to another. No part of it can be said to belong to any country until it exists in building or lasting improvement of the lands (and today, even that doesn't cause it to stick).

You want capital efficiency? Or do you want your country to be strong?

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I want the freedom for people and companies to invest as they wish without the government picking winners and losers. Competition is a beautiful thing, and it fosters innovation that makes our lives better.

I do not want someone telling us how we have to conduct free enterprise simply due to their notion of what makes us strong. That isn't freedom. It's autocracy.

This is a bit of a false dichotomy though.

There is a tension between rational desires at the national level, and rational desires at the individual - especially when those "individual" desires are embodied in multinational corporations.

You already accept that the state has a vested interest in this by identifying "strategic" industries. So the question isn't whether, its what principle governs intervention like this.

Our country decided this already for ourselves back in the 1800s, and used national economic policy to build strong domestic industries. It undoubtedly cost our consumer base more for those goods in the short term, and equally certainly benefitted the country in the long run.

"Free enterprise" in an absolute sense is not, and has never been, on the table.

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Great. Then when our nation falls like every one in the past that optimized for short term price, they will suffer the consequences.

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This doesn't even make any sense. You can't name a country that when under due to a focus on economic efficiency.

In terms of nations failing due to economic policy, I am more influenced by Acemoglu and Robinson, Niall Ferguson, Hernando Desoto, and others.

Nations fail due to eroding institutions, corruption, extreme wealth concentration, collapsing public finances, an unreliable legal system for contract enforcement and intellectual property protection, and extractive policies by government elites.

The Trump administration leans towards a lot of those right now.

Sure. What's that got to do with tariffs, homie?

In history?

The Italian city states, the Hansiatic league, the Dutch, the English, the Spaniards and Portguese, the French, the Germans, and Russians, and now trending... us. All had periods of industrial collapse through poor trade policy, and much of it was related to trading long term industrial cost for low market price / short term advantage.

But you've moved the definition a bit here. "Economic efficiency" is not synonymous with GDP and it isn't synonymous with "buying in the market where prices are low."

National productive power is a way to describe economic efficiency, combined with political power. Think of it as the balance sheet, with GDP being akin to periodic earnings.

Zobel said:

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This is a bit of a false dichotomy though.

There is a tension between rational desires at the national level, and rational desires at the individual - especially when those "individual" desires are embodied in multinational corporations.

You already accept that the state has a vested interest in this by identifying "strategic" industries. So the question isn't whether, its what principle governs intervention like this.

Our country decided this already for ourselves back in the 1800s, and used national economic policy to build strong domestic industries. It undoubtedly cost our consumer base more for those goods in the short term, and equally certainly benefitted the country in the long run.

"Free enterprise" in an absolute sense is not, and has never been, on the table.

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With very limited exceptions, when the government starts picking winners and losers they are undermining our foundational freedoms. It's not a case of "if a little bit of it is ok, then a whole lot of it is even better." No sir. We have to fight back hard against that slippery slope. Just like if a little bit of welfare is good for people who would otherwise starve, then we need to issue government debit cards so that people can buy junk food and soda in the store because it's not fair that the non-welfare people can do it and I can't.

Nope. Get outta here with that nonsense. Free enterprise rules.

I'm confused. Didn't you say that you thought steel, chips, defense had to be protected? Does that undermine foundational freedoms?

Did our 19th century protectionist policies undermine our foundational freedoms?

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Hansiatic league, the Dutch, the English, the Spaniards and Portguese, the French, the Germans, and Russians,

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The Hanseatic League was a trading bloc of merchant guilds across multiple royal fiefdoms and was never a sovereign nation so throw that one out. It was a free rider on the back of sovereign militaries. Even if you included it, the league vanished because of the discovery of the new world upending global trade, not because the league was too focused on short term efficiency. Bad example.

The French, English, Germans, Dutch, Russians, and Spaniards were all royal systems that carried global empires. Both of those systems engaged in unsustainable foreign adventuring like we are doing right now. All collapsed due to military incompetence, extreme wealth inequality, and a total collapse in public finance.

And I never equated economic efficiency to GDP . . .those are you words, Economic efficiency is very straightforward. Capital is allocated to the highest returning projects. That usually means the investments with the most growth potential, the least waste, or both and the history of those is greater wealth for all. That is why we no longer do textile and apparel and instead do biotech, high finance, value added industrial manufacturing, services, etc.

The Hanseatic league declined largely because the English wised up and kicked them out of their markets. This process started under Edward III in the 1330s when he imported Flemish weavers and outlawed wearing clothes made of foreign cloth. Under Edward IV in the late 1460s they banned importing cloth altogether. Under Edward VI they kicked the Hansards out of a market they'd owned for three centuries. Queen Mary let them back in, but in 1597 all trade with German merchants was outlawed. The league was dissolved in 1630.

You should read List's book - you would like it, I think.

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And I never equated economic efficiency to GDP . . .those are you words, Economic efficiency is very straightforward. Capital is allocated to the highest returning projects. That usually means the investments with the most growth potential, the least waste, or both and the history of those is greater wealth for all. That is why we no longer do textile and apparel and instead do biotech, high finance, value added industrial manufacturing, services, etc.

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OK. What time period is economic efficiency judged, and how does economic efficiency function at the political level? In other words, does this economic efficiency have any preference for the United States and its wellbeing?

What I mean is - I don't really care about maximizing economic efficiency overall, if it means the US doesn't benefit from it.

Zobel said:

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I'm confused. Didn't you say that you thought steel, chips, defense had to be protected? Does that undermine foundational freedoms?

Did our 19th century protectionist policies undermine our foundational freedoms?

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My posts speak for themselves and should be read comprehensively and not cherry-picked.

Just because a little bit of government direction can make sense doesn't mean that a lot of it does. In fact, there are many examples around us of government over-reach to remind us of that.

You might be the smartest and most benevolent guy in the US. Even if you are, we don't want you (or others) making grand decisions for us on who's in and who's out. Free markets, with limited government direction, are what have made our country the most successful in the world.

My point is reinforced by the OP, where the president himself can not speak to the topic of trade deficits intelligently. Why in the world would we want the government to make decisions on a broad scale that are better left to individuals and businesses?

This gross incompetence of government to make broad decisions for Americans isn't unique to Trump. Biden, Obama, and many others before offer stark reminders of why the people need to retain decision rights on their economic options and not let incompetent politicians usurp it.

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OK. What time period is economic efficiency judged, and how does economic efficiency function at the political level? In other words, does this economic efficiency have any preference for the United States and its wellbeing?

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There is no stable time period for judging economic efficiency because there is not stable time period for innovation that usually upends market dynamics.

We went from the Wright Brothers first flight in 1903 and the press learning about it a few days later through the telegram to a man landing on the the moon in 1969 with the whole world watching on personal tv sets. Markets get upended at a faster and faster pace so you can't just look through a lens and say . . .10 years . . .that is the right time frame.

And no, it does not have any more preference for the US versus other markets anymore than a CEO has a preference for staying in California and not moving to Texas because of the wellbeing of California.

American leaders understood that for a very long time, and benefitted from an economic structure that sucked in capital both intellectual and financial from all over the world which increased our federal tax income to the point that we could build the very best national defense, infrastructure, etc.

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Free markets, with limited government direction, are what have made our country the most successful in the world.

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This is a question of fact though, and history doesn't bear this claim out.

The opposite of "unlimited free trade" is not "central planned economy". Which is fortunate, because we've never had the former!

The issue is, if you go back to the whole claim above, the laissez faire economic model has assumptions about peace, common rule of law, that absolute gains matter (vs relative), and your opponent is not trying to hurt you.

IF you have nation-agnostic multinational corporations who will act against the best interests of the US to make money, and IF you have states actively working against you, IF you don't have common market rules, then the free trade assumptions no longer hold.

So what do you do then?

Why should I care about a system that will optimize for economic efficiency even in the case that this destroys my nation?

I agree that it doesn't make sense to worry too much about Texas or California - because I care about both. They're part of my country. But why should I be ok destroying both Texas and California (and the rest of the US) to maximize economic efficiency in the abstract?

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Why should I care about a system that will optimize for economic efficiency even in the case that this destroys my nation?

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Your issue is that you view it in an either/or framework rather than a probability weighted set of scenarios.

We should be worrying for more about nuclear and biological weapon proliferation destroying our nation rather than a lack of robust trade barriers.

The reason is that the probability of the US being ruined in a low to no barrier situation is close to zero. We lowered trade barriers from the 1930s to 2016 and our competitive advantages in the global economy only strengthened. There has been a live experiment running for nearly 90 years and it contradicts the framework you are trying to put forth here.

Interestingly enough I am the one arguing against a binary framework. I'm not sure how you get to either/or for me.

Over the past 20 years a great deal of the US industrial capacity has been lost. I am not sure how much exposure you have to the heavy industrial market, but it's tough. We've lost most of our heavy machinery, tool and die, almost all of our clothing and apparel, etc, etc, etc. There was a good video about this circling, the grill scrub brush thing.

Your framework doesn't account for the <<long run>>. You're measuring from 1930 to now, but who was competing with us in 1960? Not China, certainly. Yet China and Japan became credible competitors to US industrial power...by doing what I'm talking about, and explicitly not doing what you're talking about.

Are we in a better position with regard to China today than in 2000?

But anyway you really didn't get to my question. You're saying we should maximize for economic efficiency, even though you also say it is agnostic to the benefit of the US. My question is why? If it is bad for the US, but good for economic efficiency, why would I want to do that?

Three time Trump voter who definitely has Trump fatigue. That said, it wasn't long ago where we had a president who let tens of millions of illegals in, tried to close every gun dealer in the nation, made vaccines mandatory, had 22% inflation and allowed radical progressives to sign EO and pardons for him.

You'd be stupid to think not pulling that red handle for every republican this mid term. But yea. Less tweets, less Iran and more letting the market work.

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Interestingly enough I am the one arguing against a binary framework. I'm not sure how you get to either/or for me.

Over the past 20 years a great deal of the US industrial capacity has been lost. I am not sure how much exposure you have to the heavy industrial market, but it's tough. We've lost most of our heavy machinery, tool and die, almost all of our clothing and apparel, etc, etc, etc. There was a good video about this circling, the grill scrub brush thing.

Your framework doesn't account for the <<long run>>. You're measuring from 1930 to now, but who was competing with us in 1960? Not China, certainly. Yet China and Japan became credible competitors to US industrial power...by doing what I'm talking about, and explicitly not doing what you're talking about.

Are we in a better position with regard to China today than in 2000?

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We are most definitely in a better position vs China since 2000. China is economically stagnating hot mess that started losing its offshoring edge to other markets more than a decade ago. They had one angle, which was low cost and human rights and regulation free work environments. Both of those are gone for more than a decade now.

It is now facing way, way too much excess manufacturing capacity, declining demographics, a nearly insolvent banking and real estate market, and a quickly dwindling foreign direct investment pool due to all of the above.

And the US industrial product is at its highest levels ever and we have spare capacity over and above. Our industrial base is not cranking out grill scrub brushes by design.

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But anyway you really didn't get to my question. You're saying we should maximize for economic efficiency, even though you also say it is agnostic to the benefit of the US. My question is why? If it is bad for the US, but good for economic efficiency, why would I want to do that?

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Because if we don't emphasize capital efficiency the capital leaves anyway and the we are far worse off. That is where you can start citing England, France, etc.

Your last paragraph is a bit like pissing on my leg and telling me its raining. I'm an armchair economist and a professional in heavy industry. What you're saying is factually incorrect.

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Our industrial base is not cranking out grill scrub brushes by design.

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Also. Who's design, exactly?

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Your last paragraph is a bit like pissing on my leg and telling me its raining. I'm an armchair economist and a professional in heavy industry. What you're saying is factually incorrect.

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Executives at GE Vernova or Eli Lilly (technically a manufacturer) or Defense Contractors like GD and Lockheed or Caterpillar and even the auto companies etc etc are not hurting right now.

I don't disagree that many other sectors that are not competitive may be losing ground but any stat anywhere shows you that US Manufacturing in aggregate, which , peaked in 2008, contracted greatly during the Global Financial Crisis, recovered to all time highs, got smacked by COVID, and is once again reaching its all time high.

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Also. Who's design, exactly?

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That invisible hand you don't seem to like or believe in.

Gott run . . .thanks for the engaging debate today.

GEV cat etc are backlogged for years. We don't have spare capacity and their supply chains have been decimated over the last 20 years. The defense industrial base is no better. No wonder you are at odds with a discussion about productive capacity, your view of the country seems honestly disconnected.

Not really understanding this until we have an AI audit of spending and the American people can see ALL the non-sense. Elon merely gave a taste. Perhaps after we understand our waste, a discussion about foreign affairs can be had.

Chicago and Memphis have surrendered their places in finance to places like DFW. Make note and follow advice accordingly.

NYC not mentioned because its more obvious.

Also just to be clear I don't have any issue with the free market. Philosophically I am aligned with Von Mises and Hayek and I love Friedman. I'm a capitalist.

But I think that the special solution (like, special vs general relativity) of free trade is a kind of globalist utopia approach. I don't think it is the correct way to look at intentional trade. It's obvious that in the cases outlined (rules, no bad actors, etc) it's best to have free trade - like between Texas and California. The only question is what do you do once you're off those conditions?

Acknowledging that in those cases free trade is probably not optimal doesn't make me a statist. And it also seems foolish to be a free state absolutist as a kind of suicide pact.

It is a question of - what now?

Can you edit that post? I am a rather simple guy, so I don't infer what you mean when you skip words that would deliver a complete context.