Human behavior is incredibly rational and predictable given a basic understanding of the 'rules of the game'. Make a three pointer in basketball worth 10 points and prepare to witness behavior changing in a very predictable way. This is all the more evident in consumer behavior. Case in point, the vast majority of consumers on this board openly admit to buying their components from online retailers at a fraction of the price of their LBS, even though they know that this behavior may ultimately lead to the demise of their local shop. They know they really
should support their LBS, but there is a very predictable tipping point at which the consumer says they are not willing to pay a premium above X %. You can argue that the consumer is behaving irrationally for taking the short term gain in lieu of the long term health of their local economy, but that doesn't mean the consumer isn't acting in a rational and very predictable way.
DarkSpeedWorks wrote:
DBF wrote:
The real world evidence on this is not controversial,
every economist agrees that protectionism does not work.
While I agree with other posters that the article is weak, the topic is interesting. It got me thinking more about the economic implications for americans of US manufacturing vs overseas manufacturing, and what it was exactly that got trump elected as president.
What you wrote above is true, protectionism is in general a negative in rational economic terms. But there is a bit of a problem: humans, especially when making economic and political decisions, are far from rational.
So, yes, free trade means that, among other things, consumers benefit economically, as 95% of what we buy gets a little bit cheaper which means that there is a huge economic benefit when it is all added up among all of the people that get the benefit (the vast majority, if not all, of the US population). But, free trade also means that, in spite of cheaper prices and other benefits, a non-trivial number of people are thrown out of work, or lose well paying jobs and now have to work at much lower paying jobs. But, in purely rational terms, that economic loss is still far less than the economic benefits of free trade.
But, since humans are not rational, as a whole, our US population
feels the pain of job/wage loss far more than the benefit of slightly better prices for everyone across the board. And that
feeling of pain, while perhaps not rational in economic terms, is how the voters got us to where we are (politically) today.
Or, at least, this is my theory, but I'm not by any stretch an economist.
(On a compete side note, we do happen to manufacture in the usa, so, trump or no trump, we'll keep on doing what we always have ... )