protectionism

Abstract Ideas Don’t Deserve Patents [NY Times]

Adam Magoon Current Events, Law, Liberty, Philosophy, Politics , , , , , , , , ,

In preparation for something special that I will finally complete this week (Rothbard willing) lets talk about this editorial from the New York Times.

 

The article starts accurately enough explaining the US government’s monopoly power of ideas saying:

The Constitution gives Congress the power to grant inventors a temporary monopoly over their creations to “promote the progress of science and useful arts.”

 

I am actually shocked at the strong language used here, the four letter word “monopoly” is rarely used in reference to any government service.  At least in polite company.  I would also like to point out the subjective language quoted from the constitution.  “Useful arts”.  Useful to whom?  To the inventor?  To consumers?  To the government?  To humanity?  Like most state activities the ability to decide what is “useful” is left to bureaucrats in service to the government rather than in the free market where useful services will generate profits and those that generate disuse (or disutility) are met with losses.  Back to the article though:

“But in recent years, the government has too often given patent protection to inventions that do not represent real scientific advances.”

 

No argument there.  The “copyright troll” phenomenon is more than enough to make this libertarian squeamish.  Where is this editorial going I wonder?

  “The issue in this case, Alice Corporation Pty. v. CLS Bank International, is whether using a computer to implement a well-established economic concept can be patented. The court should rule that such ideas are not eligible for patent protection.

 

Alice Corporation obtained four American patents that cover a method of settling trades between investors in currency and other financial markets. The approach depends on a neutral middleman to make sure traders complete the transactions they have agreed to. The corporation, which is based in Australia, has accused CLS Bank, a London-based company that settles foreign exchange trades for investors around the world, of infringing its patents.”  

To make a long story short the US patent office granted the Alice Corporation a copyright on a form of interaction between a buyer, a middleman and a seller.  An absurd concept to be sure.  Now the question is what does the editorial suggest?

“The Supreme Court should make clear that nobody should be allowed to claim a monopoly over an abstract idea simply by tying it to a computer.”

I agree; but why stop there?  Why the artificial endpoint of “abstract ideas tied to a computer”?  If we shouldn’t allow patents on abstract ideas what would the author suggest if we proved that all ideas are necessarily abstract and therefore not able to be owned, sold, or monopolized?  Would he follow his logic to the conclusion that perhaps all patents are invalid?

The subsidies a…

Rick Weber Economics , , , , ,

The subsidies and protections that New Zealand governments once doled out so generously to both agricultural and manufacturing interests had consequences. The economic way of thinking enables one to discern these consequences more clearly and to predict the consequences of alternative policies. Doing so will often clarify the origin of the subsidies and protections, at least for anyone who believes that democratic legislators pay attention to the interests that are paying attention to them.

From Paul Heyne’s Are Economists Basically Immoral.

Fantastic phrasing of the issue of rent seeking. I think skeptics like to think the public choice theorists are cynical for assuming that political actors act in their self interest; this quote turns that view on its head.

Another example of double-speak: This is what happens when Time Warner Cable is forced to compete

Adam Magoon Current Events, Economics, Law, Liberty , , , , , , , , ,

This is what happens when Time Warner Cable is forced to compete

Such a laughable headline when government regulations are what caused the cable/telecom monopolies in the first place.

“This report admits that in the days when cable was challenging airwave broadcasters, regulators “did not hesitate to grant exclusive franchises to cable operators”4. It speaks specifically of a long history of successful regulatory lobbying by the cable industry. This report claims that lobbying of regulators resulted in a variety of tactics to deter competition (p. 35). It claims that regulators protected and favored cable incumbents for years. Licensing policies have directly or effectively barred competition in many local markets (p. 44). Such practices are no longer official, but cable companies still succeed in enlisting the help of regulators to bar direct competition (p. 44). Incumbent cable companies have also gotten regulators to use “level playing field laws” to increase the costs of entering the cable market (p. 45). Cable companies have also saddled new competitors with disproportionate shares of subsidies for public education and government programming (p. 45). The cable industry has also succeeded in getting the FCC to quash new competitors with prices for leased access no competitor “could pay and remain commercially viable” (p. 47).”

Much like the drug law argument I talked about last week this is another example of people lauding governments for solving problems that the government itself is responsible for.  We need to look beyond the double-speak and identify the underlying issues at hand.  In this case government privilege granted to favored corporations.

From the Comments: Was Colonialism Good for the Natives?

Brandon Christensen Comments, History , , ,

NEO, in response to my musings on the rule of law in Africa, writes:

Thanks, Brandon. Like I said, I don’t know very much at all about Africa, right now I’m looking a bit more at the British in Egypt/Sudan. But currently I know mostly what I read and I suspect you know what I see, so I’m not about to argue with you on it.

Given what you know, I see really good things ahead for them. And that is very good, both for them and us. Somebody once said that prosperous folks try to avoid wars because its hard on the china. I know, it’s simplistic but, its also true.

I get the impression, and I could easily be wrong here, that it might have been better for everyone if the Empires had lasted a few more decades, it looks to me like the people learned the lessons but not the mechanics of creating the institutions.

Excellent point NEO, especially about wars being bad for the china.

Now, the colonial empires were bad for just about everybody (the factions that were able to capture the rent generated by imperial policies were excepted, of course). While European imperialism did open up the markets in Africa and Asia to their mercantile spheres of influence, these policies did not open up the markets to genuine world trade. This has had several ramifications for individual liberty in the post-colonial world.

In order to open up the economies of Africa and Asia to their mercantile systems, the Europeans created a great legal code for the mercantile systems. These legal codes helped reduce transaction costs and protected the private property of European citizens abroad, which helped to foster more trade within the mercantile systems. Unfortunately, the legal codes of both the British and the Dutch (I can’t speak for the Latin states, but judging by the state of affairs that these regions are now in, I assume that such policies were just as bad, if not worse) created a two-tiered system of justice: Europeans and a small number of local elites were able to count on the legal system to protect their private property, but everybody else was relegated to a second-class citizenship. This two-tiered system was not good for the populations of Africa and Asia, nor were they good for European citizens.

It goes without saying that the colonial apparatuses did not have to do much work in regards to grafting the indigenous legal and political systems of the African and Asian polities onto the mercantile system. Most of the African and Asian polities that the Europeans subdued were already protectionist and despotic, so colonial policy became a careful matter of picking the right factions to ally with. It is important to note that the policies of the polities in Africa and Asia were responsible for their weakened state, not any sort of cultural attributes. Up until the Napoleonic Wars, Europe was still pretty much on par with the rest of the world as far as living standards went. With the advent of peace on the continent, and new legal codes that extended private property rights (including rights to freer trade in the world) to a larger segment of its citizens, Europe became far too powerful for everybody else.

We could argue, of course, that certain cultural attributes of Europeans at that time contributed to successful implementation of such policies (and we would be right), but culture is always changing. It is our task to ensure that we continue to contribute to a culture that values individual liberty above all else.

Again, this is not say that African and Asian peoples have never known liberty. Private property has been around for a long time. The arrival of European states (not merchants) into these regions of the world created a burgeoning market for all things war, and as hostilities increased, so too did the health of these states.

Relative or Absolute Advantage: A Question of Conditional Cooperation

Brandon Christensen Economics , , , , ,

A while back I posted a summary of a question posed by economists to various groups of people in a book I am slowly but surely getting through:

The Harvard political economist Robert Reich […] asked a set of groups of students, investment bankers, professional economists, citizens of the Boston area, and senior State Department officials this question: for the United States which of the two following scenarios is preferable? (1) one in which the US economy grows by 25 per cent over the next ten years, while that of Japan grows by 75 per cent or (2) one in which the US economy grows at 10 per cent while the Japanese economy grows at 10.3 percent (132).

I then asked readers the same question, although only Dr Amburgey answered (thanks a lot jerks!). Professor Amburgey stated that he would prefer scenario #1. As an academic who specializes in strategic management at a prestigious business school I would have expected him to pick scenario #1 as well. Why? Here is how Agnew and Corbridge summarized the findings:

Most people in each group except one chose (2). The economists, thinking quantitatively, unanimously chose (1). The magnitude of difference in (1) may have pushed some people towards (2). What is clear, however, is that most of the respondents were willing to forego a larger absolute increase in ‘their’ economic well-being to prevent a larger relative advantage to Japan (132).

Okay let’s slow down for moment. Does everybody see why economists chose scenario #1?

Because economists (and normal people, too) would rather live in a society where the economy grows by 25% instead of 10%. This is what Agnew and Corbridge mean when they write that economists are thinking quantitatively. So why did everybody but the economists choose scenario #2, including high-ranking State Department officials?

The inclination to forego getting richer (‘absolute increase’) if it means the other guy doesn’t get as rich as he otherwise would (‘relative advantage’) is something anthropologists call ‘conditional cooperation,’ and it seems to be a human universal. Here is what academics are stating in plain English: people are willing to forego gains in wealth if it means that others will lose out, too. The question of “How much?” is relative to a given situation.

Why humans do this is the subject of vigorous academic research, but if humans do this is acknowledged by everybody.

Economists and other academics trained in quantitative analysis are not the only ones who prefer absolute gains over relative ones, though. Libertarians are, by and large, also more likely to choose scenario #1 (I wish it were the case that libertarians were unanimous on this, but as the movement grows, so too does the number of less than intelligent people in our quadrant). Some of this may have to do with IQ, but I think the cooperative nature of our worldview also plays an influential role in the way we make our choices.

One doesn’t have to be economically-adept to choose scenario #1 (though it helps). A question that libertarians may ask is, in response to the prompt, “Why should I care if the Japanese get richer, faster than I do?” This question would more than likely be followed with a statement along these lines: “As long as they are not gaining their riches through force or fraud I see absolutely nothing wrong with this scenario.”

And it would be this response that explains why I consider myself to be a libertarian.

By the way, here is the book I’ve been reading that sparked the post. It’s titled Mastering Space… and it was written by a couple of Marxist geographers in 1995. The book is an interesting attempt to reconcile the world that stood before them (a liberal, democratic world) with the one that they believed would occur through socialist revolution (with the Soviet Union leading the masses out of the dark depths of capitalist slavery). Some of the most fascinating research to come out of the Marxist paradigm has been produced since 1991. I think it would be wise to heed Orwell’s suggestion that the Left-Right paradigm be abandoned and replaced by an authoritarian-libertarian one.

A Libertarian Moment in the US?

Brandon Christensen Current Events, Politics , , , , , , ,

I think you’re seeing a growth of self-conscious libertarianism. The end of the Bush years and the beginning of the Obama years really lit a fire under the always-simmering small-government attitudes in America. The TARP, the bailouts, the stimulus, Obamacare, all of that sort of inspired the Tea Party. Meanwhile, you’ve simultaneously got libertarian movements going on in regard to gay marriage and marijuana. And I’ll tell you something else that I think is always there. The national media were convinced that we would be getting a gun-control bill this year, that surely the Newtown shooting would overcome the general American belief in the Second Amendment right to bear arms. And then they pushed on the string and it didn’t go anywhere. Support for gun control is lower today than it was 10 or 15 years ago. I think that’s another sign of America’s innate libertarianism.

This is from David Boaz, who is being interviewed by Molly Ball for the Atlantic. Read the whole interview. There is stuff on Rand Paul, Ted Cruz, Marxism, the politics of welfare and some recent SCOTUS rulings.

There is a lot to be pessimistic about, but I can see a more libertarian US in 15 or 20 years, provided we do something about ObamaCare and Social Security. One thing we must be very vigilant about is the inevitable push for a more isolated society. Protectionist tendencies are probably going to get stronger if the economy continues to perform as dismally as it has been, and protectionism is the bane of prosperity and cooperation.

I’m Done

Brandon Christensen Current Events, Links , , , , , , ,

Whew. Finals are over. Expect a lot more from me over the next little while. Nothing tonight, of course (I’m gonna sleeeep), but more is coming.

Thanks for all of your thoughtful comments and criticisms. I’ve got a link for the evening, and it’s an old article (2001) from the Economist. An excerpt:

The affinity of totalitarianism and economic isolation was obvious in the case of the Soviet Union and communist Eastern Europe; it is still plain today in the case of North Korea, say. But democracies are capable of oppression too. It would therefore be wrong to conclude that integration is undesirable merely because it limits the power of government, even if the government concerned is democratic. One needs to recognise that some constraints on democracy are desirable, and then to ask whether the constraints imposed by markets are too tight.

These issues are rarely, if ever, addressed by the critics of globalisation: it is simpler to deplore the notion of “profits before people”. The sceptics either insist, or regard it as too obvious even to mention, that the will of the people, democratically expressed, must always prevail. This is amazingly naive. Even the most elementary account of democracy recognises the need for checks and balances, including curbs on the majoritarian “will of the people”. Failing those, democracies are capable of tyranny over minorities.

The sceptics are terribly keen on “the people”. Yet the idea that citizens are not individuals with different goals and preferences, but an undifferentiated body with agreed common interests, defined in opposition to other monolithic interests such as “business” or “foreigners”, is not just shallow populism, it is proto-fascism. It is self-contradictory, as well. The sceptics would not hesitate to call for “the people” to be overruled if, for instance, they voted for policies that violated human rights, or speeded the extermination of endangered species, or offended against other values the sceptics regard as more fundamental than honouring the will of the majority.

Read the whole thing. I don’t agree with everything in it, but in my opinion it is a damning indictment of the anti-globalist movement. A return to the good old days of yesteryear would have catastrophic consequences for the world. See, especially, Dr Delacroix’s writings on the virtuous benefits of globalization and the self-defeating measures of protectionism.

Around the Web

Brandon Christensen Current Events, Links , , , , , , , ,
  1. Danny Huizinga riffs off of Dr Gibson’s article on mathematical models in economics
  2. Longtime reader –Rick shares some eye candy of another kind
  3. Shang Jun and Wu Xia, advocates for free trade in China, take EU protectionists to task
  4. French philosopher and economist Guy Sorman asks What is the West?
  5. Economist Scott Sumner on Swedish liberaltarianism

Cyprus, the EU and Competing Currencies

Brandon Christensen Current Events, Economics , , , , , , , , , , , , ,

There have been many critiques over the European Union from many different quarters over the decades since its inception. With the seizure of cash from customers of banks in Cyprus, the worst threat imaginable has now come to pass for Euroskeptics. Economist Frederic Sautet explains how the heist has so far gone down:

Some depositors at Cyprus’ largest bank may lose a lot of money (e.g. see article in FT). Those with deposits above €100,000 could lose 37.5 percent in tax (cash converted into bank shares), and on top of that another 22.5 percent to replenish the bank’s reserves (a “special fund”). Basically “big depositors” are “asked” to pay for (at least part of) Cyprus’ bailout (the rest will be paid by other taxpayers in the EU).

I cannot think of a faster way to completely destroy a banking system than to expropriate its depositors. This is the kind of policies one would expect from a banana republic, not from a political system that rests on the rule of law. But this is the point: the EU does not respect the principles upon which a free society is based.

An economist over at ThinkMarkets also has a good piece on the Cyprus heist. The EU has taken an incredibly good arrangement – free trade throughout Europe – and turned it into an attempt to unify Europe into a single behemoth of a state. And all under the auspices of “federalism.” This is a bad development for a number of reasons. Continue reading →

The Disaster: A Teenage Victory

Jacques Delacroix Current Events, Politics , , , , , , , , , , , , ,

Last Tuesday (11/6/2012) there was a vote about the future and the teenagers won. They now have the keys to the family car.

I have never in my life so wanted to be wrong in my judgment. Here it is: President Obama’s re-election is an even worse disaster than his election was. Do I think that many of the people who voted for him gave serious thought to the giant national debt, to the impending entitlement implosion, to the tepid economic growth, or even to the unusually high rate of unemployment? No. Do I think a sizable percentage did? No. Do I think a few did consider all or any of this? I am not sure.

President Obama won re-election decisively. His margin in the popular vote was nearly three million votes. Apparently* there were none of the gangsterish electoral tactics that marred his 2008 election. This makes the results worse as far as I am concerned.

President Obama is still not a monster. It’s possible that he is manipulated by a brand of leftists we thought had disappeared long ago. It’s also possible that someone like me will nurture in his brain paranoid notions at a time of major anxiety, such as now. Continue reading →

“European Project Trips China Builder”

Brandon Christensen Current Events, Economics, Liberty , , , , , ,

That is the headline of this piece in the Wall Street Journal. An excerpt:

Chinese companies have wowed the world with superhighways, high-speed trains and snazzy airports, all built seemingly overnight. Yet a modest highway through Polish potato fields proved to be too much for one of China’s biggest builders […]

It remains unfinished nearly three years after contracts were awarded to Chinese builders. The Polish government is warning there will be detours around the highway’s “Chinese sections” when the soccer championships begin […]

The project raises questions about Beijing’s strategy of pitching state-directed construction firms as the low-cost solution to the world’s infrastructure needs […]

Covec [the state-run construction company responsible for the failures] was thin on management expertise, lacked financial skills and didn’t understand the importance of regulations and record-keeping in public works projects in the West, according to numerous people involved in the project […]

Organizing actual construction proved harder. To manage the project, Covec brought in Fu Tengxuan, a 49-year-old railway engineer, who spoke only Chinese and appeared to have little authority, telling colleagues that headquarters in Beijing needed to approve even the purchase of an office copier […]

Although the funding of Chinese projects in other areas such as Africa and Asia is often murky, analysts say that Beijing regularly foots the bill […] Continue reading →

France Does not Export Wines, nor Mexico Guacamole, nor Does the US Import Cars, etc. “National Competitiveness” for the Intelligent Ignorant

Jacques Delacroix Current Events, Politics , , , , , , , , , ,

It’s national election season again. As always happens in this season, in every developed country, the old battle horse of national competitiveness gets a new coat of shiny paint and is led out by its sparkle-strewn tether to support politicians misconceptions and mis-talks. There is a very widespread misconception that nourishes unreasonable thoughts and false notions on the economy.

Sorry but at this time, in this season, I feel a compulsion to resort to teaching, so, pay attention. There might be a quiz.

The misconception: Countries, (or “nation-states”) such as the US, Canada, Mexico, Belgium, or France don’t compete with each other like soccer teams, for example, compete against each other. In soccer, when one team wins a point, the other team loses a point. When the economy of one country picks up speed however, it is not (NOT) the case that the economy of another country (or of several countries) must slow down. The reverse is true. When the Mexican economy grows, some Mexicans are better able to buy American corn, or American video games, making some Americans richer than would be the case if the Mexican economy stagnated.

The confusion has three sources. The first source is simply ignoring that the producers of one country are also potential customers for the producers of all other countries. Those who compete with American workers, are often also buyers of American-made products. If they are not at the moment, the richer they become, the more likely they are to become buyers. One of the international functions of those who compete with American producers is thus to enrich American producers, perhaps different ones. The relationship may be more indirect. Foreign worker A competes with American worker B and he uses the money he gets from beating B to buy from American worker C. If I am C, my interests are not well lined up with those of my fellow American B. That’s a fact, no matter what politicians say in the language of football. However, if I am American worker C, in the long run, I am better off if fellow American worker B becomes richer than if he does not. For one thing, he will be able to support better equipments, such as schools, from which I will profit. Continue reading →

French Movies, Sex, and the Welfare State

Jacques Delacroix Current Events , , , ,

It’s hard to fully grasp white if you have never seen black, or green if you don’t know red or orange. And the understanding of water a fish carries in its tiny brain is probably not so great. (That’s except for flying fishes, of course. They exist; they are amazing.)

The same is true for cultures in general, including national cultures. I am pretty sure that observant individuals who have good knowledge of another culture understand best the culture in which they live. “Compare and contrast” always does some good. It does not matter much where the knowledge of the other culture comes from; it all works out the same. Thus many long-term immigrants we would expect to have a grasp of American culture superior to that of the native-born in general, with some predictable gaps.

I, of course, was reared in France. I know the French language as well as anyone and better than almost all younger French people whose vocabulary is astonishingly poor and whose command of grammar is often downright rustic. I also have good access to Mexican culture because of many small conversations with California Mexicans, because of several long stays in Mexico, because of my readings of Mexican authors, but above all else because of my sometimes dedication to Mexican telenovelas. And here is an aside: Anyone who thinks telenovelas don’t tell you anything about the “real” Mexico is missing the relationship between a people and the art forms it develops and consumes. He might just as well say that “Dallas,” the soap, was not about American society. Was it about Estonia, China, Germany, Egypt, then? End of aside. Anyway, here again, being able to understand the language corresponding to the culture is essential. (Speaking it does not matter nearly as much.)

No, a little more bragging is sadly necessary. I have lived in this country for nearly fifty years. That’s longer than most American-born citizens alive today, I would guess. Nevertheless, there are gaps in my understanding of American culture. Much that normally happens in American society before high-school is hazy, second-hand, or absent from my mind altogether. That’s because much of it appears trite, or downright boring, not worth the effort of finding out about. Baseball would be an example of the latter. A friend who is a fan actually told me once, “You don’t understand, Jacques, baseball is supposed to be boring.” ! Although I speak English with an accent (that gets worse as my hearing deteriorates), I would describe my understanding of the language as near perfect and my command in the use the same language as better than pretty damn good. At the same time, and contrary to a widespread but naïve impression, you don’t lose the fundamentals of your culture of origin by living in another society. And you certainly don’t forget your native tongue (although some seldom-used terms might slip your mind). Thus, I am a truly bi-cultural person which allows me legitimately to pull rank on most of you. So, sit up and listen.

After a hiatus of ten years, I have French language television in my house again and I am watching it several hours a day. It’s not that its fare is so great. The social scientist in me just has to. Overall, French television has improved a great deal in ten years. Mostly, it now offers pretty good serials. They are clearly imitations of American serials, an improvement in itself, especially as regards tempo. They benefit from being often filmed in the admirable French countryside. And, for some reason, the French have always produced good documentaries. (The 2005 “March of the Penguins” is a French production.) I have even discovered in replays of French television a literary show that has no equal anywhere in America. It’s the very best that contemporary French culture has to offer.

TV5, the French language television channel also offers some Canadian and Belgian movies, and many more French movies practically every night. A high proportion of the latter are recent films. There are so many of those that, after a while, I feel free to generalize. My generalizations in turn are like the negative of American culture: What disappoints me, what disturbs me, what I miss in French movies are salient features of American culture that make up much of the pleasure of everyday life in America.

First, and strikingly, the French cinema is dependent for full effect on American popular music in English, a language few master. Two reasons, I think. The first reason is that French popular music today is devoid of the quality of soul. French audiences recognize soul but French composers and singers are unable to produce it. So, French film directors borrow it from where they can: here. They do in about 80% of French films I would say, even in films that feature otherwise good French popular music. The second reason I give for this reliance on American popular music is more tenuous but I believe it’s quite real. French society is old and aging fast. (Other European societies are aging even faster.) Not much happens in France on a day-to-day basis, or on a year-to-year basis, or during one’s own full childhood. Things are pretty much today as they were yesterday and the day before. This is charming to semi-literate American tourists who think it gives the country “authenticity.” This immobility is a source of sadness to many French people, including the young but not limited to them. They know that progress must give visual and especially, auditory signals. French directors, who live constantly with one eye fixed on the other side of the Atlantic, are vaguely aware of this deficiency. I think they watch their near-final product, decide it’s not moderne enough. Then, they add a couple of pieces of American popular music to signal, that their movie was not made in 1955.

Here is my second observation: As you might expect, French movies often contain scenes of unconstrained sex and of unrestrained nudity. This fact almost never makes them even vaguely erotic. The French seem to have invented the passion-free, almost sexless, sex scene. I mean hot, perspiring, hard-breathing passion; I don’t mean anything more refined. When French films show nudity, which is often, as I have said, there seems to be no intent to show the naked human body in an attractive light. Sometimes, they almost seem to go out of their way to make nakedness seem vaguely disgusting, as if old-fashioned Catholic nuns were behind the camera. (New-fashioned Catholic nuns tend to be militant lesbians or else, they pretend to be.) The two dozen or so contemporary French directors who turn out almost all recent movies appear to have grown up without benefit of Playboy magazine. It’s puzzling and a little dispiriting. I am not sure what this lacuna means for French culture in general. Perhaps, it’s an expression of a lack of appetite for life. “La chair est triste, hélas et j’ai lu tous les livres,“ wrote the popular 19th century French poet Stéphane Mallarmé. So, maybe, it’s an old thing within French culture and I am reading too much into a few movies. As the case may be, I have never felt that way about any American film. That’s never.

My third observation concerns oozing. I mean the quiet despair that oozes from many contemporary French movies except comedies and even from a few of those. Sometimes, despair is the very topic of the film as in the fairly acclaimed: “La ville est tranquille,” staged in de-industrializing Marseille. More often, the cynicism and the hopelessness come thorough as if bleeding from the corners of the screen, in the assumptions of unimportant casual conversation between characters, for example. They also come through, of course, in the large proportions of those characters who happen to be unemployed, or not-yet-employed in spite of their advanced youth. And think about it: I am not referring to the poor or to conventional poverty. Nearly all the characters in all French movies are well-clothed, very well housed by world standards, excellently doctored, and they enjoy more than twelve years of freer than free education if they want it. (“Freer than free” because most French post-high-school students receive a state stipend and subsidized meals while they pay no tuition.) And, as you might have guessed, the average French working or non-working stiff eats better in France than the average American banker in America. (A lot better, actually!)

So, what I think I perceive, what I read between the lines in many French movies, what I think I would guess about French society by watching these movies even if I did not know the numbers, is a sense of futureless-ness. When people have nothing to look forward to, or only the next vacation, they become joyless about just almost everything. Of course, you would expect an underlying sense of hopelessness to be pervasive in all societies where a 2% economic growth rate is an occasion for official celebration. It has to be even worse when the feeling is that the end of the party – such as it was – is just around the corner.

Forty to thirty years ago, the French, like other western Europeans, chose security over everything else. It made them backward, inexpressive, and chronically despondent. As their nanny state unravels and their children keep having to pay the piper, it looks to them like everything is going to get worse. So, they have lost their appetite, even for sex.

PS: I don’t think things are going to become worse in France myself. I suspect that after a painful transition, the French will wake up and recover the vigor that was their grand-parents’ during the post-war years. That was when they acquired the economic means to enter resolutely the dead-end of welfarism instead of the open road of entrepreneurship and growth. Then, they will start making good movies again.

Update: The news on TV5, which is not exactly French television but television in French, continues to regal me with instances of staggering ignorance. Tonight, the anchor reminded us that fifty years ago, at the Bay of Pigs, Fidel Castro “repelled the American Army.” The ignorance is not neutral, it has a strong ideological bias. Guess which. Watching TV5 news has the merit of helping me appreciate the blond bombshells on Fox. They seldom say anything patently untrue and they are pleasant to look at (unlike naked women in French movies for example. See above.)

[Editor’s note: You can also access one of Dr. Delacroix’s “pop-sociology” articles on the French welfare state here, in the Independent Review]

French Elections: Redux

Brandon Christensen Economics, Politics , , , , ,

French elections are ongoing.  Here is Dr. Delacroix one more time:

The first thing to know is that France is a country where common conservative and libertarian ideas about market efficacy are rare. A conservative stance is absent from the public discourse.

I think Hollande is going to be elected. He is the worst the French Socialist Party has to offer. He has never done anything in his life, like our current president, or worse. He does not even have the merit of being a member of an interesting minority. He is the pale consort of a former big loser in a French presidential election (Segolene Royal). How much lower can you get?

All this because Sarkozy annoyed too many people, swing voters, with his bad manners and because Strauss-Khan couldn’t keep his second thinking tool where it belongs long enough. Yes, Strauss-Khan was going to be the Socialist candidate. He understands money, unlike Hollande who knows nothing about money except that the “rich” have too much of it and that it’s the root of all evil.

Hollande is the worst of a Socialist Party that has had few new ideas, has not updated itself, in the past thirty years. However, his colorlessness, the fact that he barely exists may be a blessing. It’s possible that economic technocrats in his Continue reading →

Protectionism and Job Loss: Part Nine of a Nine Steps Series (And Last, I Think.)

Jacques Delacroix Liberty , , ,

This is the last installment of a series of nine short essays in which I attempted to explain a topic that is both important and misunderstood by many intelligent people: protectionism and its obverse, free trade. 

[…]

When economic actors, people and organizations, switch from doing what they don’t do very well to what they do better, production increases everywhere, the pie gets bigger. There is no injustice involved, just a general rise in the standard of living.

For such virtuous change to achieve maximum effect, there must be economies of scope and scale. It’s not always obvious in big countries such as the US which has a large internal market (many people most of whom are rich by world standards.) It’s pretty clear when you think of small prosperous countries such as Switzerland. How efficient would Nestlé be if it made chocolate only for eight million Swiss rather than for hundreds of millions of consumers worldwide? And would the smelters of Luxembourg do a good job making steel only for the half-million Luxembourgers?

So, it stands to reason that any barrier to import limits severely the benefits of switching from mediocre to good or from good to excellent. But, the basic rule of international trade is reciprocity. (It’s a little more complicated than this in everyday life but the complications do not affect the basic soundness of my reasoning.) Countries’ governments say to each other: “ If you impede the entry on your territory of stuff made by my economic actors, I will impede access of my territory of stuff made by yours.” This is no bluff. So-called “trade wars” erupt frequently, involving different kinds of tit-for-tat. The most notable thing about every round of tit-for-tat is that it impoverishes everyone. See above.

Trade barriers, different ways of impeding access, come and go. Although it’s difficult to find a coherent argument in favor of any trade barrier, governments will often yield to interest groups and provide “protection” from imports for this or that good. They do so usually not because of some abstraction such as the “national interest,” but because of political necessity or to distribute political favors. Two interesting remarks about this poisonous practice. First, more democratic governments should be expected to be more likely to yield such favors. Second, by “protecting” domestic producers, they also lower the standard of living of domestic consumers. Naturally, the two categories of consumers and domestic producers overlap somewhat which only underscores the absurdity of protectionism. Incidentally, developing and enforcing trade barriers requires a large technical and inspection apparatus. The more trade barriers, the larger the government relative to the national economy.

All this being said, it’s clear that the removal of trade barriers will cause job losses in the affected sectors of the economy. It’s also obvious that some of those who lose their jobs will not find equivalent or better jobs. Here, individual fates diverge in small but humanly significant ways from collective well-being.

Let’s take the case of Canadian vintners. Yes, they exist. Would I make up anything so absurd? Do I have sufficient imagination? As you might imagine, Canadian wine-producing firms exist inside a network of government protectionist measures. If they were left to their own devices, most would soon be swept away by the wines of thousands of producers from twenty different places, from California to South Africa. Now, imagine that the Canadian vintners lose their muscle with the Canadian federal government and that all the protective measures are withdrawn within one year.

Under such a scenario, two things would happen. First, as I have explained step by step, many Canadian resources, including labor would eventually be switched to more productive endeavors. Because of this switch, Canadians in general but also the whole world would be a tad richer. But no one would expect the switch to be instantaneous. There would be some social dislocation, for sure.

The second consequences would be, starkly, that some people working in wineries and in wine-related businesses would lose their jobs. The fifty-five year old wine-maker of a small British Columbia winery with thirty years experience in the same winery would almost certainly have to retire. It’s extremely unlikely that he would qualify for one of the many advanced jobs open in the new, and now marginally more productive Canadian economy. An old wine-maker will not become say, a software writer, under almost any imaginable circumstance. Instead, the middle-aged wine maker will either become unemployed or he will have to take one of the lower-end jobs freed by the escalators described before.

Free trade, and opposition to protectionism have acquired a bad name, I think in part because of economists’ reluctance to face squarely this particular human implication of such policies.

I defend free trade while recognizing the wine-maker’s painful problem by pointing to the overall, collective consequences of protectionism: It’s always an economic disaster. We know this from two different sets of observations, First, other things being equal, countries that follow national policies of free trade grow faster than those that don’t. That’s true equally for poor countries and for rich countries. Similarly, when countries that have implemented protectionist policies open up even a little, they experience a quick surge in their GDP. Second, there is no part of the world where unemployment figures track free trade’s ups and downs. As an example, the sudden upsurge of unemployment in the US 2007-2009 had nothing to do with any increase in imports. This tells me that the sad middle-aged Canadian vintner’s case does not account for much of unemployment.

Other things being equal, I think it’s better to be unemployed in a relatively more prosperous country that in a poor one. The benefits are more generous, and the next job opportunities richer and more varied. Training programs are also more common and more accessible in richer than in poorer countries. And capital to start one’s own business is normally cheaper and more accessible, the more prosperous the country. I will go further: Economically, it’s better to be unemployed in a rich country than employed in a poor country. (I understand there are non-economic downsides to unemployment. This is another topic I can’t deal with here. A single thread, the economic thread, is difficult enough to follow.)

In conclusion to this whole series on free trade and protectionism in nine small steps: protectionism remains the royal road to collective poverty and it does not do much for anyone, not even for those who stand to lose their jobs when national borders open.

[Editor’s note: Part 8 can be found here]