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Tuesday, October 26, 2010

We Need More Trade Barriers with China

...and we need it now.

I've said it before, and I'll continue saying it.   And, I may be only econ person to do so, but damnit, the only way to fight this kind of stuff is to impose a penatly - and the best kind of penalty is a sharp tax on these kinds of goods coming from China.  Will it be perfect; will perfectly harmless goods be taxed?  No, and probably respectively.  But doing this is a sure way send a signal to China that these kinds of industry practices will not be tolerated.  We should demand this behavior stop, along with its trade currency manipulation.  Until their manipulation stops, we should continue to enforce our trade restrictions.   That's the only sure way to double exports or whatever absurd thing Obama thinks he's going to do without a real plan to do it.  At least this is a plan, and not some edict on high with no teeth.

Because the US is such a large nation in terms of the degree of importation of Chinese goods and exports on the world market, it has some power in the market.  Nevertheless, there would be some amount of dead-weight loss, which I suggest might be more than offset by the benefits mentioned in paragraph one.  In addition, by taxing these 'bad' goods, we essentially are correcting a negative externalities imposed by Chinese producers/government on American consumers.   Despite that benefit, consumers would be hurt by higher priced Chinese imports after the tariff policy is enacted.  However, the government would be taking in a presumably good chunk of change in taxes which it could then turn around and provide a progressive tax rebate annually until and unless China improves its aforementioned problems.

Friday, October 15, 2010

On the absurdity of some mainstream economic research

And now I introduce to you the most ground breaking research of our time:

... Come On People!  Really?  You are going to use 'equilibrium' and 'optimization' analysis on the behavioral/cultural act of cutting someone genitals off?   Welcome to the absurdity of which many (not all) in mainstream economics peddle.   Start off with 20 different assumptions about rationality, equilibriums, stable preferences, etc., and this is the kind of quackery the 'science' gives you.

Let me tell you, only an economist so brainwashed in the mathematics of 'rational' economics can say something like:
In this paper, we model FGC [female genital cutting] as a pre-marital investment. We show how the rat-race nature of the marriage market may result in inefficiently high equilibrium levels of FGC [female genital cutting].

Tuesday, October 12, 2010

Keynes: Disconnect b/w capital and labor markets

"The fact that an unforeseen change only exercises its full effect on employment over a period of time is important in certain contexts;-in particular it plays a part in the analysis of the trade cycle (on lines such as I followed in my Treatise on Month). But it does not in any way affect the significance of the theory of the multiplier as set forth in this chapter; nor render it inapplicable as an indicator of the total benefit to employment to be expected from an expansion in the capital-goods industries. Moreover, except in conditions where the consumption industries are already working almost at capacity so that an expansion of output requires an expansion of plant and not merely the more intensive employment of the existing plant, there is no reason to suppose that more than a brief interval of time need elapse before employment in the consumption industries is advancing pars passu with employment in the cap ital-goods industries with the multiplier operating near its normal figure." -J. M. Keynes, General Theory 

Keynes is basically saying (in the round-about way he does) that his Keynesian multiplier effect on spending should be highly correlated to the amount of labor employment created due to the increased spending.  IE, he assumes that his spending will lead to income multiplied which will increase the buildup of capital and GDP/output  and employment  of labor, quickly, not just capital spending alone... and not after too long of a time.   But our government's most recent 'experiment' in Keynesian economics calls into question the ability for simple Keynesian spending to quickly increase labor employment.   Unemployment has hovered at 9.6% for the last number of months despite increases in spending.  This is not a huge surprise as unemployment tends to linger for a long time after spending rebounds, but the lag is a problem for which Keynes assumes to not exist. 

If employment is the important variable for a Keynesian, why focus on spending?  Why not focus on employment multipliers?  Or as some post-Keynesians might advocate, why not have the government buffer employment more directly?  (I have mentioned reasons I think the latter is a bad idea)  Keynes' error was in assuming the majority of private industry would hire workers line-to-line with capital.  This simply isn't true.  The structure of our economy is that there are often large deviances between industry.  Further, it is also likely that a firm's first response will be to milk productivity out of existing workers as opposed to taking the hiring risk.  

Sunday, October 3, 2010

A thought for today

This just came to me:

(mainstream) Economics may be the only social science where when human behavior doesn't fit the model, humanity is blamed for the failure to conform to it rather than the model being required to explain the behavior.

Why is that?