I'm not picking on you. Just that both of your posts invited comment.
The lesson is that "People seek to satisfy their desires with the least exertion."
Your professor had it wrong. Erecting a tariff wall is not a "beggar my neighbor". It's a beggar ourselves policy.
When you or I work, we try to get as much back as we can for as little work as possible. (Translation - as high a wage as possible for as few hours as possible.)
So, it makes sense that the more imports (wages) we can get for as few exports (exertion) as possible should be our sensible objective. So, every country in the world should be trying to import as much as possible, while exporting as little as possible.
Yet, we are persuaded the opposite.
The things we produce, exchange, and receive as wages are material goods. Introducing money seems completely to confuse common sense. As we get "money" for exports but have to pay "money" for imports, it seems proper to get lots of money from exports, while thriftily spending less on imports.
Yet there isn't a member of this list who works for money.
We work for bacon and eggs, shirts and shoes, and SUVs. Our wages are the goods we get to keep us alive and make our existence tolerable. Money is no more than a convenience to make trade more convenient.
So, when trading, the object for both sides is to get more value from the transaction - which means more goods.
I'd be happy to help Japan with its export problem by taking all the goods they want to send me. I promise not to send them anything back so I won't increase their imports.
They can send them to me directly to the beach where I'll be lying on a large towel being shaded from the hot sun by a geisha, while another gently fans me.
I'm also willing to help Japan's unemployment problem by taking two ladies off their unemployment lines. Japan would, of course, pay their expenses, which would still further increase their export figures.
I'm basically just a good person.
I am ridiculing modern economics, but it lays itself open to ridicule. I remember many years ago, noticing a peculiar thing in global statistics. Total world merchandise imports were 5-10% larger than total world merchandise exports.
How can that be? If $1,000 dollars worth of goods are exported, how can $1,100 arrive as imports at their arrival port? Do they pick up fish on the way, or something?
I'm not even sure they any longer use CIF (cargo, insurance, freight). They may be using FOB (free on board) for everything. I'm out of touch.
Anyway, the import statistics included the cost of getting goods there (CIF). So, if two countries exported identical amounts to each other, each would have a trade deficit with each other. It doesn't seem possible that such a childish statistical error would be made but it was.
One country acted differently - Canada.
Canada's figures measured imports at the port of export, rather than at their own port. Well that's sensible, so this reduced import figure balanced their trade didn't it?
Well, not quite. Canada didn't measure its exports at the port, but back where things were produced in Alberta, or Saskatchewan. So, the cost (for example) of transporting the grain from the prairies to the port wasn't counted, thereby reducing the export figure.
This allowed them to produce a deficit to view with alarm.
"Those whom the Gods would destroy, they first make mad."
Harry -------------------------------------------
Ed wrote:
You may have a point, Keith. Tariffs are no longer in, so other means have to be used to reduce imports, boost exports, and get Americans to buy American. One of my long-ago economics profs called the competitive tariff raising games of the 1930s "beggar my neighbour policies". Increasingly making it more difficult for foreign producers to access the US market may be that kind of thing.
As an aside, humerous but potentially dangerous, the prof had a habit of pounding the desk when he was making a point. One day, as he was pounding away at his most furious, a large section of the plaster on the ceiling came loose (because or workers on the roof) and rained down on the class. After that, he stopped pounding and started waving his arms in the air with equal ferocity.
Ed Weick
**************************************************** Harry Pollard Henry George School of Social Science of Los Angeles Box 655 Tujunga CA 91042 Tel: (818) 352-4141 -- Fax: (818) 353-2242 http://home.attbi.com/~haledward ****************************************************
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