Mercantilism

https://en.wikipedia.org/wiki/Mercantilism

by dismalaf • 1 year ago

70 78 1 year ago

en.wikipedia.org

ViktorRay4• 1 year ago

I know some economists during the second half of the 20th century had the exact opposite view of the Mercantilist philosophy.

For example Mercantilism says a country should maximize exports and minimize imports as much as possible.

Meanwhile Milton Friedman, one of the most prominent economists of the 20th century, said that a country that had large amounts of imports with minimal exports was a very successful country. The idea being that such a country was essentially buying things from other countries at minimal cost.

Edit: The following link quotes something he said regarding this:

https://fee.org/articles/milton-friedman-the-way-we-talk-abo...

owebmaster3• 1 year ago

and what does Milton Friedman say about a country having enough money to import without export?

cjbgkagh2• 1 year ago

The US is able to exports its inflation, not all of it but a lot of it. A membership tax for the ‘rules base order’.

fsckboy12• 1 year ago

a country having enough money to import without export?

there's no such thing. when you import, you send your currency overseas to pay for the goods. There is nothing they can do with your currency except send it back to you by buying things from you, lending it to you, or making direct equity investments in your companies. (otherwise there is this huge growing pile of your currency accumulating overseas which drives down your purchasing power since it's in surplus)

not sure if Friedman said that, but he did know more about econ that me, and what I've said is accurate.

makeitdouble• 1 year ago

Regardless of current events: Both are looking at volume, when the nature of what's exchanged probably matter as much if not more.

If a country massively imports raw materials and exports a low but steady volume of high level finished products, as long as the raw materials are reasonably cheap it will be a winning strategy.

A country importing high technology goods and balancing that with raw resources will potentially be in a worse condition if raw materials stay a commodity or deplete.

rawgabbit• 1 year ago

Friedman was not saying we should maximize imports. Instead he was saying we should maximize the ratio of imports to exports. Essentially to get as much stuff from others (imports) while paying as little as possible (via exports).

”And the proper objective for a nation as Adam Smith put it, is to arrange things so that we get as large a volume of imports as possible, for as small a volume of exports as possible.”

With that said. He appears to be arguing for colonialism. Take stuff from others and pay a pittance for it.

MyOutfitIsVague• 1 year ago

It's more an argument for classical economics. Getting the most benefit for the least cost is the most fundamental economic motivation.

TZubiri7• 1 year ago

This always felt quite subjective to me.

There's also the tautological paradox where price is defined by trade, so the trade balance will always be equal by any measure, if country A exports 1T bushels of wheat and country B exports 1 computer chips, we subjectively know who is winning in the exchange, but it will tally up to equal values in the balance sheet.

ViktorRay4• 1 year ago

I think many economists would argue that both countries are winning in this exchange. Many would argue that such a transaction would be an example of a “positive sum game” where each side gains more than they lose.

Eddy_Viscosity2• 1 year ago

Any of the maximize or minimize arguments are going to be simplistic and reductionist. The optimal real world strategies are always going have to account for other factors like relationships, political stability, goal alignments, power/dynamics, etc, etc. These factors will be different for each nation you're dealing with and will greatly affect what the best import/export and tariff ratios should be. And these may also change over time. The importance of these factors (different for each nation) are so strong as to overwhelm any of the economist theories about maximize/minimize.

no_wizard5• 1 year ago

This seems to be the economic model conservative “populists” seem to hitching themselves to with the thrusting of these tariffs onto the American public

_heimdall3• 1 year ago

That really raises the question of how we want to define "conservative" though.

They aren't conserving what we already have (they're cresting new policy and abandoning trade partnerships already built).

They also aren't supporting free trade. Maybe that isn't technically conservative, but its always been my understanding that free trade was a pretty big part of American conservatism (at least in recent decades).

no_wizard5• 1 year ago

Free trade was core to both parties. Conservative is perhaps an overwrought term nowadays, but I also don’t like using the “left-right” terminology as it also suffers from lack of specificity.

To which I conclude, this is apparently what the Republicans are offering up as their form of populist policy

csense3• 1 year ago

Tariffs aren't conserving the status quo. Rather, they're an attempt to return to an (allegedly) better past state.

Specifically, a past state where foreign companies were unable to outcompete domestic ones [1].

It's also a policy going against internationalist norms (which encourage you to free trade even if it seems to be hurting you), and toward nationalist ones [2].

[1] A lot of people who like tariffs have a sense that our free trade policy was an honest attempt to play an honest game where a rising tide would lift all boats. But that didn't happen; instead of a win-win, foreign companies won big by cheating, and we lost. (And we did lose, at least if you ask just about anyone in the Rust Belt.)

For example, tariffs of their own; subsidies; IP theft; currency manipulation; various abuses of their people with low wages; bad working conditions; low or non-existent safety / environmental standards; and totalitarian governments willing to shoot anybody who complains about any of the above.

Trying to play fair to lift everybody's boats when everybody else is pouring water from their boat into yours isn't a recipe for success. It just makes you a sucker sunk by the cheaters -- too honest for your own good.

[2] Again, there's a sense of grievance. Our past policies were honestly trying to unselfishly help the world, and other countries selfishly took advantage of us. So we're done being suckers; it's our turn to be selfish. If other countries don't like us being selfish now, well, they should have thought of that instead of being so selfish themselves before.

Rightly or wrongly, that's really how the current administration thinks about many other countries. That attitude came out loud and clear in the Signal messages they accidentally sent to that journalist: https://www.youtube.com/watch?v=YHU5HDQL6F0

Jedd2• 1 year ago

I remember reading in a PJ O'Rourke book about Comparative Advantage - I've found the section, as the 'non-trivial and non-obvious' sleight stuck with me, even decades later:

  > Todd G. Buchholz, in his book New Ideas from Dead Economists, says, “An insolent natural scientist once asked a famous economist to name one economic rule that isn’t either obvious or unimportant.” The reply was “Ricardo’s Law of Comparative Advantage.” 
  > 
  > The English economist David Ricardo (1772–1823) postulated this: If you can do X better than you can do Z, and there’s a second person who can do Z better than he can do X, but can also do both X and Z better than you can, then an economy should not encourage that second person to do both things. You and he (and society as a whole) will profit more if you each do what you do best.

There follows some droll examples around the implications of this law, comparing John Grisham and Courtney Love's contributions to society, which doubtless helped consolidate the lesson.

Point being - this foundational law would seem to trump any interest in mistakenly attempting to optimise for inputs vs outputs to your nation.

EDIT: From his book 'Eat The Rich: A Treatise on Economics' (1998)

TZubiri7• 1 year ago

I've seen that postulate in the very first chapter of wealth of nations. But perhaps Ricardo expressed it in mathematical terms?

And I'd argue that there are properties of nations that make them distinct from individual humans or even companies.

The relative autarky possible for a country is much higher.

I've read a similar position by a libertarian Hayek I think in "I pencil", but I never did buy the argument, the idea that a pencil is the product of global trade, I don't buy, you can make national pencils without a sweat.

ViktorRay4• 1 year ago

Is the following video the “I pencil” you are referring to?

https://youtu.be/67tHtpac5ws

marcosdumay2• 1 year ago

Hum, no.

Adam Smith didn't understand that people would trade even if one of the peers was better at every single thing. He got lots of stuff right, and even some things that took until the 19th century to make into mainstream economics. But not this one.

roenxi• 1 year ago

the idea that a pencil is the product of global trade, I don't buy, you can make national pencils without a sweat.

It is, obviously, possible. Pencils are about as simple as it gets. But it is hardly a no-sweat process. It made international news when China declared itself capable of producing a ballpoint pen using only native tech and materials. It was a point of significant pride to the Chinese government at the time - as well it should be, it was something of a manufacturing and policy tour-de-force.

https://www.washingtonpost.com/news/worldviews/wp/2017/01/18...

Dracophoenix• 1 year ago

The paper Hayek wrote is titled The Use of Knowledge in Society. I Pencil is meant to be a simplified and poeticized example of Hayek's evaluation by Leonard Read.

mikojan• 1 year ago

Any model of international trade that does not also model externalities is worse than useless. International trade accounts for 30 percent of CO2 emissions alone.

Maybe you should produce X and Z.

topkai22• 1 year ago

That 30% number seems very wrong. The entire transportation sector is 12.5% of global emissions. International trade is more like 3% or less.

https://ourworldindata.org/ghg-emissions-by-sector

washadjeffmad• 1 year ago

If only there were a mechanism to capture or deter those externalities and return them to the market.

Are tariffs a veiled carbon tax?

saghm• 1 year ago

With the efforts of supranational organizations such as the World Trade Organization to reduce tariffs globally, non-tariff barriers to trade have assumed a greater importance in neomercantilism.

That might need to get updated within a few years...

mizzao• 1 year ago

Works better when you're trying to hoard gold.

Not so well when you have a fiat currency that's also the world's reserve currency...

Mercantilism

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