There is a problem with the premise of this thread...

the only way for the two burdens to equal, would be for the two people to take home exactly the same amount of income.

I understand what you are trying to get at Boone, but if you use burden as the measuring stick, then we do all in fact have to take home the exact same (controlling for dependents, etc)

[Edited on June 10, 2008 at 9:05 PM. Reason : .]

6/10/2008 9:05:22 PM

Quote :

"Megaloman, I'm not sure what your last post was supposed to do, except make me point out that certain kinds of money can be exchanged for other kinds of money. The imprecision is my fault, though. Let's switch "dollars" to "money"?"

Let me break it down as simply as possible. If Americans buy manufactured goods from foreign producers, we get goods in exchange for "dollars". Those dollars that get shipped overseas eventually either come back to America to be spent on American products and services or they don't.

Now, you with me so far?

If foreigners spend their dollars on American products then that creates American jobs. If they don't, then we just got a bunch of free shit by printing up some green slips of paper and shipping them overseas.

Either way, we win. Given that, anybody who makes disparaging remarks about foreign trade, or about "losing jobs" to other countries is just a straight-up idiot. Furthermore, they're a specific type of idiot that is literally destroying civilization.

If your goal in life is to force-feed that sort of insane idiocy (which you obviously don't even understand yourself) to defenseless children who lack the faculties to examine it critically, then you deserve nothing but contempt. Meaning no disrespect.

6/10/2008 10:01:15 PM

Quote :

"What if we taxed everyone that made under 40K at 10%, and everyone who made over 40K at 92%? That's a progressive tax, right? "

That'd be an extreme example, right?

Quote :

"the only way for the two burdens to equal, would be for the two people to take home exactly the same amount of income. "

Burden might be the wrong word, then.

"share?"

6/10/2008 10:01:46 PM

I guess then the question is what constitues an equal "share".

Persoanlly I don't feel that our current system of structuring is that far off.

If I had my way, I'd prolly lower corporate taxes (about 5% across the scale), raise capital gains taxes (20%), and keep individual income taxes about where they are.

That said, I agree the system we have is overly complex and could use significant simplification, but I'd like to see it happen without many fundamental changes.

6/10/2008 10:39:29 PM

Quote :

"stupid arguments of the causation of social problems? check"

This is really subjective and is constantly up for debate among society

Quote :

" parents pay for all your bills? probably check"

Nope not since sophmore year. I actually paid for all my tuition since through student loans and worked to provide for my standard of living. My final semester the last few months I actually worked 30-40 hours a week while taking the last of my senior classes. Nice true though bud.

Quote :

" majoring in something like business? probably check "

Not quite; i actually graduated in electrical engineering with a 3.4.

6/10/2008 11:06:11 PM

I seem to have offended you in some way, Megaloman. I thought we were having a debate, not making personal attacks.
That being said...actually, no. You're an ass, and you subscribe to a silly philosophy that most people realize is ridiculous and impossible by the time they're 17. Moving on to the actual argument...

My point is that this stuff that "we" are making is largely made in other places now. This means that the stuff that American companies make isn't made by Americans, so Americans are not being paid for making it. They pay an American company in the American dollars, yes, but these companies pay lower wages in other currency, in other places, for the services. Since we're breaking things down so they're easy.

My beef isn't with foreign trade - that's necessary and a good thing. Hell, my beef isn't with you. My point is that skilled and unskilled manufacturing jobs have been leaving this country for a couple of decades, and it's causing hardship. I don't like hardship, even other peoples', due to my human trait of empathy. Is it making businesses a lot of money? Sure, and if that's your only measure of whether something is good or bad then it's a fine system. I'm a little curious who is actually receiving these large quantities of green paper, because it's surely not most of us, and how their decisions affect other people.

If you're worried about me destroying civilization, I promise you, I will do my best not to bring Western culture to its knees for at least ten years. Plenty long enough for you to move to Montana, build a compound, and secede from the Union.

6/10/2008 11:29:58 PM

Quote :

"Someone making >$250k/yr does have an abundance of expendable income. 20% would hardly make a dent in their expendable income"

of course taxes make a significant dent in the disposable income of someone making a quarter mil/year.

Quote :

"You don't get rich by making a regular salary and not spending anything. "

you don't get to be a billionaire, but you can easily accumulate millions of dollars on a middle class income.

Quote :

"The 16th Amendment predates the Soviet Union."

the income tax predating the Soviet Union was a different animal than the current model.

though i don't COMPLETELY disagree with your overall point.

Quote :

"who are to judge how much someone needs thier money they worked for? You have no idea what expenses they might have incurred to achieve that income level. I think the most fair is for the govt to treat its citizens as equals, and that includes taxes. Everyone takes home the same percentage of income. The only difference is the career you choose and productivity. "

Exactly. I don't see how "burden" should be what we're concerned with.

I don't think that we should have a flat tax rate starting from the zero-income point. I do think that the first X-number of dollars you make should be tax free or at a lower percent, but our current system is much too progressive.

Quote :

"partly because the people at the top are the ones getting the most good out of the current tax system"

uhhhhh...huh?

Quote :

"While high income might be transient in some cases, most of the upper-upper-middle-class and outright rich people I've met tended to stay that way, often as a result of steady high-paying jobs or savvy investing or both. "

Sure. Most of them didn't get there by pure dumb luck, and once you have a sizeable nest egg, your money starts to work for you.

Quote :

"I wish EVERYONE only got taxed 15% on income. The sliding scale is horseshit. "

i just don't think that's realistic. Even in my ideal world of vastly smaller government and budgets, I doubt that's realistic. i mean, we're paying roughly double that on average now.

What I would like to see is a hybrid of income and consumption taxation (and at a lower overall level than we currently suffer). I would tolerate a limited amount of progressive income taxation to account for the inherently somewhat regressive nature of consumption taxation.

Quote :

"i don't think you understand. if you're making $12/hr: YOU ARE NOT GETTING GOV'T HANDOUTS"

sure you are. i'm sure you aren't getting welfare, and you most likely aren't getting food stamps and stuff, but you sure as shit are benefitting from Uncle Sam's wealth redistributing social engineering, at the very least in terms of the income tax curve (where you probably pay just about nothing).

Quote :

"So, we shouldn't tax the wealthy because...they don't deserve it? They deserve their money more? I'm not really following you here."

No, they deserve their money equally.

Quote :

"I'll agree that financial success is mostly a matter of education about finance, but you've got to get it from somewhere, or even find out that you need to learn it from somewhere. We seem to be largely convinced we're already supposed to know what to do with money, even though the last couple of years have showed a lot of us don't."

It really is pretty easy (though it does require some discipline). Unfortunately, the level of financial illiteracy is staggering. The overwhelming majority don't know jack shit about money. This would be easy to fix in schools, in my opinion, and we need to do it.

Quote :

"link? its hard to believe the mean (average) worker works 70 hours a week."

not the average worker--the average middle-class income, self-made millionaire.

Quote :

"Go! Be capitalist! Make money! But don't do it at the expense of others and expect me not to object. "

What do you mean by "at the expense of others"?

Quote :

"I think that it'd be nice, if it can be done without hurting anyone much"

here's the thing, though. either the non-rich have to pay more, or they have to receive fewer government benefits. there's no free lunch.

Quote :

"However, 50% will be paying for lazy americans who feel it is the gov't job to take care of them."

A few are legitimately, no-shit lazy. Many aren't lazy, but they certainly aren't as driven, on average, as higher wage earners. In any case, almost all of the people you're talking about think that their lifestyle should be subsidized (with a far lower % of taxes, if nothing else), instead of saying "Hey, I make X, he makes 3X, I can't afford a iPhone/new laptop/BMW/boat/house on the lake/etc, but he can. Oh well, that's math."

Quote :

"I bet there are quite a few teachers in the country who would love it if (annual salary) > (total student loans). "

I bet none of them were forced to be teachers.

Quote :

"The thread was made in response to the "why should we punish people for success!" argument. I believe that progressive taxation doesn't punish success. "

No, it punishes success--just not to the point where it isn't worthwhile to be successful.

Regardless, that's not the big beef i have.

Quote :

"I'm asking whether an equal percentage really means true equality. "

Of course not. If you make $100k/year, you can do and buy things that someone making $30k/year can't. That's not something we need to fix, though.

Quote :

"Check it out I'm going to school to have the ability to stack cheddar to the ceiling and I mean I love a big TV as much as the next guy, I might have a couple of them in fact, but I also enjoy things like living in a country with things like good infrastructure and education system. So I'm good with tossin' a little cash that way as well. Welp, see ya. "

1. the spending of all of this tax money is another subject for another day
2. nobody (except maybe megaloman) is arguing that we shouldn't have taxes
3. donate all you want. be my guest. taking the money from others is a different deal, though.

6/11/2008 12:10:30 AM

Sorry, Duke, I was responding to Megaloman. "The expense of others" thing just refers to an expectation of a reasonable wage, the right to negotiate collectively, and exploitive practices like the ones used by some corporations in poorer countries, where people work long hours for poverty wages while corporations influence local government not to get involved, Chiquita/Dole-type stuff.

6/11/2008 12:21:30 AM

Ok, I'm with you on those things.

6/11/2008 12:39:36 AM

Quote :

"you subscribe to a silly philosophy that most people realize is ridiculous and impossible by the time they're 17"

Nice try on the personal attack, but you could have done a better job of making it relevant. I've never met a single anarcho-capitalist under the age of 17. Here's a brief who's who of anarcho-capitalism.

David D. Friedman - Born 1945
Randy Barnett - Born 1952
Walter Block - Born 1941
Gene Callahan - Born 1959
Hans-Hermann Hoppe - Born 1949
Stephan Kinsella - Born 1965
Roderick T. Long - Born 1964
Wendy McElroy - Born 1951
Robert P. Murphy - Born 1976
Justin Raimondo - Born 1951

Clearly, a bunch of angst-ridden adolescents adopting some sort of knee-jerk "non-conformist" point of view.

6/11/2008 4:12:10 AM

Quote :

"You don't get rich by making a regular salary and not spending anything."

wow, who said this? Actually your income and savings are your number one asset to build wealth. Whoever has this attitude will never be wealthy, live paycheck to paycheck, and have a victim attitude bc they believe they have NO control over thier life or ability to build wealth. I really am curious who said this. I have a couple ideas.

Quote :

"i just don't think that's realistic. Even in my ideal world of vastly smaller government and budgets, I doubt that's realistic. i mean, we're paying roughly double that on average now."

I disagree with you here. I think people having MORE of thier money is NEVER a bad thing. Imagine the jump in the economy, not only sales but investments now that people have more of thier income to invest, pay down creditcards etc. Besides most of the very wealthy have tax shelters and other ways to hide income to avoid unreasonable taxes. If you take those away and treat everyone equally.. You could honestly bring in close to what we take in now. Lets keep one thing in mind, Reagan had the first Trillion dollar budget.. we now have a 3 Trillion dollar budget. And people want to INCREASE spending. Unreal.

6/11/2008 8:30:05 AM

Quote :

"Someone making 250 K a year may be making that much because they went to medical or law school Thus, they may have upwards of 150 K in school loans alone that are accruing interest while they work 60+ hours a week in a hospital. Should we punish this person MORE than a mcdonalds manager who has no school loans? Let's just take away half of their income so they struggle to pay back their student loans, that sounds fair. We don't really need them, they're just doctors, anybody could do their job. "

Ill use myself as an example. I went out of state to NCSU. My mother paid for that, thankfully. However I paid for my next four years and living expenses. I graduated at the age of 26. I had to go to summer sessions my last two years a state to graduate in four years. Only got one summer off in optometry school, it was year round after that. I lived with 3 in an apartment and waited tables for a little income. My student loan balance after those 4 years was just under 100k. No gurantees of passing, we had many that didnt, or passing your national and state board exams. I invested ALOT of time and money trying to better myself. And what was my great salary coming out of school? 75k. Do i think i should pay a greater percentage in taxes? No. Ive sacrificed enough and worked harder than the majority of people in this country.

I cant stand to hear people, my staff included, bitch about thier money issues. When 90% of the time thier poor spending and saving habits are to blame. Yet they have this victim attitude where they act like they had no control over anything. Such horseshit.

Tax us all the same. And I could see having the first 10k, or some portion, tax free. As long as everyone gets it.

6/11/2008 8:53:19 AM

Quote :

"Tax us all the same"

But is "same" equal percentages?

6/11/2008 9:04:13 AM

If everyone takes home the same percentage of income.. yes. Now the individual is more in control of thier take home. To take a bigger percentage from one simply bc they showed up to work is wrong.

6/11/2008 9:07:14 AM

Quote :

"My point is that skilled and unskilled manufacturing jobs have been leaving this country for a couple of decades, and it's causing hardship. I don't like hardship, even other peoples', due to my human trait of empathy. Is it making businesses a lot of money?"

JPrater, that is absolutely false. Preventing the trade would cause substantially more hardship. Yes, it would be less focused, but it would be real all the same. Try to remember the Walmart motto: save money, live better. And this is the truth of it. Manufacturing workers are not poor people, they tend to earn substantially more than the median U.S. worker. As such, if we assume trade is reducing the income of manufacturing workers, then it is simply bringing it down closer to the U.S. median and pulling up the wages of foreign workers, which tend to earn substantially less than U.S. workers. Meanwhile, the trade is also reducing prices in stores such as Walmart, where the poorest among us tend to shop.

Therefore, here we have a transfer of income between members of our society: from U.S. manufacturing workers to foreign workers in the form of jobs and America's poor in the form of low prices.

You seem to be getting distracted by the profits of the companies involved. Trust me, were it not for trade these companies would not be losing money; markets would adjust to keep them profitable no matter what trade policy the government implements. Then again, depending on the company, it is probable that they would be even more profitable in a world without foreign competition to driving down prices.

[Edited on June 11, 2008 at 9:11 AM. Reason : .,.]

6/11/2008 9:11:10 AM

Quote :

"To take a bigger percentage from one simply bc they showed up to work is wrong."

Yes. That's the line I've been hearing from you guys forever.

I've been trying to get you to explain the rationale behind why it's wrong.

6/11/2008 9:15:47 AM

are you serious boone?

Ok, if the lakers showed up to play the celtics and the league decided that the lakers are taller nd had an advantage, so they spot the celtics 20 points. Im sure you would say.. OH, thats progressive.

Ive said it a thousand times. Its equality my friend. The govt should treat its citizens as equals. And if everyone is payign the same percentage, and taking home the same percentage then that is equality.

6/11/2008 9:20:30 AM

The thing is, since the wealthy do pay a huge percentage of individual income taxes, if you want everyone to pay the same percentage, then we're all going to be paying ~30%, not ~15%.

6/11/2008 9:25:42 AM

Just a side note -

While the wealthiest in the U.S. have been paying about 35% individual income tax or less since 1987, which for a lot of us at least since we've been paying attention, from 1917-1986 the rate was much higher.

From 1925-1931 there was actually a window where is was lower (25%, ironic as that is the start of the depression), and from 1921-1924 it was between 46-56%, but the rest of the time it was over 60%.

But for 45 years it was over 70%, from 1936 to 1981, actually hitting over 90% several times in that period.

6/11/2008 9:36:36 AM

I think 15% is a good number. Seems fair to me. I dont know what the numbers would do to our income level, but my thought is that people having more money will create an economic boom and our govt may actually take in more revenue. Also, doing away with tax excemptions make more of the rich money in play. The ubber rich are very talented at hiding money.

The problem is that even if the govt discussed running a 15% flat tax. There would be more people focused on the "break" it gives the rich than the equality or benefits it would bring about. But there is alot of envy in this country.

If i had my choice there would be no income tax, just sales tax. But the flattax is the next best thing.

6/11/2008 9:39:37 AM

First thing to do if you want 15% income taxes is to figure out how to get to $500B in spending cuts to make up for the difference.

6/11/2008 9:52:00 AM

Well the first thing to do is not elect someone proposing 250B in additional spending.

Where did you get 500B? If it forces them to cut spending.. im all for it.

6/11/2008 9:54:13 AM

Inlays from individual income taxes are about $1.1T annually. Actually in the short term you'd prolly need more than $500B, as the wealthy pay most of the taxes, and their tax is declining by more than 50%, but I just picked 50% for simplicities sake.

In the long run stimulus will make up some of that difference, but no one really knows to what degree, and for the first few years you'll need to do something about the shortfall.

6/11/2008 9:59:52 AM

Quote :

"Ok, if the lakers showed up to play the celtics and the league decided that the lakers are taller nd had an advantage, so they spot the celtics 20 points. Im sure you would say.. OH, thats progressive."

I don't think that the two situations are analogous.

The goal of a basketball game is for one side to win, not for each side to reach x amount of points at the end of the game. Such is the case with taxes.

Now -if- that were the ultimate goal of the game, wouldn't it make sense to spot the Celtics some points?

6/11/2008 10:50:08 AM

Quote :

"The goal of a basketball game is for one side to win, not for each side to reach x amount of points at the end of the game. Such is the case with taxes."

In sports, the team with the greatest ability to compete is rewarded with points. In life, the people with the greatest ability to produce are rewarded with money.

The goal of living is not to end up with x amount of dollars, it's to exchange your productive ability for a fair amount of funds.

6/11/2008 11:09:09 AM

if everyone pays 15% income tax we will not be going to war anyone new anytime soon.

6/11/2008 11:23:15 AM

Quote :

"The goal of living is not to end up with x amount of dollars, it's to exchange your productive ability for a fair amount of funds."

No, but we're not talking about living, we're talking about taxation.

The goal of taxation certainly is to end up with x amount of dollars.

6/11/2008 1:31:54 PM

"Government is like a baby: An alimentary canal with a big appetite at one end and no sense of responsibility at the other." - Ronald Reagan

Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." - Ronald Reagan


Two of my favorite quotes. Govt doenst have a set number in mind when they tax. They will take whatever they can.

[Edited on June 11, 2008 at 2:00 PM. Reason : .]

6/11/2008 1:57:17 PM

Quote :

"me - Those dollars that get shipped overseas eventually either come back to America to be spent on American products and services or they don't."

Quote :

"JPrater - this stuff that "we" are making is largely made in other places now. This means that the stuff that American companies make isn't made by Americans, so Americans are not being paid for making it. They pay an American company in the American dollars, yes, but these companies pay lower wages in other currency, in other places, for the services."

Good lord, are you trying to argue with a tautology? I pretty much covered all the bases with "either comes back to America or doesn't." At this point I'm beginning to suspect willful refusal to understand.

I weep for the children who's minds you will destroy.

6/11/2008 2:20:04 PM

Benefits of foreign trade aside, the original point is that people here are losing the good jobs they had. I'm not seeing how this is not an objective fact, we're all aware of the fact that the national manufacturing base is gone. It's moved. We can go get in a car and I'll show you closed factories.

I don't think anyone's seriously suggested that we should end foreign trade outright. If the benefit outweighs the cost, then it can be justified economically. My concern is that many people no longer have those good jobs where they make the greater-than-median income you cited. If this drop in income doesn't hurt them, it's not a big deal. But would you take a substantial drop in pay and not be upset about it? I'm hoping to figure out some "best of both worlds" scenario here.

Let me throw in a genuine question here, Megaloman. If you can answer it without insults, that'd be wonderful. Is the money/product we're receiving back as a result of the trade you're talking about coming back here in similar amounts, given exchange rate shifts and other economic forces?

6/11/2008 2:49:05 PM

JPrater, you seem to have missed my post:
"Preventing the trade would cause substantially more hardship. Yes, it would be less focused, but it would be real all the same. Try to remember the Walmart motto: save money, live better. And this is the truth of it. Manufacturing workers are not poor people, they tend to earn substantially more than the median U.S. worker. As such, if we assume trade is reducing the income of manufacturing workers, then it is simply bringing it down closer to the U.S. median and pulling up the wages of foreign workers, which tend to earn substantially less than U.S. workers. Meanwhile, the trade is also reducing prices in stores such as Walmart, where the poorest among us tend to shop.

Therefore, here we have a transfer of income between members of our society: from U.S. manufacturing workers to foreign workers in the form of jobs and America's poor in the form of low prices.

You seem to be getting distracted by the profits of the companies involved. Trust me, were it not for trade these companies would not be losing money; markets would adjust to keep them profitable no matter what trade policy the government implements. Then again, depending on the company, it is probable that they would be even more profitable in a world without foreign competition to driving down prices."

6/11/2008 3:32:34 PM

I didn't miss it, it just read like "They can shop at Walmart and it'll be okay" for the first half. Maybe I'm not getting the question out right.

6/11/2008 3:39:11 PM

Quote :

"Before you start harping on all the redistributions from the rich to the poor, how about the distributions we have from the poor to the rich? Yeah, they exist, and there are a lot of them. Simply, the more complex the system is, the more it favors those with more money - in regards to taxes, investments, and general finances."

And what system could be simpler than a flat tax?

6/11/2008 9:49:11 PM

problem with flat tax is that it will never happen.

There, I said it.

6/11/2008 10:02:09 PM

Quote :

"problem with flat tax is that it will never happen. There, I said it. "

Ok. People said we would never have a black president too. So I guess you shouldnt vote for Obama now... since someone said it.

6/12/2008 9:05:39 AM

Quote :

"Is the money/product we're receiving back as a result of the trade you're talking about coming back here in similar amounts, given exchange rate shifts and other economic forces?"

Doesn't matter. Restrictions on trade are never justified or desirable.

People moan about job loss, which indirectly means moaning about imports. What they don't understand is that any restrictions or tariffs on imports ultimately hurts exporters the hardest. It's called the "pass through" effect. Increased prices for imported goods get passed on to consumers, who's cost of living goes up. They demand higher wages and saleries, trying to pass some of the cost on to employers. The only people who can't pass on the price increases to somebody else are the exporters, who have to continue to trade at world market prices, even if the cost of their inputs and labor go up. Trying to "save jobs" through import restrictions raises prices and destroys jobs in export industries.

Import restrictions also hurt domestic industries that depend on imported inputs. If you try to "save" manufacturing jobs in the steel industry by restricting import of cheaper foreign steel, it's going to come at the cost of manufacturing jobs in the automotive, home appliance, and other steel-using industries.

Yes. individual jobs are lost to foreign competition. Individual jobs are always being lost in the market's continuing process of creative destruction. Advances in mechanization and automation destroy jobs too, but they also decrease prices and increase productivity, leading to a rise in wages. Trying to stop loss of jobs to foreign competition, or to any other factor, is only going to lead to the destruction of still more jobs and an increase in the cost of living.

6/12/2008 10:32:28 AM

So the point is, no matter what happens, people are screwed?

Sorry, it's mostly a pretext to suggest a move to a thread on foreign trade policy.

6/12/2008 11:24:22 AM

Not at all, the "creative" part of "creative destruction" means that better jobs are always being, surprise, surprise, created. Automation creates higher wage jobs because it increases productivity. Trade creates jobs in export industries and industries that require or benefit from imported inputs. Both decrease prices, so people have more to spend on other things, voila, more jobs in those industries.

If you caught a negative vibe off my last post, it was because I was emphasizing the negativity of protectionism.

6/12/2008 11:44:32 AM

^I understand what you're saying. I've got a question I'll put in the other thread, because I pretty much always have one more.

Does anyone have numbers on what a viable percentage for our hypothetical flat tax would be? We've been kicking around 15 and 20%, and there are claims out there that once things are leveled off, those should be sufficient, but are there studies out there that back up our estimates?

6/12/2008 11:49:55 AM

Quote :

"Restrictions on trade are never justified or desirable"

I don't know if this is true. Trade restrictions are a policy tool just like any other and come with pluses and minuses.

Tarriffs for instance restrict trade but they also raise revenue. Assuming that some revenue has to be raised tarriffs could be among those that impose the least deadweight loss.

In addition if we are only concerned about the welfare of our own citizens then some tarriffs can even raise the standard of living in the home country.

Lastly, it is possible for the losses from trade to be far more concentrated than the gains. In this case trade may be a net social loss unless the winners compensate the losers. I actually have a paper idea based on this

http://www.unc.edu/~kwsmith2/Losses.pdf

6/12/2008 4:02:41 PM

yes, it is quite possible for higher tarriffs to be better than higher payroll taxes. But I find it unlikely that this would be a common case.

Quote :

"In addition if we are only concerned about the welfare of our own citizens then some tarriffs can even raise the standard of living in the home country."

Ok, high tarriffs on the importation of nuclear weapons, fine. But perhaps you could give us a single example where trade restrictions could raise our standard of living (ignoring perverse regulations such as currency pegs, etc)? Trade is not a rule, just because something is legal does not mean we must do it. As such, try to put yourself in the shoes of everyone involved: by switching suppliers, the consumer is clearly preferring the foreign, either because of price or quality. Similarly, if the domestic producer is refusing to match the price and quality of the foreign, then we can assume it is because they have a better alternative use for their capital. Similarly, if the domestic workers refuse to accept wages low enough to secure their employer in the marketplace then we can assume it is because they believe they can find better jobs with other employers.

We know this because everyone is still free to choose. If the damage to the producer and his workers exceeds the benefit to the consumer then they are free to bribe the consumer to prevent the switch (lower prices). That they do not means the damage to them from the consumer switching is less than the benefit to the consumer. As such, trade should always be a net benefit for Americans.

6/12/2008 6:20:48 PM

^

The effect comes from altering the terms of trade when one nation has monopoly power in some market. The most common example is French wine.

France imposes a tariff of foreign wine and other beverages. This increases French consumption of French wine, which in turn drives up the price of french wine. The direct effect is to lower the purchasing power of French citizens but there is an indirect effect.

French wine becomes more expensive abroad, yet people still buy it because there is some monopoly power associated with French wine. The increase in the price of the wine, improves the terms of trade for France and more than makes up for the orginal decrease in purchasing power.

The orginal article on the is "Increasing Returns, Monopolistic Competition, and International Trade" and is what made Paul Krugman a star.



Also Seater at NC State has two sector model in which the benefits from trade depend on absolute rather than comparative advantage. Its been a while since I looked at the paper but basically I think if you get stuck in the wrong sector then your growth rate can be limited by the rate of savings of the other nation, which may be lower than your own.

[Edited on June 12, 2008 at 7:20 PM. Reason : seater]

6/12/2008 7:14:34 PM

A clever point, I had not looked at it that way. However, even then the added revenue are not a product of the trade barrier; the trade barrier is merely one clever solution to a common collective action problem, and there is more than one way to skin that cat. Namely, if all the french wineries were owned by a single company then the same result could be achieved simply by demanding monopoly prices from foreigners, no governmental action needed. Similarly, private investors could accomplish this by buying and shutting down marginal wine producing regions in France, cutting production and achieving monopoly pricing. Of course, all of these fail if foreigners are willing to drink non-french wine.

But, ok, as clever as that is, that would be an export tarriff. Do you know of a similarly clever mechanism for a country to pull a similar trick with a tarriff on imports?

6/12/2008 10:51:31 PM

i got mixed up... sorry about that. Now that I have re-read it, it is no longer a given that the result will be what you say it is. Specifically, if the supply of french wine is extremely ellastic then the harm inflicted upon french wine drinkers could be substantially higher (they would be happy to pay more for foreign wine, but not as much as the tarriff demands) than the small benefits to french wine producers from higher prices.

It would be far more efficient to impose an export tarriff, thus accruing monopoly pricing against foreigners without harming domestic consumers at all, which both get cheap french wine and access to foreign wine. That would be elegant and always work whenever you enjoyed a monopoly position, hence why I assumed that was what you said. But an import tarriff to drive up export prices would, in my opinion, almost always cause more harm than benefits, even if you have a monopoly position.

6/13/2008 8:55:07 AM