Backfire Economics
In a rare point of agreement, both the New York Times Editorial Board and the Libertarian Party are criticizing Trump’s tariffs.
“Tariffs are Taxes that Americans Pay” reads the LP’s new bumper sticker slogan.
“Trump’s Tariffs Are a New Tax on Americans” say the NYT editorial board.
Put simply, a tariff is just a tax on imports. There’s no getting around the cost to Americans, leading free market economists to observe that imposing tariffs is like poking ourselves in the eye to punish our trading partners.
But it goes beyond this. Shark Tank’s Kevin O’Leary unintentionally made the point about the destructive nature of trade wars during an interview with Nick Gillespie for Reason TV:
It’s not an understatement when Don Boudreaux calls the trade war a “War on Trade.” O’Leary calls it a “brilliant” move by Trump to pressure Canada to arrest a powerful Chinese national’s daughter in Canada to poison relations between the two countries.
It was intended, O’Leary suspects, to prevent China from shifting its imports of raw materials from the U.S. to Canada, and it worked.
China did halt imports from Canada, but it also retaliated by threatening to KILL two Canadian prisoners.
Treachery breeds treachery. This won’t end well.
What’s Wrong with Trumponomics?
According to economists like Steve Moore, however, Trump’s tariffs could effectively pressure countries like China to stop manipulating their currency. The long-term devaluation of the Yuan has helped spur the domestic economy — especially manufacturing — in China, and some credit the policy with China’s overall growth and low unemployment (and simultaneous loss of manufacturing output in the U.S.).
Listening to Moore, one can easily get the impression that we are merely experiencing a bump in the road en route to globally free trade.
Not everyone is buying it, though.
Boudreaux — a senior fellow at the Mercatus Center, GMU economics professor, and curator of the eminently readable Cafe Hayek—doesn’t accept the argument that Trump’s trade war will lead to “zero-zero” tariffs in the long run.
Why not? First, because Trump doesn’t indicate any understanding of free trade.
Trump exalts “jobs” above the broader metric of prosperity. Boudreaux maintains that exports are costs Americans pay to receive the benefits of imports. In his view, there is no net benefit to having more jobs or industries in areas in which the Chinese have developed a comparative advantage. As he explained to John Stossel, the result of China’s currency manipulation is an opportunity for Americans to specialize in more rewarding jobs in the service sector.
The ironclad Bob Zadek rule of Government intervention holds that whenever government declares “war” to solve a problem, the problem gets worse.
The President has somewhat backed off of his tweet “hereby ordering” U.S. companies to stop doing business in China, but he seems stuck in the zero-sum thinking of his economic advisor Peter Navarro, who insists that the U.S. must mirror the mercantilist approach China has chosen to our own destruction.
What John Bolton’s advice is to foreign policy, Peter Navarro’s advice is to trade — a misguided American exceptionalism that puts us a great risk of losing the traditions of peace and free markets that made us great.
Boudreaux joined me to explain where Navarro’s logic falls short.
We will also discuss the wisdom (folly?) and (un)constitutionality of executive orders regulating trade under The International Emergency Economic Powers Act.
Ever wonder why conservatives are suddenly embracing a more powerful executive, and aligning themselves with Elizabeth Warren’s “economic patriotism”?
Do Trump’s tax cuts and deregulation measures redeem his economic nationalism?
Find out, on the show of ideas, not attitude:
Hear the highlights, or get the podcast here.
Transcript: A Libertarian Guide to Understanding Trade (With Don Boudreaux)
Bob Zadek: Welcome to The Bob Zadek Show.
Opinions themselves are not all that interesting. What we try to do is probe down and ask the most important question of all when discussing opinions, and that is the question, “Why?”
I care a little less about what you feel, and care more about why you feel that way. When people share with each other why they feel that way, then true learning takes place. That’s what we try to do every Sunday morning.
You can’t avoid articles in the media or broadcasts on mainstream media about trade war. This alleged war with China and other countries, sometimes Mexico and sometimes Canada, where the commander in chief of the trade war is President Trump — it is discussed a lot by the media and everybody seems to have an opinion on it.
What troubles me so much is that the discussion of trade is replete with misunderstanding. Even the vocabulary of the conversation about trade is confusing, misleading, and a distortion. “
Trade deficit,” “exporting jobs,” “currency manipulation,” “deficits,” etc.
These words sometimes have a meaning which is the opposite of what you would expect. And therefore, when Americans try to understand what’s going on, they go into a rabbit hole and get confused.
The conversation about trade deteriorates rapidly. Well, I have the cure. The cure is this morning’s guest. I welcome back to the show Don Boudreaux. Don is a senior fellow at the Mercatus Center. He is a George Mason University economics professor, and most important, he is the curator of the Cafe Hayek. Cafe Hayek is a daily blog that I receive and I cannot start my day without reading Don’s posting called Cafe Hayek. It is a must read if you have a vague curiosity about economics. Don, welcome to the show this morning.
Don Boudreaux: Thank you Bob, and thanks for those very kind words.
Bob Zadek: You are one of a very small group of my own private tutors. You helped me to understand, you helped me to learn, and you helped me to grow intellectually for over a decade. So thank you.
I would like to talk about the issue of trade — deficits, tariffs, and the exporting of jobs, a phrase that makes no intellectual or economic sense whatsoever help. We are going to help our friends understand at least what these terms mean and what is going on. It is a pleasurable task, because if we shed the cumbersome vocabulary, the concepts are really quite simple to understand.
Let’s start with the relationship between the U.S. And China and the concept of trade in general.
International Trade, Trade Wars, and Protectionism
Bob Zadek: So, Donald Trump and his advisors, Peter Navarro and Steven Moore, have complained that China has been from a trade standpoint treating us unfairly. Tell us what the economic relationship between these two countries is.
What is the conversation about and what is Trump’s and other’s complaint about our trade relationship with China?
Don Boudreaux: Trade does not take place between countries, trade is carried out by flesh and blood individuals. International trade just happens to be trade that is carried out between individuals, each of whom are citizens of different political jurisdictions. So the first thing to recognize is that there is nothing at all unique about international trade.
International trade is the same as national trade. So when I trade with you, and we are both Americans, it’s motivated by the same sentiments and it has the same consequences as when you or I trade with someone in Mexico or China or in Canada. There is no difference. Trade is trade. It’s motivated by the same reasons, regardless of which particular agency issues a person’s passport.
Trade, by its nature, is voluntary. So when I buy something from China and when some Chinese seller sells me something, both of us do so voluntarily. We both expect to gain from that. Of course we can make mistakes. We make mistakes all the time. But I know my best interests and the person in China knows his or her best interests, better than anyone else knows their best interests. So when we trade people can be sure that each of us is overwhelmingly more likely to be made better off by that trade.
So trade is mutually beneficial, whether it occurs between citizens of the same country, or whether it occurs between citizens of two different countries. For some reason, people think that trade that occurs with a foreigner is fundamentally different than trade that occurs with a fellow citizen.
So let me say this to start. Any problem that you show me, whether real or not that is created by trade with foreigners, I can show you as existing between fellow Americans. Any benefit that we get from trading with each other with our fellow Americans we can possibly get from trading with foreigners. There’s nothing fundamentally different about trading with foreigners. Now, of course, people say that when we trade with foreigners that destroys domestic jobs. It is true that when we buy imports, some of our fellow Americans might lose jobs. But that is true whenever we trade with our fellow Americans.
My favorite example is when the Atkins Diet became a fad in America, years ago. Americans changed their diets. We ate less carbohydrates and we ate more protein It had nothing to do with international trade and yet Krispy Kreme Donuts closed several of their stores and they blamed the Atkins Diet, I think correctly.
Whenever consumers change the way they spend their money, some people lose jobs, other people gain jobs.
And that is true whether that change in the way people spend their money is caused by imports or anything else. So jobs are always being destroyed and always being created by the dynamic economy that we’re in. So when Americans lose jobs to imports, that is not any different than when Americans lose jobs to any other form of economic change. There is nothing special about it.
Now you can protect Americans from losing their jobs, but you can only do that by harming other Americans or by making other Americans pay unnecessarily higher prices for things like steel or aluminum or textiles or whatever it is that you want to stop Americans from buying in China. You can protect an American job in Pittsburgh or an Ohio steel factory by imposing punitive taxes on Americans who want to buy Chinese or Brazilian steel.
You can definitely do that. But one consequence of that, and this is the fact that people like Trump and protectionists always miss. It is not only the fact that that raises the cost to Americans of acquiring steel and aluminum and the other things that are protected by tariffs, but that also destroys jobs in other American sectors. So, you can protect jobs in some sectors, but only by destroying jobs in other sectors.
When we obstruct Americans from buying foreign steel, that means foreigners have fewer American dollars. Foreigners accept the American dollars when sell the stuff. We Americans accept dollars. When foreigners get fewer American dollars, they have less money to spend in buying our exports. That destroys jobs and seminaries and sectors. They have less money to spend investing in America, that destroys jobs in other American sectors. So one of the factors that we see over and over again in economics, which is as strong as any proposition at all in the social sciences, is that protectionism does not increase the number of jobs.
What protectionism does is protect jobs in relatively inefficient industries by destroying jobs in relatively efficient industries.
Over time, as anyone who thinks about it can tell over time, what that does is lower the standard of living insofar as we have protections, because when you are protecting jobs in inefficient industries and protecting less productive jobs, it means you are protecting workers in less productive occupations, and that means those wages are going to be lower over time.
At the same time you prevent jobs from arising in more efficient and more dynamic industries. When people like Trump worry about trade, all they see is the jobs that are destroyed by imports. That’s all they see. They stop looking there. They don’t see the much larger and the bigger and more important picture here. Which is the destruction of other jobs in other parts of the economy, the increase in prices Americans must pay, and the overall slowing and encumbrances that are put onto the economy because of the intervention.
Bob Zadek: Two comments. Thank you so much for that. Number one, is the concept of “destroying jobs.” That activity of trying to protect jobs. Those jobs can be saved if the worker would be willing to do the same task at less of a salary. So it is not saving the job, it is saving the salary, not the job. Every job that is lost in America could be saved — we could be manufacturing refrigerators and television components and the like, if American workers would be willing to work at the same salary as a foreign worker.
So, there is a profound distortion. That is where the discussion I think really breaks down. Every job that is “lost” or “sent overseas” could be saved if that worker would work for less. Am I correct? That the workers want to save the salary, not the job?
Don Boudreaux: You are correct. You make two important and related points in what you just said. One point is that jobs are not things that are owned by someone. A job is a service that is performed for someone who chooses to buy something from them. If someone chooses to buy my economics lecture, that person does not commit himself or herself to the rest of eternity to continue to buy my economics lecture.
That person will continue to hire me to give an economics lecture for as long as that person feels it is worthwhile. That is under no economic obligation to continue doing that. Jobs are worthwhile only insofar as they produce things that are value to the buyer and that can be directly to a buyer or usually it is indirectly through the employer who sells things to buyers. But jobs have value only insofar as they are productive. As soon as consumers don’t want as much as they did earlier the things that are produced, then that person should find something else to do.
Bob Zadek: At the price. At the price the seller demands.
Don Boudreaux: Exactly. So this leads me to the second point. Americans could still be making low value toys and textiles if we were willing to be paid low wages that people are paid to produce those things. But it’s a good thing and not not a bad thing that we’re not willing to, to be paid those wages. When Americans get priced out of jobs by imports, that’s because most Americans have better options. The reason wages were high in America is because American workers are very productive. You don’t want very productive workers wasting their time doing much less productive tasks.
So, obviously, if you’re willing to work at a lower wage, you can have almost any job you want at that lower wage, but you have to find someone willing to pay you to work at a higher wage to produce something. We lose jobs when our wages rise. That’s a good thing. We are basically pricing ourselves voluntarily in a manner of speaking, out of producing things that foreigners can produce at a lower costs so that we can move into producing things that are more valuable, and that will eventually pay us, pay us higher wages.
Bob Zadek: California has exports a lot of food. California probably has a trade surplus with other states, and other states, let’s say Nevada, which doesn’t make that much, probably has a huge trade deficit. The governor of Nevada is not ringing his hands and bemoaning the fact that Nevada has a trade deficit. It doesn’t suffer. It’s neutral. California is no better off or worse off than Nevada. If the concept of trade deficits makes no sense, it seems absurd in one state versus another, it is equally absurd in one country versus another. It is a manufactured fear that has no basis in reality.
Trade Deficit: A “Goods Surplus”?
Bob Zadek: Now, what is this fear? Can you help us understand, when those who seek to impose tariffs and to restrict and limit our “trade deficit,” what is there fear, albeit wrong-headed? Give us some insight into what they think is wrong with our trade relationship with China?
Don Boudreaux: It’s too bad you don’t have 24 hours rather than one hour to talk about this, because there’s no concept in all of economics that is more thoroughly misunderstood and more consistently the demagogue in favor of bad policies than the so-called “trade deficits.” President Trump says it all the time, that when we run a trade deficit, it means we are losing. All a trade deficit is, is some period of time when the citizens of a domestic country import in value more than they export in value.
A better name for it would be a “good surplus.” It means we are getting more goods than we are giving up. That should be a good thing.
Ultimately, the reason people work, the reason people invest, and the reason people take risks and go to work in the morning, is because we want to increase the amount of goods and services that we have for ourselves and our families. We want to increase our standard of living. So when we run a trade deficit we are getting more goods from foreigners than we are giving up to foreigners. That is a good thing.
Also, when foreigners don’t spend all the money that they earn when they sell us stuff buying our stuff, what they are doing with that money is they are investing it in America. The way these accounts are set up and most people don’t understand this, the trade deficit is exactly offset by something called a “capital account surplus.” Down to the last cent. And so when Americans run a trade deficit, Americans are also running in the exact same monetary amount a capital account surplus. That means that foreigners are choosing to invest here.
They are building factories, they are lending money to American corporations, sometimes lending money to Uncle Sam. They are starting restaurants. So these investments promote and improve the American economy. They’re also evidence that foreigners believe in the promise of the American economy, at least relative to the promise of other countries in which they can invest. A trade deficit is nothing that Americans should be ashamed of.
Nothing an American should be fear. It is something we Americans should be proud of and something we should be should be glad of. We should be proud that foreigners consistently invest a lot of their dollar earnings in the American economy rather than to cash them all out by immediately buying stuff that we made. We should be encouraged that these investments are coming to America and increasing our capital.
These things are all good, but because it’s called a trade deficit and because it’s so easy to demagogue, people miss this fact. Another feeling that people have about the trade deficit is that a trade deficit is like a government budget deficit in that every time you want to increase your deficit you go further and further into debt. And that’s simply not true. A budget deficit is different from a trade deficit. A trade deficit does not imply greater debt.
I’ll give you a simple example. Not long ago I bought some furniture from Ikea. I spent $1,000 on that furniture. I spent $1,000 buying something from a foreign company. If Ikea takes that thousand dollars that it got from me and uses it to improve one of its stores in San Diego or Newark, New Jersey, those dollars are coming back to America as investments.
That increases the American trade deficit by $1,000 but it doesn’t harm us. Nor does it mean we’re going further into debt. We don’t owe Ikea any more because it chose to spend $1,000 on improving its stores. The language here is misleading. A trade deficit is not a deficit. It simply means that foreigners, rather than choosing to spend all of their dollars buying stuff from us, are choosing to spend some of their dollars investing in our economy.
We should be pleased by this fact. But people panic when they hear we are in a trade deficit. Politicians generally are more than happy to have people panic because the more people panic, the greater is the demand for political intervention. It is the perfect storm of bad language and political opportunism that gives rise to all these baseless fears about trade deficits. We should be pleased with trade deficits.
The Law of Comparative Advantage
Bob Zadek: You discussed in your last comments the concept of “comparative advantage.” That concept is crucial, and it shows so clearly how we benefit from the absurd concept called “trade deficit.” Let’s talk about comparative advantage. It is a very simple economic concept. You might want to reference the laughably absurd comment by Elizabeth Warren bemoaning the fact that pencils aren’t made in America.
She doesn’t understand anything about comparative advantage. And of course the irony is that she picks the pencil, which was the subject of a wonderful essay by Leonard Reed called “I, Pencil,” which is mandatory reading by anybody who wants to understand economics.
Don Boudreaux: I want to applaud you for mentioning Leonard Read’s “I, Pencil.” It’s one of the greatest things ever written and I encourage all your readers to read it. Comparative advantage boiled down to its simplest essence, is that each person can produce some things at a lower cost than most other people.
So I have a comparative advantage at teaching economics and writing about economics. My eye doctor has comparative advantage at doing ophthalmology. My department store has a comparative advantage at retailing clothing. When I spend my time teaching economics I am spending my time doing that which I do most efficiently, at least relative to other people and relative to anything else I could do.
So that means that I can earn more money doing that. Because trade is always among individuals, if we observe Americans buying pencils from Canada or Indonesia or wherever it is we buy pencils, that must mean that Canadians or Indonesians can produce pencils at a lower cost than we can produce them. Why should we then produce pencils ourselves?
As Adam Smith said, when you run a household, you produce some things in the house yourself, but the vast majority of the things you buy from merchants. So too with the country. It would be folly to produce in a household something that the household can acquire by buying it at a lower cost from the seller.
It would be folly for a country to do the same thing. So yes, we could make pencils in America. But if we refused to buy pencils from foreigners, or more realistically, if the government somehow obstructed our ability to buy pencils from foreigners, then all pencils that we would get for ourselves we would have to make ourselves, meaning we have to make them at a higher cost.
So yes, we could produce pencils, but because we would acquire those kinds at higher costs, the amount of other things that we give up to produce those pencils is greater than the amount of things that we give up when we buy pencils from more efficient foreign producers. It makes no sense for me personally to incur unnecessarily high costs to acquire the things that we want to acquire, it makes no sense for us as a country to do so either.
When foreigners can sell us things at a lower cost, then we are discouraged to make those things ourselves. We make ourselves rich by buying those things from foreigners rather than making things ourselves. The fact that Senator Warren doesn’t get this fact doesn’t surprise me. She is a politician. There is a great quote by the Great Thomas Solo, who said that the first law of economics is that reality is not optional.
The first law of politics is to deny the first law of economics. Politicians are in the business of pretending to be miracle workers. There are no miracles in the economy and the job of the good economist and the job of the good public intellectual such as yourself is to point out what works and what doesn’t in a realistic way and to pierce the fallacies and illusions that the politicians try to create in order to pay their way to power.
Bob Zadek: To explain comparative advantage, look at a football team. A football team operates most effectively and to the highest collective benefit when each position is staffed by the one most competent to do it. You can assign positions on a football team at random or in a way that seems fair to the players, but the team will be grossly ineffective. So what you do is everybody does what they do best as a result of which the team as a unit is very efficient and does its job of winning games in the best manner. Think of a planet like earth. Earth will function most efficiently if everybody on earth is contributing by doing what they do best and with what they don’t do the best they will take their earnings from what they do best and buy the services of others.
When Donald Trump talk about bringing jobs home, you can do this, but we are getting the same product more expensively than if you bought it overseas. How does that possibly make sense? Bringing jobs home is nothing other than the mother of all wealth transfers. It’s transferring wealth from American consumers to a tiny subset of the Americans whose jobs are quote protected.It’s just a wealth transfer in disguise, with the government being the mover of the wealth from one to the other. And it causes people to be overpaid for what they are doing based upon their contribution to the economy.
Don Boudreaux: Yes. Like Babe Ruth was a truly great pitcher in Major League baseball. He was a great pitcher, but he was a better slugger. So the Boston Red Sox, and then later the New York Yankees, chose him to be a slugger. This is a good example of comparative advantage. Yes, we Americans could produce pencils more efficiently than Indonesians or Canadians.
But the problem is that when we produce pencils, because it costs us more to produce pencils than it costs the Indonesians or Canadians, if we produce pencils ourselves, we give up more of other things to produce and acquire those pencils than we give up by buying them from foreigners. That’s not the way to wealth. A handful of tensile producers in America might be made better off, but Americans as a whole will be made poorer.
This is an important point that a lot of people don’t immediately get. Jobs are costs, they are not benefits. We work in order to acquire the things that work allows us to acquire. We don’t work because work is itself the end-goal.
Jobs are costs, they are not benefits. We work in order to acquire the things that work allows us to acquire. We don’t work because work is itself the end-goal.
Many of us love my job, but if George Mason University and the Mercatus Center stopped paying me, I would stop working for them. I would find some other job. I work ultimately, as much as I love my job, in order acquire the income to buy things for myself and my household. So a job is valuable only insofar as it allows us to increase our standard of living. To protect jobs in a way that decreases our standard of living, makes no sense whatsoever.
Trump’s Argument In Favor of Tariffs
Bob Zadek: Tariffs are in the news almost every single day, dawn and tariff is of course. They are where a government, in this case, the United States government, imposes costs to an imported product to make the imported product less desirable to Americans. And therefore, Americans now buy the less expensive American product because the foreign product has the added costs, the tariff.
Now in the subject of tariffs, there are two questions. Trump has been criticized a lot by using tariffs because tariffs are a tax on American buyers. It is in effect, taxing Americans for exercising their free choice of buying a Chinese product. It says, if you want to enjoy the freedom of buying a Chinese product, we will charge you for the exercise of that freedom.
A concept that’s offensive to you and I. Trump will defend tariffs. He will say, “I am taxing Americans, but it is nothing other than a short term tactic in order to cause a renegotiation of trade treaties.” Now, we can spend a whole show on the concept of trade treaties, that’s a whole other topic, but speak to the use of tariffs as simply a temporary tactic to accomplish the ultimate goal of opening up the Chinese markets to American goods.
Don Boudreaux:Trump and his advisors do claim the tariffs are really a tool to make trade freer in the long run. You can imagine a situation where when Uncle Sam raises his tariffs, foreign governments lower theirs. but one problem with that is that it never works in reality. History knows only a fraction of situations where this has worked. By far, what happens is that the foreign country, rather than cut its tariffs, raises its tariffs in retaliation. And of course, that’s what we see happening in the current situation.
History gives no comfort to those who believe that unilaterally raising tariffs is an effective tool for eventually leading to lower tariffs. It is practically not effective. The second problem with this claim by the Trump administration is that his ultimate goal is not to have Americans get as much as possible from foreigners in exchange for as little as possible. Trump wants for us Americans to export as much as possible and import as little as possible.
This is a bad thing for Americans but Trump thinks it is a good thing. So his purpose in raising tariffs, as a bargaining tool, is something that I hope we never get because what he is bargaining for is for other governments to agree to accept more American exports and in exchange to send to us as few as possible of their country’s exports. So, because Trump and his advisors do not understand trade, what they are bargaining for is something that I hope they don’t get. Their goal is misconceived. This whole notion that Trump is playing this clever game to make trade free and to bring about a regime of free trade, which is what Steve Moore says, is not true.
Trump is a mercantilist, which means he wants America to export as much as possible and import as little as possible, which is just foolish. That means he wants Americans to work more and harder to supply foreigners with goods and services, and in exchange for us to get from foreigners as little as possible. That’s the way to make America poor and not to make America rich. And that is true despite the fact that Trump does not understand that simple reality.
Currency Manipulation: Explained
Bob Zadek: Another phrase that is so misleading is the concept of what is called “currency manipulation.” Manipulation sounds shady, underhanded, somewhat, vaguely dishonest. China has been accused of this. The Chinese government dictates that every Chinese manufacturer must sell its product for less. So China manipulates its currency downward so their goods get cheaper for us. Isn’t this a good thing for Americans?
Don Boudreaux: You’re not missing anything at all. Let’s begin with the fact that for better or worse, we live in a world that is unavoidably one of currency manipulations. Almost all currency, aside from cryptocurrencies and things like that, are issued by central banks. The whole purpose of the central bank is to manipulate the money supply of that country or region. So the Federal Reserve by its very nature, for example, is a currency manipulator. Its main purpose is to consciously decide what the supply of money should be. Same is true for the European Central Bank. All governments engage in currency manipulation, it is a matter of fact.
Of course, when people like Trump, who complain about currency manipulation means that somehow these foreign governments are keeping their money supplies too high, so the value of their currency is too low relative to the dollar. They somehow think this is bad for Americans. Bob, as you point out, that’s exactly backwards.
If it is the case that the Chinese government manages to keep the value of Chinese currency artificially low, whatever that means, compared to the dollar. Then that means Americans are getting more for our dollars than we would otherwise get. That is good. I like it when I go to the store and the prices are low. I get more for my dollars when I go to the supermarket, when I go to a department store, and when I shop on amazon.com. I’m not made worse off by getting more from the money. I am better off.
There are obviously a handful of merchants in America who are made worse off. But the same is true domestically. If a supermarket sells at lower prices than some competing supermarket, they may be worse off because it’s less likely to get my business but that’s good for me. It’s good for the consumer. So to the extent that foreign governments manipulate the currency in ways designed to promote those countries exports, that is good for us. It is not bad for us. That means we get more for our dollars. We should thank and applaud them for doing that rather than criticize them.
Bob Zadek: I’m smiling because of two things you said.
Number one, you talked about the accusation that foreign governments are causing their currencies to be artificially low. How can you use the concept of artificial when it’s all arbitrary to begin with? There is no natural order of things. We’ve left fixed exchange rates back in 1944 or whenever. So there’s no such thing as artificially low when it comes to a currency. It is what it is.
And number two, when China manipulates their currency downward vis-a-vis the dollar, imagine how we smile when we walk into the mall and we see a sign store-wide sale where every product is 10% off. This is a countrywide sale. It’s like China saying we are having a sale on everything made in China. Every product is 10% off.
Don, how can our friends follow you?
Don Boudreaux: So I blog every day at cafe Hayek, www.cafehayek.com. It’s named after the great late Austrian economist Friedrich Hayek. I try to write for a non professional economic audience. I try to write for ordinary people to help them understand basic facts about economics that are often overlooked or discarded in public policy discussions.
Bob Zadek: And Don, I will just advise our listeners in the 30 seconds that your blog should have a surgeons general warning that it is addictive. When you start giving us links, I start to click the links. Before I know it the calls are backing up. My clients are angry at me. I get sucked in to all of your links. So to our friends out there, it is addictive. I invite you to read Cafe Hayek every single morning.
Don, thanks again for being on my show this morning and for sharing your wisdom.
Links:
- Cafe Hayek — where orders emerge
- Hayek Center for Philosophy, Politics, and Economics at the Mercatus Center
- Stephen Moore talks trade and Trump’s economics — Marketplace
Related Shows:
- Trump Vs. Free Trade with Richard Epstein, June 25, 2017
- Stephen Moore on Trumponomics, Oct. 7, 2018
- Elizabeth Warren’s Socialist Dogwhistle, Aug. 25, 2018
- Liberalism vs. Nationalism, Dec. 22, 2018
- Don Boudreaux on Entrepreneurship, Economic Freedom & Prosperity, May 10, 2015
- Legalize Insider Trading with Don Boudreaux, Nov. 1, 2009
