A conservative think tank found the White House measured retail price elasticity when it should have used import price elasticity. That mistake meant the tariff outputs were about four times higher than they should have been.
The formula the White House used to calculate its recent tariff is based on an error that roughly quadrupled the rates from what they should have been.
…
That meant the formula was off by a factor of four, because the White House valued the elasticity of import prices at 0.25 when it should have been 0.945, according to AEI.
Even if AEI is correct, there is no face-saving way the admin would ever admit it - or even course correct now that it has been pointed out.
This is overly generous. It’s clear that TFG thinks the trade deficits result solely from unfair trade practices. It was no coincidence that the elasticity factors cancelled each other out. TFG is simple stupid.
Math is useless when applied to the wrong problem.
Trade imbalance is predicated based on Classical Economics from the late 18th and early 19th centuries. It ignores the new knowledge gained from the Science of Complexity. Complexity Economic is not like physics, it’s a lot more like biology.
David Ricardo’s Comparative Advantage ignores the unintended consequences, or emergent properties of his theory which is correct at face value. One unintended consequence or emergent property of Comparative Advantage is the export of jobs and its devastating effect. Ricardo said nothing about jobs, only about Macro Economics. Both economies prospered but income distribution became problematic on both sides of the trade.
Isn’t that what some folks have been saying, for years, in the face of the “free trade” religion that Friedman propagated? I distinctly remember him chattering about “comparative advantage”.
What were people saying about the Fed crushing the economy with high interest rates, in 81?
With bankruptcies running at double last year’s rate, the housing industry in a shambles and small businesses hanging on for dear life, Congressmen, economists and even a few Cabinet members have begun to wonder out loud about where the Federal Reserve is leading the country.
To be sure, they acknowledge, its anti-inflationary medicine is working, but will the patient survive the cure? The increasingly harsh impact of high interest rates on the nation’s economy is raising anew the question of monetary policy and whether or not the Federal Reserve should back off from its program of gradually restricting the growth of the money supply.
Twenty years later, everyone was praising what the Fed did, to kill inflation.
If the tariffs stick, and the rebuilding of the USian industrial base happens, will we, twenty years from now, be praising the industrial rebuilding that the tariff policy spawned?
" will we, twenty years from now, be praising the industrial rebuilding that the tariff policy spawned?"
the Country following anything that Trump dreams up makes me very, very uneasy,lol. You are, I’m sure, aware of his not so stellar business career. Multiple bankruptcies, dubious and some criminal enterprises like Trump University,…
Unlike you, I really can’t give him the benefit of the doubt.
If this current scheme turns out to benefit the Country, it’ll be the equivalent of a monkey throwing darts and hitting a bullseye. I never watched The Apprentice,lol, ( and I’m sure you didn’t either ) but it seems like a good percentage of the Country is putting their faith in a charlatan.
But, if we’re alive in 20 years, we’ll see who was right.
A long time ago people were complaining that Walmart was importing cheap Chinese stuff that America could not compete with. The rejoinder was that the money saved was worth it.
You might be right but I don’t recall. It might have been before i understood the effects of Complexity, before i associated the problem with comparative advantage. Now all you hear is based on obsolete classical economics.
As expressed before, I could get behind some of the stated policies. But it comes with blatant bigotry and bullying. There was a piece on the news last night about foreign students in several Michigan universities seeing their visas revoked, for the tiniest infraction. The report went on, that a lot of foreign students are simply deciding to leave Shiny-land.
“Classical economics”, as I styled as “free trade religion”. Yes, stuff is cheaper than it was when I pedaled a Chicago built Schwinn, and watched “Hogan’s Heroes” on a Chicago built Zenith TV. Sticks in my mind that TV cost my mom about 2 months pay. But what is the cheap stuff costing us, in the reduced opportunities for the majority that are not highly educated?
For the halibut, I just plugged the cost of that Zenith color TV, as best I can remember, into the BLS inflation calculator:
Now we are into real comedy, this rivals the standup routines that were the Covid press conferences.
Although these folks say the formula has no sound basis in economics or trade law, if you proceed with the formula using the proper elasticities, then most of the tariff rates are 10%.
But, what the h***, go big, go with your gut, America first.
“As expressed before, I could get behind some of the stated policies”
But you get all of Trump, not just the few policies that you favor. That is part of the reason why Trump got elected, a lot of smart people saying that they can’t stand the man, but they like his policies. Well, we’re getting his policies, good and hard. I do think it is critical for the Country to have at least 2 functioning political party’s, and I’m thinking that a 3rd party that truly represents the working class interests would do well in the near future. But Trump and his vested interests sure do not represent me.
YMMV, you do you, and all the other cliches aside, current leader has got to go.
Steve, aa long as the economists in power don’t realize that Complexity Economics is radically different from Classical Economics they might land on some consequence but Classical Economics won’t supply the solution. It’s not religion, it’s ignorance.
Dealing with Emergent Properties, things jumping out at you unexpectedly from blue skies, are very difficult to deal with. Classical Economics is their Linus Security Blanket.
Disagreeing is good! Much more productive than echo chambers.
Schumpeter is one of my favorite political commentators. I highly recommend Capitalism, Socialism, and Democracy:
o o o o o o o o o o o o o o o o o o o o o o o o o o o o
Software Times posts mentioning this brilliant mind. Oddly enough, all are about Math is hard, plus 15
Denny is very well, thank you very much. Denny has had a plan in place for over 30 years!
Viernes negro, black Friday, February 18, 1983.
I returned from a visit to the US the next day and discovered that the government had devalued the bolivar from 4.50 to 14.00 to the dollar. There was also a privileged exchange at 7 or 8 to the dollar, I don’t remember which. Along with the devaluation came decrees to protect the poor from gouging capitalists like myself. I was selling Apple computers. We got them from the distributor at Bs. 7,000. The list price was Bs. 10,000 and we sold them with a 15% discount at Bs. 8,500. A 21.4% mark-up. The decree that bankrupted my business required me to sell my inventory at old prices, Bs. 10,000, the list price. There was no need to protect capitalists from capitalists, the distributor was under no obligation to sell old inventory at old prices. Do the math: 7000/4.5*14 = 21,778. I don’t recall the price we were offered but it was higher than what I could [sell] my inventory for. Quite simply black Friday stole my working capital.
o o o o o o o o o o o o o o o o o o o o o o o o o o o o
Dear John:
The “real” problem with economic theory is that it is based on the exact and “predicting” model of physics. Convene a dozen astronomers from capitalist USA , communist China, Christian, Jewish, Taoist, Buddhist, Kepler, Newton, Galileo, etc. and they will predict the position of Mars on January 1, 2020 very closely. Do the same with an equal number of economists and you’ll never have this kind of agreement. It is not that some economists are smart and others stupid, it’s the science itself which is NOT “predictive.” Quite simply, economics cannot make reliable predictions and anyone who thinks it can or should be able to with the right inputs, is wrong.
o o o o o o o o o o o o o o o o o o o o o o o o o o o o
The great difficulty is to bring the country back to economic health. Setting price controls is comparatively painless but it introduces terrific economic distortions. Just last week I paid $0.75 for a haircut. For the country to get back to economic sanity prices have to fit into the globalized economy. Our haircuts don’t have to be priced at the same rate as in Los Angeles or Miami but they have to be high enough to allow the barber to buy products whose prices are globally set or at least influenced by global commerce. This adjustment, eliminating price controls, can be very painful, certainly much more painful than setting price controls in the first place. This pain was the reason a previous president, Carlos Andrés Pérez, was indicted (on trumped up charges) and removed from office.
“Free trade” resulting in many tens/hundreds of thousands losing decent paying jobs, because they are not the lowest cost labor in the world, was entirely predictable. Nixon tariffed imported TVs and Reagan imposed “voluntary import restraints” and protectionist tariffs on cars and motorcycles, when the impact of “free trade” was obvious. iirc it was Ross Perot who warned about a “great sucking sound” if NAFTA was passed.
Ricardo died 200 years ago. Taking anything he said as relevant today, without current confirmation, is similar to the retrograde planet example above.
