Monday, May 23, 2016

Stolper-Samuelson Weighs in on the Protectionist Debate

Nelson Schwartz goes after Donald Trump, which in general is fine. But this passage is based on “faulty logic”:
The problem for Mr. Trump — or any president who wants to get tough on trade violators — is that, in the global economy, imposing tariffs on competitors abroad could have serious economic consequences at home by sharply raising prices on imported goods. Cheaper flat-screen televisions, computers, clothes, furniture and other products from Walmart, Amazon and elsewhere have been a rare bright spot for struggling working- and middle-class Americans
Dean Baker explains:
Suppose our trade deals had gone the route of free trade in professional services. Then Donald Trump promised to restrict the number of foreign doctors who could enter the country. The NYT would say that U.S. doctors would be hurt by this restriction since they would be paying more for health care. Of course they would pay more for health care, just like everyone else. However their increase in pay would almost certainly dwarf the higher cost of health care. The same would almost certainly be the case for manufacturing workers and likely a large segment of non-manufacturing workers whose wages have been depressed by competition by displaced manufacturing workers.
Peter Neary wrote nice explanation of the Stolper-Samuelson theorem over 12 years ago. Might we ask our economics reporters to read it?

1 comment:

Bruce said...

Stolper, not Stopler.