Friday, April 1, 2016

Dr. Krugman Loves a Lump

Free Trade Claims that Deserve Some Lumps 
Alan Tonelson | Thursday, 31 March 2016 09:54 (EST) 
All knowledgeable students of economics know that a big reason for rejecting most critiques of U.S. trade policy is their allegedly heavy reliance (explicitly or not) on the “lump of labor fallacy.” 
As explained by economics Nobel-ist and New York Times columnist Paul Krugman, the fallacy holds that “there is a fixed amount of work to be done in the world, so any increase in the amount each worker can produce reduces the number of available jobs.” And it’s especially pernicious, Krugman explained, because it “feeds protectionism. If the public no longer believes that the economy can create new jobs, it will demand that we protect old jobs from new competitors in China and elsewhere.” 
So it was interesting, to say the least, to see a leading economist this week make clear that this fallacy isn’t so fallacious, and that its existence strengthens the case for U.S. policies that depart from the free trade norm. Even more interesting: His name is Paul Krugman.


Thornton Hall said...

Why economics hasn't improved for 200 years? Promiscuous Teleology. Seriously.

Jack said...

The issue of so called free trade has nothing to do with lumps of labor, fallacious or otherwise. First let's begin to recognize that free trade is an oxymoron and what is being referred to as free is in fact structured trade. That is agreements regarding who can trade what for what and under what conditions such trade should take place. And the issues of trade in modern times is not the same as they were one or two hundred years ago. At one time it may have been one country versus another. England blocking imports of cotton goods from India in order to prop up it's own textile industry. Maybe oil trade is still like that, but most destruction from global trade comes now in the form of corporations seeking out locations wherein a labor force is exploited by its own government. China, Mexico or any other such place is not to blame so much as the corporations that are no longer identifying with their former country of origin, but instead are focused on labor pools that can be exploited indirectly. Tariffs should be in place to protect a country's citizens from loss of jobs not because other countries have built a better mouse trap, but because corporations are manufacturing goods in countries that allow its citizens to be exploited.