Imports Are Why We Want More Trade

Sen. Orrin Hatch, R–Utah, author of the recently passed Trade Promotion Authority bill, makes the usual case for trade agreements and TPA:

“We need to get this bill passed. We need to pass it for the American workers who want good, high-paying jobs. We need to pass it for our farmers, ranchers, manufacturers, and entrepreneurs who need access to foreign markets in order to compete.”

Hatch is as confused as most Washingtonians about the actual case for free trade.

This whole “exports and jobs” framework is misguided. In the Cato Journal, economist Ronald Krieger explained the difference between the economist’s and the non-economist’s views of trade. The economist believes that “the purpose of economic activity is to enhance the wellbeing of individual consumers and households.” And that “imports are the benefit for which exports are the cost.” Imports are the things we want—clothing, televisions, cars, software, ideas—and exports are what we have to trade in order to get them.

And thus: “The objective of foreign trade is therefore to get goods on advantageous terms.” That is why we want free—or at least freer—trade: to remove the impediments that prevent people from finding the best ways to satisfy their wants. Free trade allows us to benefit from the division of labor, specialization, comparative advantage, and economies of scale.

This whole ‘exports and jobs’ framework is misguided.”

Hatch isn’t alone in missing this point. President Barack Obama’s official statement on “Promoting U.S. Jobs by Increasing Trade and Exports” mentions exports more than 40 times; imports, not once. Sen. Rob Portman, R-Ohio, a former U.S. trade representative, says that a trade agreement “is vital to increasing American exports.”

If Saudi Arabia would give us oil for free, or if South Korea would give us televisions for free, Americans would be better off. The people and capital used to produce televisions—or produce things that were traded for televisions—could then shift to producing other goods.

Unfortunately for us, we don’t get those goods from other countries for free.

Sometimes international trade is seen in terms of competition between nations. We should view it, instead, like domestic trade, as a form of cooperation. By trading, people in both countries can prosper. Goods are produced by individuals and businesses, not by nation-states. “South Korea” doesn’t produce televisions; “the United States” doesn’t produce the world’s most popular entertainment. Individuals, organized into partnerships and corporations in each country, produce and exchange.

In any case, today’s economy is so globally integrated that it’s not clear even what a “Japanese” or “Dutch” company is. If Apple Inc. produces iPads in China and sells them in Europe, which “country” is racking up points on the international scoreboard? The immediate winners would seem to be investors and engineers in the United States, workers in China, and consumers in Europe; but of course the broader benefits of international trade will accrue to investors, workers, and consumers in all those areas.

The benefit of international trade to consumers is clear: We can buy goods produced in other countries if we find them better or cheaper. There are other benefits as well. First, it allows the division of labor to work on a broader scale, enabling the people in each country to produce the goods at which they have a comparative advantage. As the economist Ludwig von Mises put it, “The inhabitants of [Switzerland] prefer to manufacture watches instead of growing wheat. Watchmaking is for them the cheapest way to acquire wheat. On the other hand the growing of wheat is the cheapest way for the Canadian farmer to acquire watches.”

Posted on July 3, 2015  Posted to Cato@Liberty

Happy Second of July

Americans are preparing for the Fourth of July holiday. I hope we take a few minutes during the long weekend to remember what the Fourth of July is: America’s Independence Day, celebrating our Declaration of Independence, in which we declared ourselves, in Lincoln’s words, “a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.”

The holiday weekend would start today if John Adams had his way. It was on July 2, 1776, that the Continental Congress voted to declare independence from Great Britain. On July 4 Congress approved the final text of the Declaration. As Adams predicted in a letter to his wife Abigail:

The second day of July, 1776, will be the most memorable epoch in the history of America. I am apt to believe that it will be celebrated by succeeding generations as the great anniversary festival. It ought to be commemorated as the day of deliverance, by solemn acts of devotion to God Almighty. It ought to be solemnized with pomp and parade, with shows, games, sports, guns, bells, bonfires, and illuminations, from one end of this continent to the other, from this time forward forever more.

The Declaration of Independence, written by Thomas Jefferson, is the most eloquent libertarian essay in history, especially its philosophical core:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Jefferson moved smoothly from our natural rights to the right of revolution:

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

The ideas of the Declaration, given legal form in the Constitution, took the United States of America from a small frontier outpost on the edge of the developed world to the richest country in the world in scarcely a century. The country failed in many ways to live up to the vision of the Declaration, notably in the institution of chattel slavery. But over the next two centuries that vision inspired Americans to extend the promises of the Declaration — life, liberty, and the pursuit of happiness — to more and more people. That process continues to the present day, as with the Supreme Court’s ruling for equal marriage freedom just last week.

At the very least this weekend, if you’ve never seen the wonderful film 1776, watch it Saturday at 3:00 p.m. on TCM.

Posted on July 2, 2015  Posted to Cato@Liberty

David Boaz discusses his Politico article “The Grand Old Party’s future shock” on TRN’s The Jerry Doyle Show

Posted on June 29, 2015  Posted to Cato@Liberty

This Is the Housing Market You Wanted, Hillary Clinton Staffers

The New York Times reports:

For decades, idealistic twenty-somethings have shunned higher-paying and more permanent jobs for the altruism and adrenaline rush of working to get a candidate to the White House. But the staffers who have signed up for the Clinton campaign face a daunting obstacle: the New York City real estate market….

Mrs. Clinton’s campaign prides itself on living on the cheap and keeping salaries low, which is good for its own bottom line, but difficult for those who need to pay New York City rents….

When the campaign’s finance director, Dennis Cheng, reached out to New York donors [to put up staffers in their apartments], some of them seemed concerned with the prospective maze of campaign finance laws and with how providing upscale housing in New York City might be interpreted.

Here are some words that don’t appear in the article: rent control, regulation, zoning. But those are among the reasons that housing is expensive in New York. As a Manhattan Institute report noted in 2002:

  • New York City and State have instituted policies that severely distort the dynamics of housing supply and demand. Only 30 percent of the city’s rental units, for instance, are subject to market prices. These distortions—coupled with Rube-Goldbergian environmental and zoning regulations—have denied New York the kind of healthy housing market enjoyed by most other major cities.

And a report by Edward Glaeser and Joseph Gyourko for the Federal Reserve Board of New York Economic Policy Review suggests that “homes are expensive in high-cost areas primarily because of government regulation” that imposes “artificial limits on construction.”

As I’ve said in other contexts: This is the business you have chosen. If you want the government to control rents and impose regulatory costs on the building of housing, then you can expect to see less housing and thus more expensive housing. Welcome to your world, Hillary Clinton staffers.

Posted on June 29, 2015  Posted to Cato@Liberty

David Boaz discusses various issues on Al Jazeera America’s Third Rail

Posted on June 28, 2015  Posted to Cato@Liberty

That Time We Presented a Bust of Hayek to Yevgeny Primakov in the Kremlin

Crane Presents Hayek Bust to Primakov

Yevgeny Primakov, a Soviet apparatchik who made a very successful transition to the post-Soviet era in Russian politics, has died at 85. He served as speaker of the Supreme Soviet, head of the Russian intelligence service, foreign minister, and prime minister. As Andrew Kramer of the New York Times writes, “With hooded eyes and a gravelly voice, Mr. Primakov struck an image of the archetypal Soviet diplomat and intelligence operative.”

I was in Primakov’s presence once, and that’s the way I remember him. In 1990 Cato held a weeklong conference in Moscow titled “Transition to Freedom: The New Soviet Challenge.” The largest gathering of classical-liberal thinkers ever to take place in the Soviet Union, the event included Nobel laureate James Buchanan, Charles Murray, and numerous Russian scholars and members of parliament. “When Cato’s president Edward H. Crane reminded the large audience that ‘the government that governs least governs best’ … hundreds of Russians clapped and cheered wildly,” the Wall Street Journal reported. “Only a handful of die-hard Communists sat glum-faced, arms folded.” As shown in the photo above, Crane presented a bust of F. A. Hayek to Primakov, then the chairman of the Council of the Union of the Supreme Soviet, as more than 1,000 Soviet citizens attended their first open forum.

Fourteen years later, at another Cato conference in Moscow, Crane reminisced about his encounter:

And it’s been pointed out on numerous occasions at this conference that for civil society to thrive, the institutions of the rule of law, constitutionally limited government, a strict respect for private property and the sanctity of contract, as well as a free and open private sector media are essential. Indeed, there are no great secrets to achieving economic prosperity and a free society, a thriving civil society.

When I was in Moscow for Cato’s 1990 conference, I made that point when I had the privilege of presenting a bust of the great economist and social philosopher F.A. Hayek to Yevgeny Primakov, then chairman of the Council of the Union of the Supreme Soviet. I concluded my remarks by saying, “It is, therefore, particularly appropriate, here in this lavish hotel built exclusively for the Communist Party Central Committee, to acknowledge through the presentation of this bust that Hayek was right and Marx was wrong.”

“It is the Cato Institute’s sincere hope that this bust of F.A. Hayek will rest in a prominent place in the Kremlin where it will remind Mr. Gorbachev and other leaders of the Soviet Union that there are answers, readily at hand, to the problems that beset the USSR.”

Mr. Primakov was gracious in accepting the award, under the circumstances, and said that when he next visited the United States he would present me with a bust of Lenin and that I put it where ever I wanted. I think I know what he had in mind.  

Posted on June 27, 2015  Posted to Cato@Liberty

Libertarians and the Long Road to Gay Rights

Justice Anthony Kennedy has been called the most libertarian member of the Supreme Court (though Ilya Shapiro finds his libertarianism “faint-hearted”). So maybe it’s no surprise that in the Lawrence (2003), Windsor (2013), and Obergefell (today!) cases, Kennedy wrote a majority decision finding that gay people had rights to liberty and equal protection of the law.

As I note in The Libertarian Mind and in an article just posted at the venerable gay magazine The Advocate, libertarians and their classical liberal forebears have been ahead of the curve on gay rights for more than two centuries: 

As the Supreme Court prepares for a possibly historic ruling, most of the country now supports gay marriage. Libertarians were there first. Indeed John Podesta, a top adviser to Bill Clinton, Barack Obama, and Hillary Clinton and founder of the Center for American Progress, noted in 2011 that you probably had to have been a libertarian to have supported gay marriage 15 years earlier.

Just seven years ago, in the 2008 presidential campaign, Barack Obama, Joe Biden, and Hillary Clinton all opposed gay marriage. The Libertarian Party endorsed gay rights with its first platform in 1972 — the same year the Democratic nominee for vice president referred to “queers” in a Chicago speech. In 1976 the Libertarian Party issued a pamphlet calling for an end to antigay laws and endorsing full marriage rights.

That’s no surprise, of course. Libertarians believe in individual rights for all people and equality before the law. Of course they recognized the rights of gay people before socialists, conservatives, or big-government liberals.

In the article, and more so in the book, I talked about some of the history of classical liberal-libertarian thinking on gay rights in earlier centuries, perhaps beginning with the pioneering criminologist and reformer Cesare Beccaria in 1764.

The Declaration of Independence promised life, liberty, and the pursuit of happiness to Americans. Of course, not everybody enjoyed those rights at first. But eventually those ideas took root and led to the abolition of slavery and later to civil rights and women’s rights. It took even longer for people to take seriously the idea of homosexual activity as a matter of personal freedom and to recognize gays and lesbians as a group deserving of rights.

It was the classical liberals, the ancestors of libertarians, who first came to that recognition. From Montesquieu and Adam Smith in the 18th century to the Nobel Prize–winning economist F.A. Hayek in 1960, it was libertarians who insisted that (in Hayek’s words) “private practice among adults, however abhorrent it may be to the majority, is not a proper subject for coercive action for a state whose object is to minimize coercion.”

More in The Libertarian Mind and at the Advocate.

Posted on June 26, 2015  Posted to Cato@Liberty

Libertarians Have Long Led the Way on Marriage

As the Supreme Court prepares for a possibly historic ruling, most of the country now supports gay marriage. Libertarians were there first. Indeed John Podesta, a top adviser to Bill Clinton,  Barack Obama, and Hillary Clinton and founder of the Center for American Progress, noted in 2011 that you probably had to have been a libertarian to have supported gay marriage 15 years earlier.

Just seven years ago, in the 2008 presidential campaign, Barack Obama, Joe Biden, and Hillary Clinton all opposed gay marriage. The Libertarian Party endorsed gay rights with its first platform in 1972 — the same year the Democratic nominee for vice president referred to “queers” in a Chicago speech. In 1976 the Libertarian Party issued a pamphlet calling for an end to antigay laws and endorsing full marriage rights.

That’s no surprise, of course. Libertarians believe in individual rights for all people and equality before the law. Of course they recognized the rights of gay people before socialists, conservatives, or big-government liberals.

As long as marriage is licensed by government, same-sex couples are entitled to equal legal rights.”

The Declaration of Independence promised life, liberty, and the pursuit of happiness to Americans. Of course, not everybody enjoyed those rights at first. But eventually those ideas took root and led the abolition of slavery and later to civil rights and women’s rights. It took even longer for people to take seriously the idea of homosexual activity as a matter of personal freedom and to recognize gays and lesbians as a group deserving of rights.

It was the classical liberals, the ancestors of libertarians, who first came to that recognition. From Montesquieu and Adam Smith in the 18th century to the Nobel Prize–winning economist F.A. Hayek in 1960, it was libertarians who insisted that (in Hayek’s words) “private practice among adults, however abhorrent it may be to the majority, is not a proper subject for coercive action for a state whose object is to minimize coercion.”

Historians have often noted the general danger to minorities of a powerful and expansive government. In his book Christianity, Social Tolerance, and Homosexuality, the Yale historian John Boswell wrote that “gay people were actually safer under the [Roman] Republic, before the state had the authority or means to control aspects of the citizenry’s personal lives. Any government with the power, desire, and means to control such individual matters as religious belief may also regulate sexuality, and since gay people appear to be always a minority, the chance that their interests will carry great weight is relatively slight.” In Intimate Matters: A History of Sexuality in America, John D’Emilio and Estelle Freedman noted that a growing commitment to freedom in 18th-century America brought about “an overall decline in state regulation of morality and a shift in concerns from private to public moral transgressions.”

Despite the broad influence of liberalism in the world, governments have continued to meddle in sexuality. As recently as the 1960s, homosexual relations were illegal in almost all states, and 13 states still had such laws on the books until the Supreme Court struck them down in 2003. When these laws were vigorously enforced, they drove gay people underground and created much misery. Gays and lesbians could not be open about their lives. If they were, they risked being fired, being thrown out of their homes, and even being beaten or killed. Once gay people stood up for their rights, social attitudes began to change and governments backed away from enforcing the laws. However, until the court ruling, sodomy laws were still used, for instance, to deny gay parents custody of their children.

Today, Libertarians believe, as John Stuart Mill famously wrote, that “over himself, over his own body and mind, the individual is sovereign.” That applies to gay people and to everyone else. Thus Libertarians continue to oppose laws criminalizing any consensual sexual activity among adults, in the United States and elsewhere.

Many Libertarians argue for the complete privatization of marriage, making marriage a matter of individual contract and — for those who want it — a religious ceremony, thus removing any need for state recognition of marriages. As long as marriage is licensed by government, however, same-sex couples are entitled to equal legal rights. The same rule applies to other government programs, from tax laws to Social Security to adoption. Libertarians would like to get government out of most areas, but as long as government is involved, it must treat citizens equally. The Supreme Court may be about to agree.

Posted on June 25, 2015  Posted to Cato@Liberty

Which States Have the Most Libertarians?

In 2010 I blogged about which states have the strongest libertarian constituencies, using some data from political scientist Jason Sorens, founder of the Free State Project, and also 1980 Libertarian Party results from Bill Westmiller. That column can be found here, complete with graphics.

Now Sorens has updated his results with 2012 data added to 2004 and 2008. As he notes, the results are fairly similar. You still find the most libertarians in the rugged individualist states of the mountain West plus New Hampshire. The mountain states were also best for Ed Clark, the Libertarian nominee back in 1980. As I noted previously, New Hampshire was in the bottom 10 for Clark, but near the top in Sorens’s ranking in 2010 and a bit higher this time. I’m not really sure what caused the change. 

Sorens notes that “Vermont, Maine, Kentucky, and Texas have gained, while Michigan, Idaho, Indiana, and Georgia have fallen” in the later calculations. I pointed out previously that Kentucky, my home state, was dead last for the Libertarian candidate in 1980. And it didn’t do very well in Sorens’s 2010 ranking either. Since June 2010, of course, Kentucky has elected the most libertarian member of the Senate, Rand Paul, and one of the most libertarian House members, Thomas Massie. So it’s about time the state’s voters started moving up the libertarian rankings, albeit only slightly. 

Here’s Sorens’s latest ranking:

state libertarians
Montana 5.504036
New Hampshire 4.163368
Alaska 3.586032
New Mexico 3.319092
Idaho 2.842685
Nevada 2.477748
Texas 1.632528
Washington 1.568113
Oregon 1.180586
Arizona 1.0411
North Dakota 0.7316829
Indiana 0.6056806
California 0.5187439
Vermont 0.4731389
Utah 0.2056809
Colorado 0.1532149
Kansas 0.107657
South Dakota 0.0328709
Maine -0.0850015
Pennsylvania -0.2063729
Iowa -0.3226413
Georgia -0.3296589
Virginia -0.3893113
Maryland -0.4288172
Rhode Island -0.470931
Tennessee -0.4882021
Missouri -0.4912609
Arkansas -0.5384682
Louisiana -0.5897537
Nebraska -0.6350928
Minnesota -0.7662109
Michigan -0.7671053
North Carolina -0.811959
South Carolina -0.8196676
Illinois -0.9103957
Ohio -0.9599612
Delaware -1.057948
Florida -1.072601
District of Columbia -1.091851
New York -1.225912
Kentucky -1.330388
Massachusetts -1.342607
Wisconsin -1.410286
New Jersey -1.431843
Connecticut -1.606663
Alabama -1.863769
Oklahoma -1.93511
West Virginia -2.244921
Mississippi -2.519249

Lots of technical background can be found at Sorens’s post on the Pileus blog. More on the broader libertarian vote here and especially in this ebook.

Posted on June 22, 2015  Posted to Cato@Liberty

David Boaz discusses his book, “A Libertarian Mind”, on WHYY’s Radio Times with Marty Moss-Coane

Posted on June 18, 2015  Posted to Cato@Liberty

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