For the past few weeks, I have been playing with the following argument. Tell me what you think:
In the past year, fuelled by Trump’s fiery rhetoric as well as the left, a lot has been said against trade, especially framing it as the cause for the decrease of manufacturing jobs in the United States or Canada. But the truth is, trade played a much lesser role than decades of efficiency gains due to automation and information technologies. Although most of us do not realize that fact, the US has never produced as much industrial goods as they do now, with the big difference being that they produce all of it with less workers than before.
Let us consider the following abstract case:
- 20 years ago, 200 workers built 200 tractors.
- Now, because of efficiency gains, 150 workers are able to build 210 tractors, while the other 50 workers are fired.
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Yesterday, Andrew Coyne wrote the following:
Whether a country has a trade deficit or a trade surplus, that is — with the world in general, let alone with individual countries — does not make the slightest difference to its welfare. It is a primitive fallacy to think that it does…
Where did Trump (and others) get the idea that the purpose of trade was to run a surplus? Perhaps, as a businessman, he equates a country’s trade balance with a company’s profit and loss statement. More likely, it is a matter of mistaking accounting for economics. Every first-year economics student is taught that national income equals consumption plus investment plus government spending plus the difference between exports and imports: the trade balance.
I’ve found that being charitable, when it comes to assessing people’s understanding of basic economics, is a habit seldom rewarded.
This afternoon, President Trump’s spokesman announced that they may impose a 20% tariff on Mexican imports as a way of making Mexico “pay” for the border wall.… Continue reading
It took the butt-ugly advertising wrap around my morning newspaper to remind me that tomorrow is Black Friday, supposedly the biggest shopping day of the year. You know, the day when Americans stampede one another to get into Walmart and pull guns on one another in the flat screen TV aisle of Best Buy.
It wasn’t so long ago that Black Friday, and the anti-consumerist hysteria that surrounded it, was one of the biggest days on the culture jammer’s calendar. Because that was also the day that Adbusters magazine sponsored Buy Nothing Day. That is the day when anti-consumerism activists try to “jam” the shoppers by cutting up credit cards, engaging in sit-ins, riding their bikes, participating in zombie walks or critical mass rides, and so on. The point is to not buy anything, while drawing attention to the grossness of those who are.
We had a lot of fun with BND in The Rebel Sell.… Continue reading
Finally, a centre-right we can believe in! A right-wing politician who, instead of just pretending that various collective action problems do not exist, instead acknowledges them and proposes market-based solutions… I’m not always a huge fan of market based solutions to collective action problems, but if I have to choose between a market-based solution and no solution, I’ll take the market-based one.
What am I talking about? Toronto Mayor John Tory proposes road pricing for the DVP and Gardiner Expressway. This is a drum that I (and many others) have been beating for a long time. Here’s a piece I wrote for Policy Options a long time ago (link). This remains my favorite line:
Roads are congested because they are free. If we gave away cheese for free, too many people would eat too much cheese. Similarly, when we give away use of roads, we get too many people driving too much of the time.
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Andrew Coyne’s column in the National Post today is an unusually clear example of a mistake that people on the right always make when talking about public pensions. The headline in fact says it all: Turning the CPP into 18 million RRSPs. Here’s the basic problem with Coyne’s analysis. A public pension, like CPP, is providing an insurance product to Canadian citizens, in the same way that the health care system provides an insurance product to Canadians. Having insurance is not equivalent to having a pile of money in a savings account. And yet people on the right – merely because they don’t like government – are constantly suggesting that we abolish these insurance schemes, and replace them with individual savings – effectively forcing individuals to self-insure. So people like David Gratzer want to get rid of public health insurance, and replace it with individual savings accounts. And now Coyne wants to phase out public retirement insurance and replace it with individual savings accounts.… Continue reading
One of the things that makes it interesting to teach business ethics is the need to continually revise the curriculum. I usually spend a week discussing the latest “big scandal” in the corporate world – unfortunately, I almost never teach the same one twice, because something new always comes along. First time I taught the course it was junk bonds, and the Gordon Gekko stuff. Then along came Enron, against which all of that misbehaviour paled. Then the financial crisis. Then the Deepwater Horizon disaster. And now Volkswagen. At very least, “corporations behaving badly,” is an area where you never risk running out of material.
I’ve been following the Volkswagen fraud rather carefully in part because it affects me personally, since my wife has an Audi A3 with the TDI diesel engine. She also precisely fits the profile of a consumer who was defrauded by the “clean diesel” claim. Back when she bought her car, she had narrowed the choice down to two vehicles: the Lexus CT 200h (hybrid) and the Audi A3 diesel.… Continue reading
The Wal-Mart-ification of Public Services
Our childcare fantasies for this country are pocketbook politics at their most distorted.
Currently, monthly childcare fees at licensed non-profit centres can be as high as $1600/month. They vary widely depending on the geography and age of the child. The service is on par with rent and tend to bite new parents in the butt.
In response to steep fees (by the way, can we call it “tuition”?) it seems that many Canadians have decided that parents should pay about a quarter of the going rate while the rest of us generously pick up the tab. The thing is, no part of the $15/day childcare “movement” makes an effort to elaborate on the fine print of that bargain. Though market demand far exceeds the present supply of spaces, the current and would-be users of childcare services are pressing for a super discounted price. As presented, their appeal does not make sense.… Continue reading
Jeffrey Simpson wrote a column today on an issue that I think is of a paramount importance in Canadian politics – I’ve often said that the near-total collapse of the centre-right is the most important development in our political system over the past two decades. Unfortunately, the way that Simpson articulated the idea confused many people. First of all, he described it as “The Disappearance of the Moderate Conservative“, and second, he tied it to the unfortunate term “red Tory,” which is a complex political tradition that is not exactly relevant to the current set of issues.
The biggest problem has to do with the term “moderate,” because it suggests a person who takes a position between some set of extremes, and so if you think of the three political parties arranged on a left-to-right spectrum, a moderate conservative is just someone who is more like a liberal. This is not a helpful way of framing the debate (because conservatives just dismiss it, as the sound of a downtown Toronto media elite whining, “why isn’t everyone a liberal like me?”).… Continue reading
The most recent issue of Res Publica features a collection of articles on social insurance and the welfare state, a topic near to my own heart. It was recently featured by Bookforum under the heading The Greatness of Modern Welfare States. I thought I might say a few words on this paper (ungated here) by Xavier Landes and Pierre-Yves Néron (two of my former postdocs, I should mention). Much of the discussion is a response to this paper of mine (which is actually just a more academic presentation of an argument developed in my book, The Efficient Society), in which I basically present a philosophical defence of that standard “public economics” view that the major role of the modern welfare state is to correct various forms of market failure. Much of this activity gets misclassified, however, as “redistribution,” suggesting that it follows some sort of an egalitarian logic, when it fact it is just an insurance scheme being run in the public sector, and is therefore no more redistributive than any other sort of insurance.… Continue reading
That’s the upshot of my op-ed in the New York Times today.
For those who are wondering, these things are really hard to write — you have to cram so much into such a tiny space, there really is no room for nuance. The Times asked for 1000 words, I delivered 1250, they wound up having space for 850, so 400 words had to go!
Part of what went were the sections where I expressed my appreciation for the encyclical, which I actually think is an incredibly positive contribution to the current debate. If one thinks of how much damage the Church has done with respect to the population issue (and it’s important to remember that, back in the ’60s, the Church really could have gone either way on the contraception and abortion question), it’s absolutely wonderful that Pope Francis has positioned the Church on the right side of the climate change issue.… Continue reading