Thread: McCain, Clinton win NH

Originally Posted by Shek

lwarmonger,
As it relates back to the pharmaceuticals industry, restricting trade with other countries if they don't pay our price is simply imposing an embargo that will harm our best interests.

Besides restricting the drugs that the third world countries can use cheaply would mean a decreasing market for the developed world to peddle their wares to as since the people in 3rd World country are too busy being sick or dying to make any useful production work and create capital to generate economic forces that would give rise to an emerging market for the developed world to sell their manufactured goods.

( Whoaaaaaaa what the hell was that? I can't believe I wrote this above statement using only one sentence. Now that scares me. )

Originally Posted by Shek

lwarmonger,
As it relates back to the pharmaceuticals industry, restricting trade with other countries if they don't pay our price is simply imposing an embargo that will harm our best interests.

And forcing American's to over pay (pay more than fair market value in another industrialized country while imposing protectionism vs American consumers at home like blocking re-importation) and paying multiple times doesn't (drug prices and tax payer supports)? What your saying only makes sense if your putting profit ahead of people.

The simple fact is the American consumer is not offered free trade by the pharmaceutical industry which uses PAC's and lobbyist to create laws to block competition and fair market values from taking hold. These companies have profitability even without artificial price supports that cost people not only thier lives, but the quality of life they have left in the name of profit. if they reduced price-demand would go up and so would profits as more sick people could afford treatment. I mean thats the goal of the market right to find the balance between supply and demand. Industry is using government to artificially inflate its profits and I find this intolerable. its not honest profit its blood money.

My simple (way too simple?) way of explaining it to myself is that economic strength is based on the movement of money. The more money moves around, the better an economy. In my simplistic viewpoint it shouldn't matter as much which direction it's moving, as long as it's moving.

If I were younger I'd probably try to equate it to differential calculus and fluid dynamics.

-dale

Originally Posted by Shek

lwarmonger,

The United States is better off if it has no trade barriers erected, period. It doesn't matter what the other countries do. While it is true that we would be even better off if the other countries completely opened their markets, the fact remains that the unreciprocated elimination of trade barriers makes the US better off.

By allowing in cheaper goods, resources can be freed from American production of these same goods and put to use in other areas of the economy that can use them more productively. The flip side to this is that the flow of goods/services and capital must balance. Thus, if we run a trade deficit, we have to run a capital account surplus. This means that capital is flowing in and finding investment spending uses, which increases the productivity of America.

Another name for trade barriers is "self-imposed embargo". That's what it really is. Here's a great little excerpt from an article that illustrates this:

I understand that even free trade, if only from the United States, benefits America... however it benefits other nations more. England in the late 19th century was benefited by relatively free trade, however since none of their rivals were willing to agree to free trade they were benefited more by Englands free trade policy.

As with all the measures of power, economic power is relative. It is not how fast the United States is growing that is important, but how fast other nations are growing relative to us, and how sustainable that growth is. While free trade by us and only us benefits the US, it benefits our potential rivals more (since they aren't engaging in free trade), and in the long term helps to undermine our position by helping our competitors to grow faster than we.

If you have a few hours (and that's all it will take), I'd highly recommend checking out "The Choice" by Russell Roberts and reading it. It will take you through the gauntlet of arguments that are used to try and put down free trade. You'll discover that these arguments are not tied to the good of the whole.

If the good of the whole means the good of all of the entire world, I would agree with you... however if the good of the entire world is advanced at the expense of America's position because we play fair and they don't... well as I said before I have a problem with that.

As it relates back to the pharmaceuticals industry, restricting trade with other countries if they don't pay our price is simply imposing an embargo that will harm our best interests.

My objection is when those countries rip off our intellectual property because they "need" it... and then we tolerate it. It ensures that most of the costs of developing those drugs are born by the American consumer, which is in no way "free" trade or even good capitalism.

Note, my objections to the pharmaceutical companies aren't that they have incentives to develop drugs (I agree that is necessary), my objections are that those incentives are born mostly by Americans because other countries aren't willing to acknowledge the incentives process... and then we tolerate it and give them new drugs anyways.

Originally Posted by lwarmonger

As with all the measures of power, economic power is relative. It is not how fast the United States is growing that is important,

Er, growth is perhaps the most important economic indicator. Either that, inflation, or unemployment.

The slower the growth, the more unemployment and lower living standards you're going to have, full stop. I'm not sure people are going to be consoled when they hear 'but ah, the Chinese are even poorer!'

but how fast other nations are growing relative to us, and how sustainable that growth is. While free trade by us and only us benefits the US, it benefits our potential rivals more (since they aren't engaging in free trade),

Frankly it doesn't matter who imposes the tariffs on themselves, so long as tariffs are imposed. Refer below.

and in the long term helps to undermine our position by helping our competitors to grow faster than we.

That's certainly a strategic concern but closing yourself off is likely to be merely a damaging, alienating rearguard action in the rise of these competitors, whose advantages - population, in China and India's case - you cannot combat.

If the good of the whole means the good of all of the entire world, I would agree with you... however if the good of the entire world is advanced at the expense of America's position because we play fair and they don't... well as I said before I have a problem with that.

Which specific instances of playing unfair are you speaking about?

Take as an example, subsidies. If you didn't mean this then ignore me. "Their government subsidises their $100 TV so it costs only $50 for us." In other words, their government is paying for half the TV! Subsidies in export industries is effectively economic aid for the importing countries!

"We have no trade barriers, but they do." Frankly it doesn't matter who imposes the trade barriers, it balances out to dalem's movement of money. Imposing tariffs means you are buying less from them, so they have less US dollars to buy from you. In the long run, as production adjusts, you will hurt your own exports as well as theirs, and the more you both do it, the more and more comparative advantage cannot be exploited. It's sagged down by tariffs which prevents the easy flow of money - dalem, your thesis works on a global scale too.

My objection is when those countries rip off our intellectual property because they "need" it... and then we tolerate it. It ensures that most of the costs of developing those drugs are born by the American consumer, which is in no way "free" trade or even good capitalism.

It isn't free trade or good capitalism, it's just the fundamental problem of enforcing those sorts of rights across borders.

Originally Posted by HistoricalDavid

It's sagged down by tariffs which prevents the easy flow of money - dalem, your thesis works on a global scale too.

Hey, I'm smart!

Seriously, has anyone done any comparitive analyses using fluid dynamics to model capital flow?

-dale

Originally Posted by Ironduke

How about this:

http://www.worldaffairsboard.com/200...wsletters.html

I didn't really think someone that old would not have that kind of view. Let's face it, a majority of caucasian population in this country at least feel that way in certain degrees. It's amazing the stuff people would reveal to you outside of work hours and with no ethnic minorities around.

Originally Posted by zraver

I am not arguing for adults, I don't think we should let them starve, and should provide self improvement incentives but other than that the dole should be a rough life. I am arguing for the kids who do not choose to born into poverty and broken homes. As for character and work ethic it can be instilled with hope and rewards- good grades, gold stars, teachers pet etc all ways of rewarding the traits we find desirable in kids.

After all the cliche isn't the spoiled poor kid, but the spoiled rich kid who squanders opportunities others provided.




We do invest in our kids. We urge them to improve their skills with the end result that they are too qualified and unwilling to perform the jobs that unskilled aliens are willing to do. We have a huge manpower shortage at the lower end of labor spectrum. How can a nation get its menial tasks done if it promotes higher education for everyone? That's the paradox here. We have to stop looking down on manual labor if we want to bar foreign workers from coming here and sending money home.

[/QUOTE]

I take your point, in theory that is. But there are many cases of people from poverty-stricken backgrounds who have bettered themselves by sheer determination without gov't help. So, the door is open. Question is, do we go trolling for disadvantaged people and hand them a free ride, or do we help those who come forward and ask for it? I see nothing wrong with a laissez faire approach to this issue. Who will pick the apples and tend the fields? People with college degrees?

Originally Posted by zraver

And forcing American's to over pay (pay more than fair market value in another industrialized country while imposing protectionism vs American consumers at home like blocking re-importation) and paying multiple times doesn't (drug prices and tax payer supports)? What your saying only makes sense if your putting profit ahead of people.

The simple fact is the American consumer is not offered free trade by the pharmaceutical industry which uses PAC's and lobbyist to create laws to block competition and fair market values from taking hold. These companies have profitability even without artificial price supports that cost people not only thier lives, but the quality of life they have left in the name of profit. if they reduced price-demand would go up and so would profits as more sick people could afford treatment. I mean thats the goal of the market right to find the balance between supply and demand. Industry is using government to artificially inflate its profits and I find this intolerable. its not honest profit its blood money.

It was capitalism that grew the pharmaceutical industry and it is capitalism that will keep it alive. If you take that away from them, then where will the drugs come from? You're ignoring the millions of people helped by their products and focusing on those who don't have access to them. In helping the latter by dictating prices you risk killing the industry. I am not saying we shouldn't subsidize medicines for poor people, but we can't put the monkey on the back of the pharmaceutical industry and expect it to continue for long as a viable economic sector.

BTW, where is the evidence that pharmaceutical companies are gouging the poor and using lobbyists to obtain unfair concessions?

Originally Posted by HistoricalDavid

Er, growth is perhaps the most important economic indicator. Either that, inflation, or unemployment.

The slower the growth, the more unemployment and lower living standards you're going to have, full stop. I'm not sure people are going to be consoled when they hear 'but ah, the Chinese are even poorer!'

The Chinese in 1990 enjoyed far better standards of living and were much wealthier than they had been in 1800... however comparatively they were much worse off than the West, whereas in 1800 they were fairly equal.

We compare our situation to that of the alternatives, and wealth is not absolute, it is relative. Hence your comparison isn't accurate. After all, in 50 years the United States will (barring nuclear war or massive pandemic) be far wealthier than it is today... however people then won't be comparing themselves to the US today, they will be comparing themselves to how the Chinese, Japanese, and Europeans are doing in 50 years. Hence if the United States is growing slower than other nations who could be our rivals, it would be a net loss for the US over the long term.

Frankly it doesn't matter who imposes the tariffs on themselves, so long as tariffs are imposed. Refer below.

It does matter if tariffs are imposed on only one nation though.

That's certainly a strategic concern but closing yourself off is likely to be merely a damaging, alienating rearguard action in the rise of these competitors, whose advantages - population, in China and India's case - you cannot combat.

I don't think that requiring free trade to be reciprocated is unfair, nor would it be bad in the long term. If a little short term pain forced protected markets to open up and trade on fairer terms, that would be worth the short term pain and even the difficulties encountered diplomatically. After all, the reason that China hasn't allowed their currency to readjust to a level reflecting their strength or allowed other nations to export products that they are competitive in producing to China is because there is no reason for them too. The US, Europe and Japan have done next to nothing to accomplish what we all agree that we want (namely reducing the artificial constructs that have provided such a boost to the Chinese), and so there is no reason to be surprised when the Chinese don't cooperate.

Which specific instances of playing unfair are you speaking about?

Take as an example, subsidies. If you didn't mean this then ignore me. "Their government subsidises their $100 TV so it costs only $50 for us." In other words, their government is paying for half the TV! Subsidies in export industries is effectively economic aid for the importing countries!

Keeping their currency at an artificially low level means that it is far cheaper for others to buy their goods (thus boosting their exporters) and far more expensive for their population to purchase goods (thus preventing Chinese from buying better quality American products). In the short term this looks beneficial to the United States, however this benefit comes at a price. Because the low prices are artificial, it means that they are going to go away eventually.... however that will only be after the market is dominated by those who benefited from the artificially low currency in the first place. After that happens the price goes up dramatically... and then we have a problem.

Think "dumping" on a macro-economic scale. We've made that illegal on a micro scale for good reasons, namely it isn't "fair" in the slightest.... but standing up to China in order to make it illegal on a macro scale isn't something we are willing to do.

"We have no trade barriers, but they do." Frankly it doesn't matter who imposes the trade barriers, it balances out to dalem's movement of money. Imposing tariffs means you are buying less from them, so they have less US dollars to buy from you. In the long run, as production adjusts, you will hurt your own exports as well as theirs, and the more you both do it, the more and more comparative advantage cannot be exploited. It's sagged down by tariffs which prevents the easy flow of money - dalem, your thesis works on a global scale too.

And Britain is as strong today as it was in 1880 relative to the rest of the world because having free trade policies when nobody else did "balanced out."

Given our trade deficit, I don't really think they are using American dollars to buy things from us.

It isn't free trade or good capitalism, it's just the fundamental problem of enforcing those sorts of rights across borders.

Funny how we seem to have these problems far more often with China than with Europe or Japan... come on, if they want to join the club we have to make them play by the rules.

Originally Posted by JAD_333

BTW, where is the evidence that pharmaceutical companies are gouging the poor

What is gouging? Making someone pay more than they are willing (not wanting) to pay?

You can only make someone pay more than they are willing if you put a gun to their head (or knife to their neck, etc.). It takes physical force or the threat of physical force to coerce a voluntary transaction between two parties who have no legal binding contract between them.

I submit that gouging is something that is made up and cannot be objectively defended from an economic standpoint. However, it can be objectively defended that price controls imposed to prevent "price gouging" does make society worse off.

Originally Posted by lwarmonger

The Chinese in 1990 enjoyed far better standards of living and were much wealthier than they had been in 1800... however comparatively they were much worse off than the West, whereas in 1800 they were fairly equal.

We compare our situation to that of the alternatives, and wealth is not absolute, it is relative. Hence your comparison isn't accurate. After all, in 50 years the United States will (barring nuclear war or massive pandemic) be far wealthier than it is today... however people then won't be comparing themselves to the US today, they will be comparing themselves to how the Chinese, Japanese, and Europeans are doing in 50 years. Hence if the United States is growing slower than other nations who could be our rivals, it would be a net loss for the US over the long term.

No, it wouldn't be a net loss. "Gee, it really sucks that the Chinese have 1 42" LCD TV per household now vs. in 2008 when they had none. We had an infinite lead then whereas now we only have a 100% lead . . ."

Making policy decisions based on fallacious economics will only lead to poor outcomes (and relatively poorer incomes as well). Instead of pandering to economic ignorance, if fallacious zero sum trade politics is a concern, then politicians and policy-makers need to educate the public instead of kow-towing to it.

A great look at the issue of inequality/zero-sum thinking shows that its prevalence and importance is overblown.

Cafe Hayek: The Income Race

Originally Posted by lwarmonger

It does matter if tariffs are imposed on only one nation though.

No, by placing a tariff on China for goods and services, since we run a trade deficit with China, we will be placing a tariff on Chinese imports of capital to the US (we run a capital account surplus). The net result is more expensive goods and less capital to conduct investment spending.

Once again, I recommend reading "The Choice" by Russell Roberts. Without using a single graph, Roberts portrays all of these issues in just over 100 pages in simple and easy to understand language using example after example.

I don't think that requiring free trade to be reciprocated is unfair, nor would it be bad in the long term. If a little short term pain forced protected markets to open up and trade on fairer terms, that would be worth the short term pain and even the difficulties encountered diplomatically.

Protection of the sugar industry started in WW2. Farm subsidies were temporarily instituted a few decades ago. Temporary protection has a way of becoming permanent. So, in addition to the fact that the tariffs don't have a sound argument from the get go, the fact that "temporary" protection tends to be a myth is another strike against it.

Originally Posted by lwarmonger

After all, the reason that China hasn't allowed their currency to readjust to a level reflecting their strength or allowed other nations to export products that they are competitive in producing to China is because there is no reason for them too. The US, Europe and Japan have done next to nothing to accomplish what we all agree that we want (namely reducing the artificial constructs that have provided such a boost to the Chinese), and so there is no reason to be surprised when the Chinese don't cooperate.

Besides the fact that trade wars tend to find mutually sub-optimal outcomes, you are conflating nominal and real variables. While the Chinese can pursue policies that fix the spot (nominal) exchange rate, they cannot control the real exchange rate and other real variables that constrain how they can price their goods. Exchange rate policy can artificially alter trade patterns in the short-run, but not the long run. The Chinese short-run is ending, and they are facing tremendous inflationary pressures. Even if they maintain the same band for the yuan, rising domestic wages are forcing prices upwards. For example, for the more skilled jobs, the Chinese are having to hire foreigners to come and provide the necessary skilled labor on the margin now. Even on the lower end of the skill spectrum, you see that firms are now moving to other SE Asian countries (e.g. Vietnam) to take advantage of their low wages due to the lack of capital and a large, unskilled population.

Originally Posted by lwarmonger

Keeping their currency at an artificially low level means that it is far cheaper for others to buy their goods (thus boosting their exporters) and far more expensive for their population to purchase goods (thus preventing Chinese from buying better quality American products). In the short term this looks beneficial to the United States, however this benefit comes at a price. Because the low prices are artificial, it means that they are going to go away eventually.... however that will only be after the market is dominated by those who benefited from the artificially low currency in the first place. After that happens the price goes up dramatically... and then we have a problem.

Once again, capital seeks the highest risk-adjusted return. As Chinese prices rise, then firms will invest in manufacturing capabilities elsewhere. This is already happening.

Originally Posted by lwarmonger

Think "dumping" on a macro-economic scale. We've made that illegal on a micro scale for good reasons, namely it isn't "fair" in the slightest.... but standing up to China in order to make it illegal on a macro scale isn't something we are willing to do.

Dumping is dubious concept in practice. I'd invite you to name some examples where foreign firms undercut domestic competition and then jacked up prices. Also, it's enforcement uses some tenuous decisions. I'd refer you to "The Choice" yet again.

Originally Posted by lwarmonger

And Britain is as strong today as it was in 1880 relative to the rest of the world because having free trade policies when nobody else did "balanced out."

Given our trade deficit, I don't really think they are using American dollars to buy things from us.

They absolutely are buying things from us. They're buying our debt for starters. How do you think interest rates remained so low despite some record deficits? Because someone was willing to finance our debt for very cheap. In case this worries you, read the following post.

Cafe Hayek: Should Americans Worry That Foreigners Hold Lots of Dollar Assets?

Originally Posted by lwarmonger

Funny how we seem to have these problems far more often with China than with Europe or Japan... come on, if they want to join the club we have to make them play by the rules.

But we did have major "problems" with Japan in the 1980s and early 1990s.

Beyond just "The Choice", I'd also recommend a subscription to The Economist - it provides a great survey level knowledge of everything we've been discussing in this thread.

Originally Posted by Shek

What is gouging? Making someone pay more than they are willing (not wanting) to pay?

You can only make someone pay more than they are willing if you put a gun to their head (or knife to their neck, etc.). It takes physical force or the threat of physical force to coerce a voluntary transaction between two parties who have no legal binding contract between them.

I submit that gouging is something that is made up and cannot be objectively defended from an economic standpoint. However, it can be objectively defended that price controls imposed to prevent "price gouging" does make society worse off.

As I see it, gouging is charging more than a reasonable price in a situation where the supply is adequate but extenuating circumstances create the opposite impression. Gasoline stations around New Orleans right after hurricane Katrina jacked their prices well over a buck above the national average. One could argue that supply at that time and place was limited and, therefore, the price was justified, but that was not the case. I would call that gouging whether people were willing to buy it or not, because it took advantage of a crisis to create the perception of a shortage.

But I would agree with you in the case of manufacturers who are the sole source of a proprietary product. Certain medicines which are patent-protected offer the manufacturer a virtual monopoly on them and, therefore, they can charge whatever price they want regardless of supply. People who need them for health reasons have no alternative but to pay the price. So, the question arises, as xraver alluded to, are companies like Pfizer gouging (overpricing) their proprietary products and thereby aggrivating the health care "crisis"?

I was not saying that they do price gouge. I was asking for evidence of that. However, I do believe they seek higher margins on patent-protected medicines to make up for lower margins on generics. In other words they look for more profit on some drugs and less on others, which is in line with market forces. Considering that over the full range of products they offer, Phizer earns a respectable, but not unusal 34% margin, I don't see price gouging. Certainly, a 30-40% margin is not out of line with the average for all types of manufacturers.

Putting aside the humartiarian aspect, Phizer's pricing formula seems to make perfect sense. But when you inject life and death into the equation, the high price of patent-protected medicines for deadly diseases like AIDs rankles advocates for compassion who cast Pfizer, etal, as heartess cretens. But I am sure you will agree that were Phizer to accede to radical price cuts on its proprietary medicines for an extended period of time, they would suffer financially. The margins on their generic medicine sales would not make up the slack. This would in turn lower profits. Lower profits would hurt them in the credit market. Eventually, they would be forced to cut back their research and development investment.

The fact that the same medicines can be bought more cheaply in Canada also doesn't prove gouging, since Canada is buying wholesale through its national health care system and subsidizing the lower cost to its citizens. As far as I know, the pharmaceutical company is still getting its price. Do you know more on this?

Well, I went far beyond your premise. Must be the politician in me.)

Charges of gouging only occurs in areas that have been hit by disasters and people need to buy goods to survive or to recover. It is a well valid tested concept because without gouging charges, the area will be hit by a flight of stampeding populations seeking somewhere else to better their lives. As a result, it would wreck the local economy and set back the local economy and community by a very significant margin. Gouging prevention relieves pressure created artificially and allows some breathing space for the local economy and community to recover.