Tuesday, March 1, 2016

Why I am an immigration restrictionist and a trade protectionist

In a Facebook back and forth, Ashland University History Professor John Moser pointed me to this April 2015 NYTimes piece by Greg Mankiw arguing for the Trans-Pacific Partnership.

My father, Levis Kochin, is a Chicago School economist and so I grew up hearing this kind of argument.  I do not believe anymore that these arguments should persuade people who care about the well-being of their country.  Here is why:

The classical free trade/open borders arguments ignore
1) Distributional consequences, who gets what
2) People's risk preferences. I offered a room full of academic economists each a dollar to give up their tenure while retaining all the other parts of their contract. No takers.
3) fiscal consequences: classical mercantilism was intended to maximize net state revenue by routing trade through ports where customs could be conveniently levied. Nowhere in The Wealth of Nations does Smith mention this.
4) One argument Smith does mention and endorse:  "defense is more important than opulence" -- presumably this applies not just to defense of territory but defense of culture or our way of life.
5) classical economics treats labor as a cost and leisure as an unalloyed benefit. And yet I know academic economists who forfeit income in order to teach when they could collect more if they retired. In other words, this is bad psychology.

The most compelling case I know for a protectionist and restrictionist political economy is made by the German philosopher J. G. Fichte, in his short book The Closed Commercial State (originally published 1800).    Read it and decide for yourself.

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