Ben Shapiro defends free trade

In which I demonstrate why Ben Shapiro has been running non-stop from a debate with me, particularly one concerning economics. First, this is a link to his piece entitled “Yes, Tariffs Are Still Stupid. Here’s Why”. Go and read it first, in its totality, so you will understand that I am not making any of this up and I am fairly representing his positions that I am criticizing.

Yes, free trade is good.

On Thursday, The Journal of American Greatness, an outlet devoted to President Trump’s purported philosophy, printed an article by Spencer Morrison, a law student and editor-in-chief of the National Economics Editorial. The article is an attempt to rebut the chief conceits of free trade, and in particular, knock down my objections to President Trump’s fondness for tariffs. It’s titled “Why Ben Shapiro is Wrong on Free Trade.”

The reality is that my arguments on free trade have been supported by every major free market economist in history, but I do appreciate the central billing.

This is a little sleight of hand, as Benny presents a tautology as if it means something. Friedrich List is a major non-socialist economist who strongly favored tariffs, but is he a “free market economist”? What does “free market economist”, a phrase that is meaningless in economics terms, mean?  It means an economist who supports free trade. So, the reality is that Benny is cribbing “his” arguments from economists who support free trade. Which is not news.

Morrison’s argument in favor of tariffs begins with an analysis of a three-minute segment of video from my daily podcast in which I talk about the flaws in tariff-based economics. As I’ve actually done full episodes on tariffs, and written extensively about them, I wouldn’t say that the video is my fulsome argument against them, but it’s sufficient for purposes of discussion. Morrison first misrepresents my argument in the video: he says that I’m pro-trade deficit, when in reality, I merely explain in the video that trade deficits are an irrelevant economic statistic (neither good per se nor bad per se) and that some countries that run trade deficits do just fine, while some that run trade surpluses don’t. Morrison takes that to be me stumping for the beauty of trade deficits — which, again, I don’t do, since I think that statistic is irrelevant. 

It’s fair for him to criticize Morrison’s misrepresentation, since Benny is not pro-free trade deficit, he merely thinks they are irrelevant. But Benny is totally wrong, since a trade deficit is not even remotely irrelevant, as it literally shrinks the economy. To grow the economy and increase GDP, export. To shrink the economy and reduce GDP, import. What this reveals is that Benny clearly does not know how GDP is calculated, nor is he aware of how the trade deficit is a part of the basic GDP formula: C+I+G+(x-m).

As it happens, I address this in the next Voxiversity video, but those of you who understand addition and subtraction should be able to grasp that when (x-m) is negative, there is a trade deficit and GDP is lower. Without the trade deficit, the USA would have a $20.3 trillion economy rather than a $19.7 trillion economy, so it’s hardly “irrelevant” considering that 3 percent growth is cause for celebration these days.

Finally, Morrison gets to his central argument: comparative advantage doesn’t work when capital is mobile. Here’s Morrison:

Comparative advantage is an elegant theory, but it too is domain-specific—it only works when certain preconditions are met. For example, capital must be immobile for the theory to apply. Shapiro ignores this crucial limiting factor, and applies comparative advantage to just about everything. This is his root error. … For example, comparative advantage suggests that the key to getting rich is to specialize production, regardless of what you produce. That is, a country with a comparative advantage in growing soybeans should focus on growing more soybeans, while a country with a comparative advantage in manufacturing semiconductors should focus on manufacturing more semiconductors. In either case, this supposes, their relative wealth will correlate with the degree of specialization, as opposed to the complexity of their production. This is objectively wrong.

To support the contention that it is objectively wrong to embrace comparative advantage, Morrison cites two studies. First, he cites a paper from economists Ricardo Hausmann, Jason Hwang, and Dani Rodrik, claiming that countries that manufacture automobiles develop faster than those that grow bananas, and another from Stephen Redding of the London School of Economics stating that economic growth is path-dependent — that if you develop a particular industry that is more sophisticated, other industries grow up around that industry, making for a more powerful economy. The result, Morrison claims, is that the United States should enforce tariffs on behalf of its most technologically advanced/important industries, to prevent other countries from undercutting those industries and reducing us to comparative advantage in nail-clipper manufacturing.

First, literally every economist knows that comparative advantage doesn’t work when capital is mobile. The immobility of capital is only one of David Ricardo’s false assumptions that are required for comparative advantage to logically hold up. Shapiro doesn’t understand that the papers Morrison is citing are not relevant to the capital argument, or that Morrison is simply trying to keep it simple for economics illiterates like him. The immobility of capital is merely the fifth of the seven false Ricardian assumptions intrinsic to the theory of comparative advantage listed by Ian Fletcher, which are as follows:

  1.     The comparative advantage is sustainable.
  2.     No externalities.
  3.     Production factors move between industries without cost
  4.     No change in the ratio of income inequality.
  5.     Immobile international capital
  6.     Short-term efficiency causes long-term growth
  7.     Foreign productivity does not improve
There is, of course, an eighth and more important false assumption, the immobility of international labor, that I have identified, but that is well beyond Shapiro’s level, so we will simply mention it in passing and leave it at that.

There are several points to be made here. The first is the most important: the argument Morrison makes is for total state control of the economy. If we can simply pick the best industries and subsidize them, we should obviously do that. Why not just embrace mercantilism?

That is a blatant and shameless misrepresentation of Morrison’s argument. His argument for tariffs is clearly not an argument for “total state control of the economy”. Shapiro is simply being dishonest there.

First, of course countries that develop higher-profit sectors will have higher growth rates than those that rely on low-profit sectors. And of course the decisions you make now have impact on the future development of industry. But this has nothing to do with tariffs. The Hausmann, Hwang, and Rodrick paper doesn’t mention tariffs once. Neither does the London School of Economics paper.

Again, there’s a reason for that. There are two problems with tariffs: first, you cannot tell which sectors will be the most profitable, because you cannot tell the future, which means that government is far more likely to “lock-in” particular pathways than to spur future growth; second, most market “lock-in” is self-correcting — we develop new products on a routine basis that are different in kind than the products that preceded them. Horses and buggies dominated the market, and we built roads in a certain way to accommodate them, and we built houses near those roads. Then cars came along and blew all of that out of the water.

If we could see the future, we could have simply picked which industry upon which to focus. We couldn’t. And in 1947, the smart money would have been in using government to tax all other industries to dump money into manufacturing, for example. That would have been totally wrong. In 1947, according to the Bureau of Economic Analysis, manufacturing represented 25.4{8f3a20e95123fc761e5b6545cdcf28fe932999778b1965cb4dd78a3d9b063320} of GDP production in the United States; finance represented 10.3{8f3a20e95123fc761e5b6545cdcf28fe932999778b1965cb4dd78a3d9b063320}; agriculture 8{8f3a20e95123fc761e5b6545cdcf28fe932999778b1965cb4dd78a3d9b063320}. If we had been creating tariffs to protect the “most important” industries, we’d have put our money on manufacturing, finance, and agriculture. But we’d have been wrong. By 2016, manufacturing represented 11.7{8f3a20e95123fc761e5b6545cdcf28fe932999778b1965cb4dd78a3d9b063320} of GDP; finance represented 20.9{8f3a20e95123fc761e5b6545cdcf28fe932999778b1965cb4dd78a3d9b063320}; agriculture represented 1.0{8f3a20e95123fc761e5b6545cdcf28fe932999778b1965cb4dd78a3d9b063320}.

The papers may not mention tariffs, but tariffs are the primary way those sectors are defended, when imports in those sectors are not simply banned altogether. I hope Shapiro is being dishonest there too, because his claim that tariffs have nothing to do with how countries develop industries is simply wrong.

And more often than not, you can tell which sectors are going to be more profitable than others. The fact that you cannot predict these things with absolute 100 percent accuracy does not mean that you cannot do so at all, or to a worthwhile extent. Despite some famous blunders, MITI did so very successfully in Japan from 1949 to 2001. Germany still does so today, to such an extent that exports make up 46.1 percent of its economy. Ben completely fails to understand both the way tariffs work as well as the fact that he is begging the question; if we’d put our money on protecting the manufacturing sector, then that sector almost certainly would not have fallen from 25.4{8f3a20e95123fc761e5b6545cdcf28fe932999778b1965cb4dd78a3d9b063320} to 11.7{8f3a20e95123fc761e5b6545cdcf28fe932999778b1965cb4dd78a3d9b063320} of GDP. Preventing such declines is the primary point of using tariffs to defend a particular sector!

And this is the point. Impoverishing your profit sectors through tariffs in order to dump money into non-competitive industries impoverishes your country as a whole. Economic flexibility requires that the government not impede the free flow of capital within industries. That’s true when capital is mobile as well — if we invest our money in Chinese tech because it’s cheaper and better (even if they’re subsidizing that industry!), that money comes back to the United States in the form of capital account surplus.

First, it’s both statistically and historically false to claim that tariffs impoverish countries. Second, money does not necessarily come back to the United States, as the existence of foreign-held eurodollars, the $3.1 trillion held overseas by US corporations since 1986, and the recent decision of Apple and other tech companies to repatriate over $400 billion being will suffice to demonstrate. And third, Ben clearly has not thought through the intrinsic costs of economic flexibility, which when taken to their free trade extreme are absolutely and inevitably lethal to any nation.

I could go into considerably more detail, but at this point, it should be obvious to the informed reader that Ben is doing little more than spouting off free trade rhetoric that he has learned by rote; he does not understand the theory of comparative advantage, its justifications, its assumptions, its flaws, or its inescapable consequences. With regards to free trade and economics, Benny is an ignorant and uninformed fraud, and his position on free trade is completely and utterly incorrect. Tariffs are not stupid, but Ben Shapiro certainly is.

So look what I found

I uncovered four old videotapes a few weeks ago. Originally there were six, and unfortunately the missing two were of my 1997 interview with Umberto Eco, but what I found contained about two hours of unique footage of interviews and public interactions with the great dottore. I arranged to get them digitized for use in a potential future Voxiversity, or perhaps even a documentary. Here is one screencap from the last tape, which shows Doctor Eco with Spacebunny and me at St. John’s University.

Mailvox: Hultgreen-Curie, architecture edition

Has it ever occurred to feminists that perhaps there is a very good reason for the glass ceiling?

You have probably heard about the collapse of a pedestrian bridge at FIU in Miami today.  I was researching who the builder is, I stumbled across an article from yesterday celebrating the bridge’s construction.

 Key quote from the female engineer/project executive, Leonor Flores (speaking about teaching her daughter that women can go into STEM):

“It’s very important for me as a woman and an engineer to be able to promote that to my daughter, because I think women have a different perspective. We’re able to put in an artistic touch and we’re able to build, too.”

Yeah, about that…

FIU pedestrian bridge collapses days after installation; police say multiple deaths, cars trapped.

If you think about it, what is this but an example of Merkel’s Germany or May’s Britain writ small? Or, to put it in even more brutal terms, Carly Fiorina’s Hewlett-Packard….

Discrepancies

I can’t say I’m terribly surprised to be informed that the Clinton Foundation accounting appears to be more than a little shady:

The Bill, Hillary & Chelsea Clinton Foundation filed Its 2016 Annual Report to California on Form RRF-1 seven days past the final deadline on Nov. 22, 2017. This key document was subsequently rejected.

That means the best-known Clinton charity has not been operating in full compliance with California laws for months, an adverse fact that should have been disclosed in other U.S. states where Clinton charities solicit donations, especially including New York.

Another glaring problem with the rejected California filing is that the total revenues of $77 million declared for the whole of the Clinton Foundation are much less than the $217 million in combined grants and contributions claimed on its 2016 external audit, which is available on page 5.

The calculation is: Total contributions of $135,445,489 plus total grants of $81,153,172 equal combined revenues of $216,598,561, which rounds up to $217 million. This large discrepancy is only part of the problems facing the Clinton Foundation in California.

On Feb. 22, 2018, Becerra demanded receipt of information concerning “all government funding, including grants from foreign governments” received by the foundation during 2016. The deadline for receipt is March 24, 2018.

California charity laws are tougher than those in many other U.S. states. In California, for example, charities must disclose particulars concerning all government grants, including those by foreign government entities.

These particulars, including amounts, are available to state regulators because California also requires that charities disclose (confidentially) the names of all donors giving 2 percent or more of total revenues in a given year, as listed on Schedule B of their federal tax filings.

The Clinton Foundation’s 2016 federal filing poses additional problems. Total revenues declared in Part VIII, line 1h, were just $63 million, or $14 million less than the amount declared on the California RRF-1 filing — and a whopping $154 million less than the figure independently confirmed by auditor CohnReznick.

It’s also a little remarkable that the Clintons continue on their rapacious mission to rake in more and more money… and for what? They both look like death mildly reheated these days. Hillary can’t even navigate a simple set of stairs. What on Earth will another million, or ten million, do to improve their quality of life one iota?

Open Brainstorm tonight

Tonight at 8 PM EST we will have an open Brainstorm session to discuss the current status of Arkhaven and Dark Legion, as well as the hypothetical possibility of creating a community-owned movie studio. I realize the latter sounds entirely crazy, but I don’t think it’s necessarily quite as insane as it sounds. It might not be possible yet, but a number of the necessary pieces are at least prospectively in place. And while it’s not even a secondary or tertiary goal of mine, the utility of having a viable visual outlet for the stories we are creating in other formats does not escape me.

There are 500 seats available, and it is first come, first seated.

I have a request in for a feature that would permit reserved seating, but obviously they have not yet had time to implement it. I’m sorry about the double emailing to Brainstorm members, but DST hasn’t changed here yet so I initially got the time there wrong.

His finest moment

The great William Shatner has many accomplishments of note. But this very public spanking of a pseudo-Nobel laureate is indubitably his greatest.

The female Steve Jobs

Turned out to be the female Bernie Madoff:

Elizabeth Holmes — the Silicon Valley wunderkind whose blood-testing startup Theranos has collapsed in a slew of scandals — has been charged with “massive fraud” by the Securities and Exchange Commission.

The SEC on Wednesday accused Theranos CEO Holmes and a top lieutenant of defrauding investors of more than $700 million through false claims about its technology.

Holmes — a Steve Jobs wannabe who dressed exclusively in black turtlenecks as she talked up her blood-testing unicorn, which at one point boasted a valuation north of $9 billion — settled with the regulators for $500,000 while neither admitting nor denying the accusations.

Theranos disclosed in a 2016 letter to investors it was under a criminal probe. No criminal charges have been filed, and it’s not known if the investigation is ongoing.

Holmes additionally agreed to not be a director or officer of a public company for 10 years, and to forgo profiting from Theranos ownership until $750 million is returned to investors, according to the consent order with the SEC.

Theranos and 34-year-old Holmes ran “an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance,” according to the SEC.

While Theranos had said it was on track to make $100 million by the end of 2014, the real figure was “a little more than $100,000,” according to the SEC.

The thing you have to understand about Silicon Valley is that for the last 20 years, it has essentially consisted of little more than techno-Ponzi schemes. Very, very few of the companies that are created there are actually intended to make money on the basis of their nominal business. What is remarkable, in many cases, is the way in which many of these startups never have very much revenue, let alone profit, at all.

These “startups” are basically schemes to suck in investors and keep stringing them along until the company can drum up an exit, which can take the form of going public, or in most cases, an acquisition. But the whole game is more akin to gambling than it is to conventional business development. This is the difference between an Infogalactic and a Gab, for example. We’re not Silicon Valley startup artists, we’re not looking for a future exit, we are developing our own new tech on a community-supported shoestring, we aren’t slinging around buzzwords or issuing press releases, and we strongly prefer volunteers and supporters to employees and investors. Only time will tell which Alt-Tech model works better, but if Gab eventually implodes, you cannot say the warning signs were not there.

Anyhow, I always assumed Elizabeth Holmes was a complete fake, so this news of her confirmed con artistry does not surprise me at all. She clearly didn’t know what she was talking about, she always seemed to be more interested in TED Talks and photoshoots than business, and she surrounded herself with the kind of older men who are always complete suckers for any woman who is young and blonde.

Russia is the reason A Wrinkle in Time flopped

Wait, did I say RUSSIA? Oh, sorry, I meant to say that RACISM is the reason that it flopped.

‘A Wrinkle in Time’ Director Ava DuVernay Uses Racism to Explain Away Bad Reviews….

In an interview with Screen Rant, writer Jennifer Lee explained why she took out the Christian themes and Bible references from the book. “It wasn’t removed, it was just opened up in language that wasn’t exclusive, guardian angels versus stars, are they the same thing? Maybe,” Lee said. She emphasized “inclusivity,” saying, “Since we’re not limiting, we’re not picking some religion, but we’re saying we all feel, we can feel that you’re a part of something extraordinary and the messages are the same.”

This helps explain why the film ditched the book’s explicit Christian themes, trading them for vague New Age spirituality that failed to deliver the depth of the original story. Furthermore, it is the exact opposite of “inclusive” to excise all Christian historical references, even to Jesus, Copernicus, or Michelangelo.

As The Federalist’s Ellie Bufkin noted, non-Christian and liberal reviewers agreed that the removal of Christianity from “A Wrinkle in Time” severely weakened the movie.

Sure, it’s not the anti-Christian bigotry, the urinating all over a cherished childhood classic, or the Wakandawashing of the white characters, it’s Vladimir Putin!

I mean, of course, to say that it was RACISM. Specifically, the racism of straight white Christians.

It is absolutely no surprise at all that A Wrinkle in Time flopped. Padre Pio knew that it would flop. Nostradamus knew that it would flop. There is probably a stone buried deep in a South American jungle carved with ancient Mayan hieroglyphics predicting it would flop. Even journalists who are under the vague impression that a tesseract deals with financial regulations knew eight years before it even came out that it was going to flop, because the Hollywood Values crowd hates hates hates Christianity, Christian morality, Christian values, Christians, Jesus Christ, the Bible, and God. There was never any chance that they could produce a movie that would be consistent with the core themes of the book.

What is more interesting is to ponder why Black Panther was successful whereas A Wrinkle in Time was not, given their superficially similar approaches. So, what were the salient differences?

  • Black Panther was competently told.
  • Black Panther respected the original characters.
  • Black Panther was aimed at its core market.
  • Black Panther’s production team actually appears to have liked its source material.
  • Black Panther had competent set and costume design.
I suspect that Black Panther also sucked all the available “black power” enthusiasm out of the market, which probably added insult to injury to the shoddy A Wrinkle in Time performance.

How the Big Three ruined comics

My observation is that the combination of a) a distribution monopoly and b) SJW editors and content are the primary culprits for the ongoing collapse of the comics industry, which is on track to decline as much as 20 PERCENT in units this year. In corporate terms, that’s practically free fall.

However, Arkhaven writer Jon Del Arroz declares at Castalia House there are other content-related problems that merit mention, and lays the blame at the feet of three of the more influential comics writers of the last 30 years.

The industry has three major problems in its storytelling, which each one of these works exemplifies in three ways:

A focus on realism in a medium that by definition is absurd. Alan Moore’s Watchmen is what brought this on. The whole point of the book was to show real heroes growing old, having problems, being corrupt and dealing with real world issues and relationships – and by “real world” of course we mean a debaucherous romp of sex, drugs and violence, which no one relates to. Modern writers want to switch all their characters to this realism feel, which makes no sense when you have Asgardian gods who magically transform at the picking up of a hammer, or a nerd clinging to walls and swinging from rooftops. Realism has no place in such stories, and it’s painful to read boring stories about The Visions sitting at home pretending to eat meals even though they’re robots.

An obsession with rebooting mythology. This is Neil Gaiman’s hallmark. He’s made an entire career out of rebooting. If you look at Sandman, he takes classic mythological figures, imports them into a punk rock/goth 80s world and turns it into a weird horror story. When he worked for Marvel briefly, he rebooted Marvel as if the heroes had been born in the 1600s. American Gods, his novel, is about rebooting mythology again. His formula is obvious. It’s all he does, and it’s all DC and Marvel do now. It’s not selling? Let’s reboot Superman again with an all new #1. That’ll sell for the gimmick collector for a minute, but then when you degrade into the same, tired, unoriginal realism in storytelling, the sales plummet again. No one wants to read the revamped origin story for the umpteenth time, this time it’s the definitive, real version! The original worked just fine and remain in our memories, not the reboots.

Striving to be darker for shock value. This is where Frank Miller changed the game, and for the worse. Everything is gore. Everything is awful, dark, terrible. Characters are dying, whether it be from street thugs or from AIDS, everyone’s life is in the pits and sucks. The streets of New York or Gotham are pure cesspools of no hope, and pure grit. He paved the way for writers like Garth Ennis or Mark Millar to try to one up that grittiness, or Ed Brubaker to turn an optimistic character Captain America into some depressing, dark story with his Winter Soldier storyline. Guess what? You’ve just made sure every parent in America doesn’t buy these books because they know they’re not appropriate images for their kids to see, thereby turning off an entire generation of customers from getting attached to these works.

The three points above all are dangerous paths for lesser writers to tread, and do lead to even greater problems when EVERY story becomes a combination of these tropes, which is what we have in modern comics.

Jon isn’t just a critic, though. He’s putting his pen where his mouth is by translating Richard Fox’s popular Ember War series into comics that will be published later this year by Arkhaven. Check out the first two preview pages at the Arkhaven forums.

The roar of the toothless lion

I fail to see the point of Britain’s posturing here, unless the neocons are going to try to get their Russian war in an indirect fashion:

Theresa May vowed to expel 23 Russian spies today as she laid out Britain’s retaliation over the Salisbury nerve gas outrage. In the biggest diplomatic swipe for decades, the Prime Minister gave the ‘undeclared intelligence agents’ a week to leave the country and suspended ‘all high level contact’ with the country.

Mrs May also paved the way for a crackdown on Russian oligarch money in London and urged the international community to join sanctions.

As tensions with Moscow reached new lows, the premier also suggested that covert reprisals would be undertaken – in an apparent hint at cyber attacks.

Mrs May said she was determined that the package would ‘fundamentally degrade Russian intelligence’ capability in the UK.

Theresa May won’t stand up to the European Union and she can’t protect British girls from being raped and murdered by third-world invaders, but she’s going to stand up to Vladimir Putin and Russia. Sure she is.

At least she’s been able to defend the British Isles from Brittany Pettibone!

What a global embarrassment May has turned out to be. Even Red Jeremy wouldn’t have been so haplessly incompetent.

UPDATE: Yes, that is what it is. The neocons know they can’t get Trump to start a war with Russia over Ukraine or Syria, so they’re using May to start it, then rely upon the NATO treaty to force the US to go to war with Russia.

May argued that the incident can be characterized as a state-directed chemical weapon attack that occurred on British territory — in other words, an act of war. She mentioned invoking NATO Article 5 as a response to incident. NATO Article 5 — also called The Three Musketeers Clause — commits the alliance to defend an ally when its territory is attacked. 

Of course, the God-Emperor is far too canny to be manipulated in this obvious way. In fact, the situation may present a golden opportunity for him to tear up the NATO treaty altogether.