Stationary Bandit

What rise in protectionism?

As the worldwide recession unfolded, an increasing number of cries for protectionism appeared.  When times are tough domestically, people often respond by demanding protection from foreign competition to protect jobs.  When everyone does this, things get worse (such as during the 1930s).  A quick skim of the news suggests that protectionism has risen over the past few years.  The Global Trade Alert claims hundreds of instances. However, Dani Rodrik questions whether protectionism has actually risen.  He writes

Moreover, we do not even know whether these numbers are unusually high when compared to pre-crisis trends. The GTA report tells us how many measures have been imposed since November 2008, but says nothing about the analogous numbers prior to that date. In the absence of a benchmark for comparative assessment, we do not really know whether 192 “protectionist” measures is a big or small number.

Given the short time period, it is hard to distill a trend.  He also argues

The reality is that the international trade regime has passed its greatest test since the Great Depression with flying colors. Trade economists who complain about minor instances of protectionism sound like a child whining about a damaged toy in the wake of an earthquake that killed thousands.

I agree.  The 1930s have not reappeared.  He claims that “ideas, politics, and institutions” are the reasons for the lack of increased demand for protectionism.  In true Rodrik-style, the welfare state prevented demand from rising.

But the relative docility of rank-and-file workers on trade issues must ultimately be attributed to something else altogether: the safety nets erected by the welfare state. Modern industrial societies now have a wide array of social protections – unemployment compensation, adjustment assistance, and other labor-market tools, as well as health insurance and family support – that mitigate demand for cruder forms of protection.

Social welfare programs diffuse protectionism by reducing the costs of losing a job.  Maybe.  But I wonder if it also a result of human capital accumulation that allows people to change careers more quickly than they could in decades past.   Losing a job then would not have the same expected costs.

“Bubblicious Groupthink”

David Brooks writes

Since the masters of finance have been exposed as idiots, the masters of government have concluded (somewhat illogically) that they must be really smart.

He continues with a nice anecdote regarding attempts to remake markets based on the previous presumption.

The effort to cap golden parachutes in 1989 perversely caused companies to increase their golden parachute packages right up to the legal limit. A 1993 law to cap C.E.O. pay led to greater use of stock options and encouraged riskier behavior.

Regulations have unintended consequences.  Attempting to manage risk before it appears is absurd.  It takes time for actual level of risk to appear.  After all, many of the problem loans of today had AAA ratings only a short time ago.  Few people then foresaw the future.  What makes our current leaders think they can predict systemic risk ex ante?  As Brooks argues, self-deception seems the likely candidate. 

David Hume I Hardly Know You

At least the version put forth by David Brooks.  Mario Rizzo has an outstanding rebuttal.  The idea of Hume “at his desk with his head in his hands” over global warming or “in the fetal position, weeping” over health care reform is absurd.  I imagine him reminding the public that “every man ought to be supposed a knave, and to have no other end, in all his actions, than private interest.”  Then he would ask tough questions searching for the actual rather than rhetorical motivations of reformers.  Then he would reveal the incorrectness of the proposed reform to alleviate the problem.  Economies are complex phenomena that yield outcomes that are difficult to change towards you preferred outcome.  It is as if people have minds of their own.  As Hayek liked to point out, Hume’s project, in part, was to use reason to whittle down the claims of Reason.   I doubt Jeremy Bentham (the other protagonist in the Brooks column) would stand a chance. 

Funniest Sentence I read today

It is not Tyler's take, as far as I can gather, because as usual Tyler rejects the standard libertarian view in favor of a complex, pluralistic story that satisfies no one but himself. 

That is from Bryan Caplan.  I have the same reaction to many of Tyler's arguments.

The Red Light Credit Crunch

Even where it is legal, the world's oldest profession seems to have limited access to credit.

Amsterdam city council is turning its attention to a pressing problem for one of the city's key business sectors -- banking and credit for prostitutes who can't get accounts from mainstream institutions.

The city's red light district is famed the world over for its women in tiny windows and even tinier clothing, but despite the trade being legal, many banks shy away from taking the ladies on as customers.

Immigration Questions

Russ Roberts raises a few good points pertaining to the present debate.

We once believed in a lady in the harbor with a lamp beside the golden door. She said "send me your tired huddled masses yearning to breathe free." She welcomed the wretched and the homeless. Now it's "send me your tired huddled masses as long as they're software developers, 25-39 years old and can already speak English." So modern. So utilitarian. So ugly.

Here's an idea. If we care so much about keeping the US competitive in the global economy, we can do more than just keep the wrong people out. Let's make existing residents prove they're worthy of staying here.

Here is the whole piece. 

Media Hypocrisy?

When major companies close plants, newspapers are quick to point out the suffering of those who lose their jobs.  They express their disgust with the amount of the salary of the CEO.  If only the CEO would take a reduction in salary, these workers could retain their jobs. 

Here is an instance where very few people will learn of the plight of recently unemployed.  The NYT is closing an Edison, NJ plant and several hundred jobs will be lost.  I wonder how many media outlets will remind us of the salary of the CEO of the NYT?

Update

After taking some time off from blogging, I plan to resume shortly.

The Dionysian Trap

The always insighful Orlando Patterson offers his thoughts how culture has constrained young black males from benefiting from recent economic progress in the United States.

So why were they flunking out? Their candid answer was that what sociologists call the "cool-pose culture" of young black men was simply too gratifying to give up. For these young men, it was almost like a drug, hanging out on the street after school, shopping and dressing sharply, sexual conquests, party drugs, hip-hop music and culture, the fact that almost all the superstar athletes and a great many of the nation's best entertainers were black.

Not only was living this subculture immensely fulfilling, the boys said, it also brought them a great deal of respect from white youths. This also explains the otherwise puzzling finding by social psychologists that young black men and women tend to have the highest levels of self-esteem of all ethnic groups, and that their self-image is independent of how badly they were doing in school.

I call this the Dionysian trap for young black men. The important thing to note about the subculture that ensnares them is that it is not disconnected from the mainstream culture. To the contrary, it has powerful support from some of America's largest corporations. Hip-hop, professional basketball and homeboy fashions are as American as cherry pie. Young white Americans are very much into these things, but selectively; they know when it is time to turn off Fifty Cent and get out the SAT prep book.

Here is the whole piece. 

Clive the Turtle

Not too many animals can claim that they belonged to Lord Clive, who led the British in the Battle of Plassey against the Nawab of Bengal in 1757. and lived through Y2K.

A tortoise that once belonged to British colonial general Clive of India in the 18th Century has died in a zoo in Calcutta.  Adwaita, "the only one" in Bengali, was found dead by keepers in Alipore Zoo on Wednesday. His shell cracked some months ago and a wound had developed.   West Bengal officials said records showed Adwaita was at least 150 years old but other evidence pointed to 250.

Story here.