David R. Henderson  

My Debate with Ian Fletcher, Part Trois

Role-Playing Games: Behind The... Manias, Panics, and Crashes...

Ian Fletcher responded to my last post as follows:

You accuse me of wanting "the government to interfere in people's lives."
I'd like to plead cheerfully 100% guilty as charged to that.
Although a government that doesn't "interfere in people's lives" certainly sounds good, and would make a superb subject for an after-dinner speech, the reality is that all governments, of any ideological stripe, exist precisely and solely to "interfere in people's lives." Governments are coercive; they exist precisely because a functioning society sometimes requires people to do things they won't do voluntarily. Things people will do without being told don't require government.
The fact that you can't drive 150 MPH on the freeway is government "interfering in your life."
So is the fact that you can't walk into a liquor store with a gun and take the owner's money.
So is the fact that you must (on pain of going to jail) hand over part of your income to fund everything from the Navy to the National Science Foundation.
A government that never interferes with anybody's life is a teenage anarchist fantasy with no basis in America's political heritage. (Among other things, it is not what the Founders intended by the remotest stretch of the imagination.)
Therefore, if you're going to argue against my proposal for an import tariff, you're going to need to find a better argument than that it causes "the government to interfere in people's lives."

I said in my first post that our debate was "pretty civil." I think it got slightly less so with his comment about a non-interfering government being "a teenage anarchist fantasy." I'm guessing Mr. Fletcher is aware--maybe he's not--that there are some pretty serious post-teen anarchists out there--I'm not one--who could give him a run for his money.

Nevertheless, I think we're getting somewhere. Like Mr. Fletcher, I don't think it's a slam-dunk argument to say "Government interferes in our lives and that is wrong." You've got to say why it's wrong. I think my previous argument was a slam-dunk argument on narrower grounds. Recall that Fletcher had claimed that he didn't want to have the government "intervene in specific individual choices." He has now pled "cheerfully 100% guilty." That's progress.

I'm guessing Fletcher would dispute that, saying that somehow his systemic solution of tariffs does not intervene in specific individual choices. But it does, as commenter Curtis pointed out when he said:

Systematic tariffs do intervene in individual choices: Slapping everybody in the face means I get slapped in the face individually.

So what is my argument against tariffs? It's that tariffs are a coercive measure initiated against peaceful people doing peaceful things. That distinguishes them from his case of a government stopping someone from robbing a liquor store. I'm guessing that he can appreciate that distinction. Can he?

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CATEGORIES: International Trade

COMMENTS (17 to date)
J Storrs Hall writes:

That sort of reply (on Fletcher's part) is a good example of why most libertarians think most leftists are simply dishonest mud-slingers. Consider that virtually every serious lib I know would be ecstatic if we could roll the size and scope of government back to, say, the Andrew Jackson administration -- a fantasy which, oddly enough, does have a basis in America's political heritage -- by definition. Indeed, in practical terms, we'd be overjoyed if we could only roll it back to the Eisenhower administration.

The bit with arguing over the semantics of "interfere" is a red herring. The classical liberal theory of the proper sphere of government was very well defined, and anyone who ignores it for debating points is, again, simply being dishonest.

Ben Hughes writes:

I think you're off-track from the original debate anyways. An argument about whether or not the government "interferes" detracts from the more serious arguments on the efficacy of trade which is to the heart of the disagreement between Ian Fletcher and almost all other economists.

In other words, even if you agree at a more general level that "government interference" is great, it does not follow that tariffs are good. One needs a sound argument to convince people of that beyond poor analogies to the necessity of other forms of government inference.

Mr. Fletcher still has many, many questions which are left unanswered.

Justin R. writes:

An interesting philosophical argument I heard:

Question 1: Does an individual have the right to use physical coercion to force other people to do what they want if these people have not interfered with the individual's physical safety or well being?

Answer 1: Most people say "no."

Question 2: From where does a republic / democracy (what we typically describe as "western government") draw its power and legitimacy?

Answer 2: Most people say "from the people."

Question 3: If an individual does not have the right to use coercion as described in question 1, how can they grant this right to anyone else, whether it be other people or the government?

Answer 3: Most people role their eyes and say the questioner is nuts. Perhaps....

John B writes:

Am I the only one that finds Fletcher's faux pragmatic posturing tiresome?

("Oh, your idea sounds great in the airy theoretics of your invory tower, but here in the real world...")

Billy writes:

Is he implying that without government interference we would routinely see individuals driving 150 mph on the interstate and holding up liquor stores? I think statements assuming life would fall apart without an interfering government are teenage leftist fantasies.

ohwilleke writes:

The duty to pay taxes, which he identifies specifically, is much more analogous to the case of a tariff, and much more historically relevant. Tariffs were the primary means by which the federal government was financed for most of the period from the adoption of the current Constitution in 1789 to until the Civil War (1861). Shay's Rebellion is another important precedent in the early Republic and also involved a rifle shot as opposed to broad based tax collected for revenue purposes that had the effect of biasing peaceful activities done in otherwise peaceful ways.

David E writes:

I have missed the previous part of the debate so apologies if this is off track, but doesn't almost everyone agree that government can keep one person from hurting another. The question is when should government get in the way of a willing contract between two or more parties. Most people would agree that one exception is when other people are harmed, hence traffic laws, pollution laws etc. Many people would also agree with government enforcing 1) some level of transparency - truth in labeling laws etc., 2) actions that would endanger children, and possibly 3) actions that could lead to death or permanent damage to adults (e.g. heroine use, suicide, possibly seat belt laws). Should anything else be covered?

jc writes:

@David E said "Most people would agree that one exception is when other people are harmed, hence traffic laws, pollution laws etc."

Wouldn't Fletcher simply say the following?

"Yes, this is my precise point. I cheerfully endorse coercion here because it prevents other people from being harmed...in this case, harmed by the trade you and a foreigner would otherwise freely conduct.

Your actions (i.e., freely trading) will harm other Americans. Yes, it will help help foreigners, and that is generally a good thing, to help others. But, the role of the *U.S.* government is not to help the citizens of other countries or protect them from being harmed; it is to protect the citizens of its *own* country from being harmed.

Thus, I would cheerfully forbid you from harming others in this way."

So, yeah, I think the question that has to be addressed is whether it is right to assert that trade is either good for us or an exercise of free will that does not result in negative externalities worth impeding at the point of a gun...or whether he's right to assert that free trade *is* harmful enough to other Americans that it *should* be stopped or slowed down.

So... (1) Is trade good or bad for us? (2) And if it's bad, how bad is it? (2a) Bad enough to stop, or slow down, via rules enforced by the threat of government violence against you?

(Btw, though I'm not sure about this, I don't think he's a leftist. I'd guess he's a U. of Chicago educated Paleoconservative? Just a guess on the Paleoconservative part...)

Eric Hosemann writes:

Being 100% guilty of wanting to interfere in people's lives is not the same thing as being one of the founders of a democratic republic. The form of government they designed has checks and balances meant to prevent people like Mr. Fletcher from wantonly satisfying their impulses, not to prevent people from leaving each other alone. The founders knew that government properly restrained would aid people in peacefully coexisting. The constitution was aimed at the future Fletcher's of the world.

JW writes:

I find Fletcher's argument here to be extremely weak. The question is not does the government by its nature intervene in people's lives. The answer to that question is yes.

The real question is to what extent and in what ways should the government intervene in people's lives. Fletcher's civics lesson does nothing to answer that question.

Gian writes:

The libertarians equivocate on classical liberal theory of state. The pre-civil war Govts could be intrusive e.g. you could not sell pornography and I suppose liquor trade was subject to licenses.

I do not see why a pre-civil war Govt would balk at imposing tariff if it thought it useful and prudent. Is there anything in the pre-civil war Constitution that bars the Federal Govt from imposing any tariff it deems fit?

So if American Constitution does not bar arbitrary tariffs, then how could it be against uniform tariff?

The libertarians need to decide and tell us if they stand with the Constitution of 1789 or if that is too imperfect, too unjust for them.

Also not all believe that the authority flows upwards from the people. The reactionaries believe in the patriarchal theory of the state, as in the Sir Filmer's ideas.

Jeff writes:

There are a number of things that people who actually know something about economics disagree on. Free trade is not one of them.

Trade restrictions outlaw trades that free people would voluntarily make. No one volunteers to trade anything unless he thinks the trade will make him better off. So trade restrictions clearly harm those whose trades are restricted.

If you want to argue in favor of trade restrictions, you have to do it on grounds that restrictions will somehow benefit the larger community more than they harm the individuals whose trades are forbidden. The idea that the government should control trade, promoting exports and/or restricting imports, is known as mercantilism.

Adam Smith's 1776 book The Wealth of Nations demolished mercantilist arguments. Forty one years later, when David Ricardo explained what comparative advantage is, he provided the final nail in the coffin. Restrictions on free trade have not been intellectually respectable for two centuries.

If you don't know this, and Fletcher clearly does not, you have no business opining on anything to do with economics. This is very basic stuff, taught in Econ 101, and it's not worth arguing about. I can explain comparative advantage in less than five minutes to a fifth grader, and he will then be more qualified to discuss economics that Fletcher is.

Kirby writes:

Now society may not fall apart without government, but don't we need the government to regulate the tools of trade, ie:
--counterfeit money
--bank's capital reserve

8 writes:

The system is not populated with 100% Anglo-Saxons. You can create a system and set the rules, but the behavior of players in the game can change the results. If you live in a world with mobility of capital, but not mobility of labor, then the system inherently favors capital over labor. (Ricardo assumed no international movement of capital. In that case, comparative advantage works. If the capital leaves too...) If you have one group of people who believe in trading for maximum return on every trade, and one group who do not, then there's not a two-way system. Americans and Brits take their capital and exit their home market for higher returns abroad, creating jobs abroad, but the cycle is not international. Capital and labor are flowing out of the U.S. and circulating domestically in China or between emerging markets. (Leave aside the insanity of importing more labor as capital flows out. I don't even think Econ 101 would suggest that strategy.) Yes, dollars come home, but it's quickly resent abroad to invest abroad.

Is the appeal to free trade is that it makes the whole society better off, or that people should be allowed to engage in any trade they want? If the latter, than no problem. If the former, there's a serious disconnect between the textbook and the real world.

Tracy W writes:

Americans and Brits take their capital and exit their home market for higher returns abroad, creating jobs abroad, but the cycle is not international. Capital and labor are flowing out of the U.S. and circulating domestically in China or between emerging markets.

Okay, so Americans take their capital and seek higher returns abroad. We will assume that Americans start off with US dollars. We'll also note a fact - that all decent-sized economies have their own currency, perhaps pegged to the US dollar, but still a separate currency (there's a few places that use US dollars straight, but they generally have serious problems that mean their economies are tiny). So the Americans investing abroad in, say, Brazil, need to change their capital from US$ into Brazilian reals. To do this, they need to find someone who is willing to exchange reals into US$, or possibly a chain of someone's, with things like changing reals into euros and then someone else willing to change euros into US$. Typically the Americans get a bank to arrange the swaps.

So the Americans investing abroad have less US$ and more foreign currency. Offsetting this must be someone with less foreign currency and more US$. What are they going to do with that money? With all due respect to the US currency designers, few people want US$ for purely aesthetic purposes. Instead, they are going to spend that money on US things, be that investments or flat-out spending (things like perhaps sending their kids to US universities).

Now let's say that very few people want to invest in or buy things from the USA. So the Americans seeking to send their money abroad will get a very bad exchange rate. This will decrease the return they get on their overseas investments, so they'll be more inclined to invest at home.

With the British, the situation is even more balanced, because even fewer countries use the GBP as an alternative.

Governments can intefere with this process, by fixing exchange rates and thus create a situation where there's a net outflow of capital, passing the costs on to their taxpayers. But with truly floating exchange rates, I don't follow how money can flow out of a currency area on net. Am I missing something here?

Your statement that labour is flowing out of the USA surprises me, as to the best of my knowledge the USA is a net recipient of migrants - see http://www.nationmaster.com/red/graph/imm_net_mig_rat-immigration-net-migration-rate&int=-1. What is your source for this, and that capital is flowing out of the USA?

If you have one group of people who believe in trading for maximum return on every trade, and one group who do not, then there's not a two-way system.

This statement puzzles me. Surely if you have trade then there is a two-way system. Trade fundamentally requires at least two people. Did you mean to say that in your situation, both groups can't benefit? But that's wrong, as long as the group that doesn't maximise on every trade still will only trades when they're better off than when they don't trade, then both groups benefit from voluntary trade. The first group might get a larger share of the return, but they have to give the second group something to get them to trade at all.

R Richard Schweitzer writes:

Missing from the "debate" is an understanding of "What is Government?"

It is not some reified entity with its own organic existence equivalent to the individuals subject to the impact of its operations.

Government, which in the U S is now approacing the Administrative State condition, is a collection of politically constructed bureaus (for many of which the original purposes of construction have long since atrophied) which are staffed and operated by other ordinary individuals working on the bases of their own personal motivations.

So, in the end, we are looking at what are entirely human interactions.

Ron H writes:

@Gian: You may be confusing the issue.

There was nothing illegal about tariffs prior to the Northern War of Aggression - I mean Civil war - and there still isn't. In fact, the US Constitution, Article 1 Section 8 clearly grants Congress the power to "lay & collect taxes, duties, imposts, and excises.

The question here, is whether tariffs are beneficial, and they clearly are not, as they benefit a few at the expense of the many. There is always a dead weight loss to consumers.

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