David R. Henderson  

Are Anti-Dumping Tariffs Intelligent?

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One area in which I had always thought that Paul Krugman and I pretty much agreed close to 100% was his own area: international trade. His "Ricardo's Difficult Idea" is one of the best things ever written on trade and his Pop Internationalism is also excellent. See his bio in The Concise Encyclopedia of Economics for more on his excellent work.

So I was surprised while watching this interview to see him say the following (at about the 10:00 point):

But you know those [anti-dumping tariffs] are part of the system. I mean the people who devised--The world trade system as it exists, uh, I'm going to get in trouble with some Trumpies, or something, but anyway is actually a system designed by intelligent people. And one of the things it has is it has escape clauses, it has safety valves. There are if there's a hugely disruptive surge of exports, you are able to do things like anti-dumping duties, market disruption measures to give yourself, to provide a cushion to give yourself some time.

But anti-dumping duties are a bad idea. As Fred Smith once put it in a pithy line that trade economist Jagdish Bhagwati (who taught Krugman at MIT) quoted in his book Protectionism, "If our antidumping laws applied to U.S. companies, every after-Christmas sale in the country would be banned."

Count me shocked. Whatever other differences Paul Krugman and I have, I had no idea that he thinks anti-dumping duties are part of an intelligent plan.


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COMMENTS (9 to date)
Harold Cockerill writes:

Not just after Christmas sales but Christmas itself should be banned. If getting stuff cheaper is bad then getting it for free must be awful.

Think how bad off we would be if the nations of the world just shipped us all kinds of stuff and didn't want to be paid at all. What a disaster.

Don Boudreaux writes:

It's indeed disappointing that Krugman lends his name in support of these rent-seeking measures. As David (above through Fred Smith) and commenter Harold Cockerill correctly note, markets are always experiencing 'disruptive surges' - those are inseparable from entrepreneurial markets marked by consumer sovereignty. And there's nothing about 'disruptive surges' that come from foreign entrepreneurs or businesses that differ in any economically relevant way from domestic entrepreneurs or businesses.

More generally, to ponder a world in which an entrepreneur- or consumer-driven 'disruptive surge' is an aberration - a relatively unusual event - an occurrence that is so out of the ordinary that the state must mute its consequences lest disorder reign indefinitely - is to ponder a world that ordinarily and normally is something close to the textbook devices of the Evenly Rotating Economy, or the stationary state, or General Competitive Equilibrium. These textbook devices are analytically useful, but they are not and never have been descriptive of real-world market economies. If all that you understand about markets is what you learn from pondering these textbook devices, you have a too-incomplete understanding of how real-world economies operate.

Real-world modern market economies have as part of their very essence disruptive innovations and creative destruction. What does it say about Krugman's economics that he views such disruptions as problems for markets rather than as natural to markets?

Or, alternatively, what does it say about Krugman's economics that he seems simply to assume that disruptions sparked by foreign firms are somehow different, in a fundamental and worse way, than are home-grown disruptions?

And what does it say about Krugman's economics that he also simply assumes that antidumping policies will be used apolitically by government officials, without risk of there being used to swell the purses of rent-seekers? Note along these lines that Krugman describes the use of antidumping measures as themselves disrupting markets. He's correct to do so. But why should we expect that market disruptions unleashed by political agents will work to nicely offset those by private economic actors? And why is the best response to one market disruption another market disruption rather than simply to allow the first market disruption to work itself out through private market processes?

Someone might object to these objections to Krugman's reasoning by noting that he justifies the use of antidumping duties as a response to 'disruptive surges' that are 'huge.' Again, are disruptive surges from abroad generally more 'huge' than are surges from domestic entrepreneurs, firms, and changes in consumer preferences? I suppose that one can make such a case, but it's unclear to me what that case might look like. (Serious question: has anyone studied this matter empirically - that is, compared the magnitude of 'disruptive surges' from abroad to home-grown surges?).

Jacob Egner writes:

David Henderson and Don Boudreaux: just wanted to take a little time saying that I appreciate your writings (posts, comments, etc). Thanks for being thoughtful, careful, and interesting.

David Henderson:

You say you were "surprised" and "shocked" at Paul Krugman's apparent support for anti-dumping duties (at least in some circumstances), since this is the same person who wrote "Ricardo's Difficult Idea" and "Pop Internationalism".

I get the sense that Paul Krugman has changed significantly since he wrote those pieces in the mid 1990's. More than once at Cafe Hayek, Don Boudreaux has used the terms Dr. Krugman and Mr. Krugman to refer to Paul Krugman's very different expressed opinions/judgments between the mid 1990's and more recently. I'm a little surprised that Don Boudreaux didn't mention it here.

I have come to think that the contents of "Pop Internationalism" is a very poor guide to predicting the opinions that Paul Krugman expresses these days.

To be speculative and uncharitable, perhaps his recent endeavors, like writing opinion pieces for the New York Times, has slowly influenced him to be more political, more polemical, and less of a dispassionate pursuer of truth. I find that his columns are often uncharitable/unfair to "the other side", and I get the sense he wants to push certain narratives/worldviews at the expense of truth and honesty. Being an opinion writer does reward such unfortunate things.

(One of the things I like about your writing is that you seem to be very charitable and fair to other opinions, and you are okay with there being nuance and valid counterpoints to your judgments.)

Anyway, do you plan on being less "shocked" the next time that Paul Krugman expresses a significant departure from what was expressed in "Pop Internationalism"? People stay the same more than they change, but I think we should start embracing the idea that Paul Krugman has changed a lot.

Hazel Meade writes:

How often, in practice, have anti-dumping duties been permitted? Any data on this.
I vaguely recall the US imposing some anti-dumping duties on Chinese steel back in the 2000s, but I thought they were struck down by the WTO.

Don Boudreaux asks:

What does it say about Krugman's economics that he views such disruptions as problems for markets rather than as natural to markets?
Suppose we recognize the state as a distinct organization, distinct from the underlying economy in the geographic region identified with the state. Then, it seems to me, Krugman's economics represent the state and not the underlying economy. The American state, being somewhat democratic, needs public-good sounding justifications for the programs through which it extends its control and feeds itself. Krugman, by casting an image of problems in a poor, unregulated economy, eases the way for extensions of state power.

Although I am libertarian and (as an individual human) opposed to states, I suggest that states prove Darwinian fitness by their very existence. States survive a sort of natural selection for living organizations on the scale of states.

David R. Henderson writes:

@Jacob Egner,
David Henderson and Don Boudreaux: just wanted to take a little time saying that I appreciate your writings (posts, comments, etc). Thanks for being thoughtful, careful, and interesting.
You’re welcome, Jacob, and thank you.
I get the sense that Paul Krugman has changed significantly since he wrote those pieces in the mid 1990's.
I think you’re right. I’ve given evidence of it on this blog, as has Don Boudreaux.
I have come to think that the contents of "Pop Internationalism" is a very poor guide to predicting the opinions that Paul Krugman expresses these days.
That’s what I had not come to, and still have not. It’s one thing for him to write about taxes and income inequality in a way that differs from his earlier views. It’s quite another for him to write positive things about restrictions on free trade, given his area.
(One of the things I like about your writing is that you seem to be very charitable and fair to other opinions, and you are okay with there being nuance and valid counterpoints to your judgments.)
Thank you.
Anyway, do you plan on being less "shocked" the next time that Paul Krugman expresses a significant departure from what was expressed in "Pop Internationalism"?
By the nature of shock--in this context, it means extreme surprise at the unexpected--I don’t plan on being shocked. But to get to the heart of your point, I am a good Bayesian and so I will probably be a little less surprised when I next see him advocating restrictions on free trade, but still surprised. To understand why, see my response to your point a few points up.

Thaomas writes:

No economist thinks that "anti-dumping" duties are a "good" idea. They are a necessary idea in a world where not everyone understands that trade is potentially a win-win for everyone. Maybe if our economy in the last few decades had distributed the benefits to trade and technical progress we would not be biting our nails over a candidate whose trade policy is like Mr Trump's

Jacob Egner writes:

David Henderson:

Thank you; your response warms my icy heart, especially the part about being a good Bayesian.

And I have adjusting my own estimates upon reading your judgments on the matter, as you are more versed with Krugman than I am.

David R. Henderson writes:

@Jacob Egner,
You’re welcome.

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