Can someone explain to me why "protectionism" is bad?

You probably already follow the global-justice objection to overly protectionist policies (which is not to imply that plenty of global-justice types are not fine with protectionism), and given the way we push other nations to open up their markets, you probably also follow the "that's just totally lame and unfair" argument, too.

What kind of inequities are you talking about here? If you're talking about low pay, then I don't think it's helpful to lump in minimum wage policy with barriers to trade and migration, which is what I understand by "protectionism" (not just any interference with a free market).

in general, lower tariffs = more trade = more business = more cash flow for middlemen to pick up = more jobs = less reason to fight wars?

I mean, keep in mind that the main thing protectionism is usually protecting is jobs -- often blue-collar manufacturing jobs -- and strong believers in the market will of course tell you that when domestic industries collapse, well, it's sad about the workers and their jobs, but this is a positive adjustment of the market toward greater efficiency.

Please note that I'm just summarizing arguments here, not actually making or endorsing them.

Hence a tax on imports is equivalent to a tax on exports. The Lerner symmetry theorem

otoh, when the protectionism is on the side of the stronger countries vs. the weaker, then you get things like american farm subsidies propping up agribusiness at the expense of farmers in guatemala and guinea. and protectionism is probably not much of an answer for something like american manufacturing -- the levels of tariffs you'd have to impose to make american t-shirt manufacturing competitive with bangladeshi t-shirt manufacturing would be so high that you'd price t-shirts right out of a lot of people's reach, even if you managed to hold onto the t-shirt plant down the street (which there's a good chance you wouldn't anyway).

it is all, of course, very complicated. and the more i read by professional economists, the more i'm convinced most of them don't really understand all the dynamics either. (hence the engagement of some creative economists in the study of complexity, which might not yield any easy answers but might at least help get a handle on the morass of forces in play.)

The Undercover Economist by Tim Harford

I found this article but it's unsatisfying on a number of levels. I understand the basic argument for competition but don't see why that necessarily means maximizing competition yields the best possible result.

Oh well, I'm not worried because peak oil is going to make trans-oceanic shipping too much of a burden, and we don't have to worry about peak oil anyway because bird flu is going to shrink the population and reduce energy demand, which will in turn reduce our greenhouse gas emissions and prevent us from being engulfed in floodwaters.

Most thinkers who believe in a deregulated economy would view the minimum wage as quite the opposite in that it creates a disadvantage which other economies with lower labour costs can then exploit.

results are variable, and relying on individual examples can be dangerously anecdotal. Ireland moves from protectionist stagnation to long-term trade oriented growth, while South America goes from a longer period of protectionism to a not particularly successful trade oriented system. In both cases similar things happened - the switch to trade wiped out the flabby protected industries. In South America, not much really came up to replace them. However, in both cases the switch to trade was triggered by crisis - the protectionist system was failing catastrophically.

I am waiting for Nicky's authoritative review before I even think about doing that.

And I can cancel it before it comes out if I so wish.

I'd ask Nick if I were you. I won't get the book until April.

Sneak review preview: 4/5 stars.

Freakonomics comes out in paperback on the same day Nick's book comes out in hardback. If that's not downright bizarre I'll fist a flip-flop fucker.

Also, this:

The importance of being negative
Sales figures show that a bad customer review carries far more weight than a good one
TIM HARFORD
Financial Times
March 25, 2006
pg. 12

The British edition of my book, The Undercover Economist, is out soon, so I won't be able to keep my eyes off Amazon.co.uk. The function of Amazon is to allow people to buy your book, but it also provides a "sales rank" showing how many books are selling, and it collects readers' reviews. The sales rank changes every hour and it's a drug. The reviews, whether good, bad or crushingly indifferent, are nearly as addictive.

The Undercover Economist in me wonders why anyone would write a review and, given that people do write reviews, why anyone would pay attention to one. Writing a review takes time and effort and appears to offer no reward. At the time of writing, about one in 500 buyers of the American edition of my book had left a review. The other 499 hadn't bothered. This is as economic theory would predict.

That fact has implications for a potential customer trying to interpret the reviews. This is a highly biased sample of reviewers, although it's not clear quite what the bias is: do people review books when they're especially pleased or when they're especially disappointed? Either way, Amazon reviewers are not normal people: one of my reviewers calls himself Drool Clueless - perceptively, I think. Another, Compassionate Conservative, wrote 85 substantial reviews of other books in the 10 days after reviewing mine. That doesn't seem humanly possible, let alone typical.

One thing is clear enough: since only one in 500 of my readers writes reviews, if I round up 10 friends and persuade them to add five-star reviews, the result should be hard to distinguish from the reviews I would get if I had 5,000 delighted readers.

Frankly, nothing could be easier; the smart buyer will tend to discount positive reviews, knowing that negative reviews are more likely to be genuine. Admittedly, they may not be. I could post a review of Martin Wolf's book, Why Globalization Works, that says: "This is a terrible book. Read Tim Harford's brilliant book instead." But the gains from slating someone else's book are pretty small in most cases. I'd do better with: "If you liked Tim Harford's brilliant book, you'll love this too." Since bad reviews are less likely to be fictional, if a potential buyer sees a bad review, they should give more weight to it than to a good one.

All this is just armchair reasoning, but it turns out to be correct. A couple of hard-working researchers at the Yale School of Management, Judith Chevalier and Dina Mayzlin, have combined the rankings with the reviews to work out whether reviews do indeed boost sales. Their clever method compares the ranking on Amazon.com with the ranking on the other big online bookseller in the US, Barnes & Noble. Both rankings should go up and down in response to advertising, press coverage and so on, but a good or bad review posted on Amazon should affect sales on Amazon but less or not at all on Barnes and Noble.

It turns out that reviews do make a difference, especially bad ones. Chevalier and Mayzlin reckon that a book with four five-star reviews would drop 20 per cent in the rankings if one of the reviews had been a one-star review instead. Drool Clueless cost me a lot of sales. Although good reviews have less impact, they do boost sales.

So I'm counting on you, loyal readers, to start the buzz. Of course, since these columns are not extracts from the book, you don't actually know what it will be like. But don't let that stop you posting a five-star review in eager anticipation.

Tim Harford's book "The Undercover Economist" will be published in the UK on April 6 (Little, Brown Pounds 17.99).

http://images-eu.amazon.com/images/P/0141019018.02.LZZZZZZZ.jpg

but yeah as Messrs. Dods & mothra point out, protectionism often (in the example of minimum wage appearing in the basic form of commodity minimum price fixing for something that most consumers cannot acquire from non-domestic sources, cf also typically STAHL UND RINDFLEISCH) proves itself self-defeating in even the short term, as several of the largest consumers of given commodity immediately begin seeking out alternative sources.

I suppose the real enemy here is price-fixing in general, or any other regulatory measure which has the side effect of price fixing (cf everything the FCC does just about), not necessarily all the various activities that could be said to come under the umbrella of "protectionism." The more you think about it the more it seems like that's just a loaded term that's become too vague and politicized to carry truly meaningful value one way or the other and I probably should have phrased my comments better yesterday.

Good thread, though!

It's not a particularly controversial approach, I don't think. Many politicians know the country would be better off overall if they lifted protectionist measures, but special interest groups (eg. farmers) are too powerful to stand up to in their constituencies.

Freakonomics will tell you nothing about protectionism and very little about traditional economics (the UK cover is a lot less wanky, btw).

Protectionism has a very nasty habit of back firing (see the smoot hawley tariff act causing a British Empire vs US trade war that caused the great depression, but don't worry because it all turned out nice in the end with a world war, and the US winning by Lend Lease). Protectionism ought to be the dictionary example of uninteded consequences.

How people can be so blind to the tit for tat measures that seem to be an inevitability of throwing up barriers, where the soap box demagogues shout the national interest. Either way they are lots loosers, and the loosers are normally working people; people who suffer increased prices or loose their jobs.

This Graham-Schumer Bill that is currently under considerration int he US senate seems to be incredibly short sighted. A 27.5% price increase in everything that comes from china, bang goes the pruchasing power of the lower and middle income Americans, instant inflation in key goods, goods that the US cannot make as cheaply without regressing to 19th century working conditions. It is also believed that china cannot retailiate that they will loose a big market, that they can't put tariff on imports as they need their imports to supply their manufacturing.

If china has lost that market already, might destroying the US by turning US T-Bills to junk be an attractive retalliation. (China finances US puchase in china by lending the US vast sums of money, and could bankrupt the US at a moments notice if it felt like it)

And remember, this isn't about helping chinese worker, about raising their job conditions, this is a squeeze to get china to free float their currency bring. It won't do anything to help US workers, except make them poorer.

gah, too many ideas, not enough time to structure them.