Mark Thoma summarizes the ongoing debate over the impact of trade over on Economist's View. His post "Why Large American Gains from Globalisation are Plausible" is an excellent point to enter the discussion.
This post touches on the related issue of inequality - a topic that seems to lie at the heart of a great deal of angst in both academic and popular circles.
I recommend a read of the post over on Thoms'a blog (a portion of which can be found below.)
Thoma makes presents the conventional view of trade as he writes:
You can read Dani Rodrik if you want to know "under what conditions will trade liberalization enhance economic performance?" ... Whatever the theory says, the evidence in this paper and the evidence more generally is pretty clear, globalization has large net benefits.
Much of the discussion in this blog post revolves around the potential impact of trade on the US economy. For example:
The Bradford et al. study argues that removing all remaining barriers to trade would raise U.S. incomes anywhere from $4,000 to $12,000 per household (or 3.4-10.1% of GDP). That is a whole chunk of change!
Why large American gains from globalisation are plausible, by Gary Clyde Hufbauer and Matthew Adler, Vox EU: The Peterson Institute calculates that the US economy was approximately $1 trillion richer in 2003 due to past globalisation – the payoff both from technological innovation and from policy liberalisation – and could gain another $500 billion annually from future policy liberalisation (Bradford, Grieco, and Hufbauer 2005). Past gains amounted to about 9% of GDP in 2003, and potential future gains constitute another 4%.
However, empirical research on the American economy does not support the contention that income distribution has been strongly affected by international trade and investment. The forces of technology, education, and immigration are much stronger (Lawrence 2008). Also see the WSY online: Technology, Not Globalization, Feeds Income Inequality
Critics of globalization often cite increasing income inequality in their opposition, but a new study suggests that technological advances, not globalization, is responsible for an increase in the gap.
Rising Income Inequality: Technology, or Trade and Financial Globalization?
Prepared by Florence Jaumotte, Subir Lall, and Chris Papageorgiou
Estimates using a new and more reliable dataset on inequality and detailed measures of globalization suggest that the observed rise in inequality across both developed and developing countries over the past two decades is largely attributable to the impact of technological change. The contribution of increased globalization to inequality has in general been relatively minor. This reflects two offsetting effects of globalization: while increased trade tends to reduce income inequality, foreign direct investment tends to exacerbate it. Both globalization and technological progress tend to increase the relative demand for skills and education. While incomes have increased across all segments of the population in virtually all countries in the sample, incomes of those who already have higher levels of education and skills have risen disproportionately more.
The implication of these findings is that broader access to education will allow a greater segment of the population to take advantage of the opportunities from globalization and technological change. While these changes have increased incomes across countries and helped reduce poverty, the benefits would be even greater, allowing for a faster reduction in poverty, if the distribution of skills became more equal. This suggests that the returns to investment in education for all countries has risen in the recent era of globalization.
Saturday, July 26, 2008
Thursday, July 17, 2008
Confidence in Free Markets
The LA Times reported that the general attitude toward markets and government intervention may be changing:
"We're at a hinge point," said William A. Galston, a senior fellow at the Brookings Institution in Washington who helped craft President Clinton's market-friendly agenda during the 1990s. "The strong presumption in favor of markets, which has dominated public policy since the late 1970s, has een thrown very much into question."
The author of the article, goes on to observe:
Now, to a degree not seen in years, politicians and outside experts are looking with favor at more, not less, government involvement in the economy.
This article confirms a trend that I have seen in my interactions with students, fellow faculty and my circle of friends.
Kling, in a review of what he calls a must read book Happiness and Economics: How the Economy and Institutions Affect Human Well-Being points out one possibility for this procedural utility. Kling summarizes this idea in his post and Frey's book is now on my reading list.
"We're at a hinge point," said William A. Galston, a senior fellow at the Brookings Institution in Washington who helped craft President Clinton's market-friendly agenda during the 1990s. "The strong presumption in favor of markets, which has dominated public policy since the late 1970s, has een thrown very much into question."
The author of the article, goes on to observe:
Now, to a degree not seen in years, politicians and outside experts are looking with favor at more, not less, government involvement in the economy.
This article confirms a trend that I have seen in my interactions with students, fellow faculty and my circle of friends.
Kling, in a review of what he calls a must read book Happiness and Economics: How the Economy and Institutions Affect Human Well-Being points out one possibility for this procedural utility. Kling summarizes this idea in his post and Frey's book is now on my reading list.
Sunday, July 13, 2008
Friday, July 11, 2008
Week 1 Discussion ECN 211 Summer
Our first week of study of macroeconomics has generated a thoughtful and spirited discussion that has generated a list of economic questions/challenges facing the US today. At the left you will see a poll based upon the challenges presented by students in ECN 211 Principles of Macroeconomics online at Mesa CC. Please take a moment and vote for the one issue that you feel is the most pressing. Then, take a moment and post a comment/reply to this posting explaining your reasoning.
Comments and questions
Also, after reading the assigned chapters, I think we have all learned that something is only worth as much as a person is willing to pay for it.
This is a clear conclusion from studying human behavior and an
extension of this point, if person A is willing to pay 5 dollars for an item and person B is willing to pay 2 dollars for an item, who should own the item?
Regarding ethanol - This is a great example of our government
trying to solve one problem, and creating a dozen more.
This is an excellent illustration of the tension between principles 5 and 6. A element in societies that tend to develop and grow is the ability to adjust to mistakes or unintended consequences. Principle 5 that observes that decentralized markets tend to be a good way to resolve questions implies that, when mistakes or errors are made, the
decentralized decision makers in the make can adjust or respond quickly.
We all know that, in spite of the contention of principle 6, that governments are much slower to adjust or react. Recall the governmental action to prohibit alcohol production and consumption in the early 20th century in the US. While it became almost immediately obvious that this action was ineffective and in fact created any number of unintended consequences, it was years before the government adjusted
to correct this mistake.
How likely is it that supply and demand is what is driving up the gas prices?
This is a great question and reveals both an understanding of the economic way of thinking and a sense about how society operates. The answer is clear from both an economic perspective as well as an empirical perspective.
The real question is what are the elements that make up demand and supply and what are the variables that change demand and supply.
I think, that the "political stand point of our government" has almost every effect on the economy. Tax the wealthy, tax the poor. Raise the minimum wage, do not raise the minimum wage. Chapter 6 sums up the answer to your question beautifully. It discusses payroll tax, luxury tax, and whether or not to tax the seller or the buyer. It was
a pretty interesting chapter.
Yes, and it is important to keep in mind an observation about the role of government (which is vital) to the economy. The government can assist in decision making with a clear set of guidelines that protect property, insure compliance with contracts, and allows for an independent and transparent judiciary.
If higher gas prices mean we change the way people think about scare resources, then bring it on.
our price has increased due to the increase in the value of the euro. So, if the euro has increased then that means they are paying more for their gas which, in turn, effects the purchase price for Americans also.
My economic question is do you think the tax rebate checks were a true benefit to our society, or were they merely a ploy to distract us from other issues our nation faces?
I hear a lot of different things coming from China. Is it true that since they have been hording as much of the American dollar that they can, that if they want to dump it all back into the American economy at once, it would completely ruin us?
My question may be a controversial one, but I once heard that the only thing that America produces is weapons and that most everything else is bought from other countries, which pretty much leaves our country dependent on other countries. Is this
true?
I understand utilizing trade with others so you can specialize in a field that yields the highest output for yourself but how does a starting economy grow when it is not good enough at its specialty to really benefit itself or make enough money to purchase its other needs? What do you do if you simply don't have the resources or revenue to grow your economy?
On one hand, Federal oversight may stop the band lending practices from happening in the future, thereby adding stability to the housing community. On the other hand, the government has done few things right when they intervene in the private sector. Either way, some type of policy should be in place if Americans are expected to pay for the lenders mistakes and greed.
How likely is it that supply and demand is what is driving up the gas prices?
I personally believe there is a lot of corruption and wrong doings, not just supply & demand, which is driving the cost of fossil fuels.
I think, that the "political stand point of our government" has almost every effect on the economy. Tax the wealthy, tax the poor. Raise the minimum wage, do not raise the minimum wage. Chapter 6 sums up the answer to your question beautifully. It discusses payroll tax, luxury tax, and whether or not to tax the seller or the buyer. It was a pretty interesting chapter.
If you are interested in my comments or responses to student questions raised during the first week of our summer session class, click on the comments link below.
I look forward to the results of this informal poll.
Comments and questions
Also, after reading the assigned chapters, I think we have all learned that something is only worth as much as a person is willing to pay for it.
This is a clear conclusion from studying human behavior and an
extension of this point, if person A is willing to pay 5 dollars for an item and person B is willing to pay 2 dollars for an item, who should own the item?
Regarding ethanol - This is a great example of our government
trying to solve one problem, and creating a dozen more.
This is an excellent illustration of the tension between principles 5 and 6. A element in societies that tend to develop and grow is the ability to adjust to mistakes or unintended consequences. Principle 5 that observes that decentralized markets tend to be a good way to resolve questions implies that, when mistakes or errors are made, the
decentralized decision makers in the make can adjust or respond quickly.
We all know that, in spite of the contention of principle 6, that governments are much slower to adjust or react. Recall the governmental action to prohibit alcohol production and consumption in the early 20th century in the US. While it became almost immediately obvious that this action was ineffective and in fact created any number of unintended consequences, it was years before the government adjusted
to correct this mistake.
How likely is it that supply and demand is what is driving up the gas prices?
This is a great question and reveals both an understanding of the economic way of thinking and a sense about how society operates. The answer is clear from both an economic perspective as well as an empirical perspective.
The real question is what are the elements that make up demand and supply and what are the variables that change demand and supply.
I think, that the "political stand point of our government" has almost every effect on the economy. Tax the wealthy, tax the poor. Raise the minimum wage, do not raise the minimum wage. Chapter 6 sums up the answer to your question beautifully. It discusses payroll tax, luxury tax, and whether or not to tax the seller or the buyer. It was
a pretty interesting chapter.
Yes, and it is important to keep in mind an observation about the role of government (which is vital) to the economy. The government can assist in decision making with a clear set of guidelines that protect property, insure compliance with contracts, and allows for an independent and transparent judiciary.
If higher gas prices mean we change the way people think about scare resources, then bring it on.
our price has increased due to the increase in the value of the euro. So, if the euro has increased then that means they are paying more for their gas which, in turn, effects the purchase price for Americans also.
My economic question is do you think the tax rebate checks were a true benefit to our society, or were they merely a ploy to distract us from other issues our nation faces?
I hear a lot of different things coming from China. Is it true that since they have been hording as much of the American dollar that they can, that if they want to dump it all back into the American economy at once, it would completely ruin us?
My question may be a controversial one, but I once heard that the only thing that America produces is weapons and that most everything else is bought from other countries, which pretty much leaves our country dependent on other countries. Is this
true?
I understand utilizing trade with others so you can specialize in a field that yields the highest output for yourself but how does a starting economy grow when it is not good enough at its specialty to really benefit itself or make enough money to purchase its other needs? What do you do if you simply don't have the resources or revenue to grow your economy?
On one hand, Federal oversight may stop the band lending practices from happening in the future, thereby adding stability to the housing community. On the other hand, the government has done few things right when they intervene in the private sector. Either way, some type of policy should be in place if Americans are expected to pay for the lenders mistakes and greed.
How likely is it that supply and demand is what is driving up the gas prices?
I personally believe there is a lot of corruption and wrong doings, not just supply & demand, which is driving the cost of fossil fuels.
I think, that the "political stand point of our government" has almost every effect on the economy. Tax the wealthy, tax the poor. Raise the minimum wage, do not raise the minimum wage. Chapter 6 sums up the answer to your question beautifully. It discusses payroll tax, luxury tax, and whether or not to tax the seller or the buyer. It was a pretty interesting chapter.
If you are interested in my comments or responses to student questions raised during the first week of our summer session class, click on the comments link below.
I look forward to the results of this informal poll.
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