1/9
It is indeed a great explanation, but only if Argentina exists in the world of Econ 101, where capital is scarce and always flows to its most productive use, foreign and domestic governments are unable to distort the economy, and trade always balances...
ht @jorge_guajardo
It is indeed a great explanation, but only if Argentina exists in the world of Econ 101, where capital is scarce and always flows to its most productive use, foreign and domestic governments are unable to distort the economy, and trade always balances...
ht @jorge_guajardo
https://twitter.com/DrEliDavid/status/1826938987329561062
2/9
according to comparative advantage. That's when cheaper textiles from Pakistan would allow Argentina to relocate workers into sectors in which it has a comparative advantage. In that world, both Argentina and Pakistan are better off because Argentina can sell to Pakistan.
according to comparative advantage. That's when cheaper textiles from Pakistan would allow Argentina to relocate workers into sectors in which it has a comparative advantage. In that world, both Argentina and Pakistan are better off because Argentina can sell to Pakistan.
3/9
But what if we live in a world in which Pakistani textiles are competitive mainly because Islamabad is trying to expand textile exports by imposing measures that directly and indirectly prevent wages in Pakistan from rising with productivity?
But what if we live in a world in which Pakistani textiles are competitive mainly because Islamabad is trying to expand textile exports by imposing measures that directly and indirectly prevent wages in Pakistan from rising with productivity?
4/9
In that case, Pakistani exports will rise but its imports will not. This means that the Argentine textile workers that are left unemployed by Pakistani imports will not be able to find other jobs, unless Argentina encourages a rise in household debt, because the total...
In that case, Pakistani exports will rise but its imports will not. This means that the Argentine textile workers that are left unemployed by Pakistani imports will not be able to find other jobs, unless Argentina encourages a rise in household debt, because the total...
5/9
consumption available to drive Argentine production will have contracted. In that case Argentina would probably have to choose between allowing unemployment to rise, thereby reducing its total production, or forcing production to be driven by rising debt.
consumption available to drive Argentine production will have contracted. In that case Argentina would probably have to choose between allowing unemployment to rise, thereby reducing its total production, or forcing production to be driven by rising debt.
6/9
By imposing tariffs, however, Argentina would be able to retain those workers, and so it would have either more production, or the same amount of production with less debt. That would be a better outcome.
But economics is less a science than an ideology, which means that...
By imposing tariffs, however, Argentina would be able to retain those workers, and so it would have either more production, or the same amount of production with less debt. That would be a better outcome.
But economics is less a science than an ideology, which means that...
7/9
practitioners must decide either that tariffs are always good or that they are always evil. That is why the main form of disagreement with this thread is likely to be in the form of angry counterexamples in which tariffs have clearly repressed growth.
practitioners must decide either that tariffs are always good or that they are always evil. That is why the main form of disagreement with this thread is likely to be in the form of angry counterexamples in which tariffs have clearly repressed growth.
8/9
There are many such examples, but I'd propose that there have been cases historically in which tariffs have positively affected growth and other cases in which they have negatively affected growth. Rather than choose a side, it would be much more helpful to...
There are many such examples, but I'd propose that there have been cases historically in which tariffs have positively affected growth and other cases in which they have negatively affected growth. Rather than choose a side, it would be much more helpful to...
9/9
work through the range of conditions in which tariffs are likely to boost growth, and the conditions in which they are likely to suppress growth, and then see which set of conditions more closely applies – not to Econ 101 but rather to the world in which we live.
work through the range of conditions in which tariffs are likely to boost growth, and the conditions in which they are likely to suppress growth, and then see which set of conditions more closely applies – not to Econ 101 but rather to the world in which we live.
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