in Recent essays in American CompassMichael Lind attempts to refute certain aspects of economists’ arguments about free trade. others have dealt with A number of empirical, factual and theoretical issues are included in his essays. I will focus on just one particular claim. Lind writes:
The attack on tariffs as regressive taxes unites two themes of early 21st century neoliberalism. One is the left-wing neoliberal doctrine that individual taxes, rather than government policies or the economy as a whole, must be progressive in their effects. The other is that it is “efficient” to deregulate trade and immigration to lower wages for workers and thereby lower prices for consumers, as long as the “winners” compensate the “losers”; Therefore, it is the doctrine of right-wing neoliberalism that it is the best policy. Forms of redistribution through tax law.
For reasons of space, I will ignore his claims about the left-wing dogma and focus on the right-wing dogma claims. “It is “efficient” and therefore the best policy to reduce trade and immigration regulations to reduce workers’ wages and thereby lower prices for consumers.” “Winners” defeat “losers.” As far as compensation, preferably in the form of redistribution through tax law. ” Lind doesn’t provide any quotes or links to support his claims, so it’s hard to know who (or what) exactly he’s responding to here. If you open a trade textbook, the doctrine he claims will not exist.
Rather, I think He mentions a potential consequence in international trade called the factor equalization theorem. Wolfgang Stolper and Paul Samuelsson, 1941 and Abba Lerner, 1952. Dear reader, without going into technical details, this theorem states that under certain conditions, if you trade with a trading partner that is relatively labor-abundant, wages will rise and the return to capital will increase. Note that we are saying that the number of trading partners with relatively abundant labor will decline, while the number of trading partners will decline. If capital is relatively abundant, returns to capital will increase and wages will fall. According to this theorem, factor prices (wages and returns on capital) are equal between trading partners, wages are equal between two countries, and returns on capital are equal between two countries.
Assuming that my idea that he is realizing the factor equalization theorem is correct, Lind takes advantage of it, gives it certain claims that no one actually holds, and converts them into the doctrine of free trade. seems to be claiming that. The problem is that this theorem does not hold up well to empirical scrutiny. The assumptions in it are too strong. In particular, this theorem requires that the labor power (as well as the capital) of all trading partners is effectively the same. In fact, labor is do not have It is the same across many trading partners. American workers are extremely productive, and we operate in a capital-driven economy with strong, stable institutions, higher education, and generally high access to productivity-enhancing infrastructure. . In contrast, Chinese workers are not and are much less productive. According to world bankThe average Chinese worker produces approximately $42,000 worth of goods and services annually. Conversely, the average American worker produces approximately $150,000 worth of goods and services annually, and the average American worker is 257% more productive than the average Chinese worker. That’s it. Chinese workers cannot replace American workers. We shouldn’t expect trade to drive American wages down toward Chinese wages. surely, I don’t think Americans’ wages will go down..
To make this point less abstract, consider the following. My hometown football team, the New England Patriots, is in dire need of a good quarterback. I’m a 35-year-old man and I want to play for the Patriots. In fact, they would offer me the league minimum wage ($795,000) and I would immediately quit my job and play for the Patriots. Millions of other New Englanders (and Americans, for that matter) would also take the Patriots’ offer. So why did the Patriots offer UNC’s 21-year-old rookie Drake Maye nearly $60 million ($36 million over four years plus a $24 million signing bonus)? The answer is obvious. He and I are not the same no matter how you look at it. No one would reasonably expect our wages to be the same (mine going up, his going down). In this case, the theorem does not hold.
Factor price equalization is more likely to occur between very similar trading partners, such as the United States and Canada. That is, the technology is similar, transfer costs are low, and the workers are similar. However, the smoothing of factor prices is do not have Lind seems to think so. in fact, The opposite can just as easily happen. Factor price equalization is a special case of trade, not the general case.
John Murphy is an assistant professor of economics at Nicholls State University.
