The MR Podcast: Tariffs!
On The Marginal Revolution Podcast this week, Tyler and I discuss tariffs! Here’s one bit:
COWEN: I have a new best argument against tariffs. It’s very soft. I think it’s hard to prove, but it might actually be the very best argument against tariffs.
TABARROK: All right, let’s hear it.
COWEN: If you think about COVID policy, the wealthy nations did a bunch of things. Some of them were quite bad, and the poorer nations all copied that. They didn’t have to copy it, but there was some kind of contagion effect, or that seemed like the high-status thing to do. I believe with tariffs, something similar goes on. There’s a huge literature about retaliation. Of course, retaliation is a cost, that’s bad, but simply the copying effect that it was high status for the wealthy nations to have tariffs. They can afford it better, but then places like India had their own version of the same thing. That was just terrible for India at a much higher human cost than, say, it was for the United States. Again, it’s hard to trace or prove, but that I think could actually be the best argument against tariffs, simply that poorer countries will copy what the high-status nations are doing.
This is like Rob Henderson’s idea of luxury beliefs, beliefs which the elite can proffer at low cost but which have negative consequences when adopted by working and lower classes. Tariffs aren’t great for the US but the US is so large and rich we can handle it but if the idea is adopted by poorer nations it will be much worse for them. I wish I had been clever enough to say this during the podcast but I never know what Tyler will say in advance.
Here’s another bit:
TABARROK: Here’s the question which the Trumpers or other people never really answer is, what are we going to have less of? Yes, we’ll have more investment. Let’s say we get another auto plant. The unemployment rate is 4%, so it’s not like we have a lot of free resources around. Most of the time, we’re in full equilibrium. If we have more auto plant workers and more cars being produced in the United States, we’re going to have less of something. I think it is incumbent on people who want tariffs in order to get more employment in manufacturing or something like that to say, “Well, what are we going to have less of?”
COWEN: The more sophisticated ones of them, I think, would say, well, the US is super high on the consumption scale, even relative to our very high per capita incomes. If we end up spending some of that consumption on boosting real wages, it’s actually a good investment, if only in political sanity, stability, fewer opioid deaths. It’s a very indirect chain of reasoning. I would say I’m skeptical. Again, it’s not a crazy argument. It’s a weird kind of industrial policy where you channel resources away from consumption into investment and higher wages. A lot of those plants are automated. They’re going to be automated much yet. It’s further stuff, maybe to other robotics companies or the AI companies. Again, I think that’s what they would say.
TABARROK: I don’t think they would say that.
COWEN: No, the more sophisticated ones.
TABARROK: Are there? I haven’t seen too many of those….
Here’s the episode. Subscribe now to take a small step toward a much better world: Apple Podcasts | Spotify | YouTube.