Friday, December 6, 2013

Compromise US & India; WTO

A deal over the subdies that India applies to its farmer were taken into consideration by the WTO and it had mostly to deal with the fact that the subdy hurts the farmers of India and this was something that the US did not want to continue. 
As we discussed in class trade may be effected by policies or laws that the home countries does not see as good or morally wrong. The US may see the fact that farmer are losing profits due to a subsidy and there by may not want to trade until they make changes to their laws or policies. Now normally since the US is a large country that may be a large portion of India's export this would be a bad for India, but fortunately their exist the WTO which helps with the rules of trade so that business would be conducted. After the WTO meetings there was a comprise "the Indian subsidies will remain, subject to future negotiations, and a trade facilitation effort will move forward". 
Unfortuantely this does not help with the issue that the US would like to resolve but a comprise to future negotiations may be the next best thing to change India's policy. Although if the WTO would ask who would have more power over the other and ask if the US has any monopsony power that would give it the power to control other countries thru trade? 

Thankyou All for everything and I hope you all have a nice finals week. Good Luck!

Both developed countries and poor countries would get hurt from tariffs.

As the textbook (chapter 8) says, under perfect competition, each country or firm is a price taker in its market. The use of an import quota is a limit on the quantity of a good that can be imported from a foreign country. Past Examples of import quotas in the United States include limits on the imports of agricultural goods, automobiles, and steel. More recently, the United States and Europe have imposed quotas on the imports of textile and steel from China. Here is the example about the deadweight loss due to a tariff with the U.S. steel tariff in place from March 2002 to December 2003.
I think the major reason why the U.S. would do so was the political motivation. We could use small-country model to explain how costly these tariffs were in terms of welfare. Because the U.S. was a large country so it can earn itself by finding its optimal tariffs (sometime), and American prices were falling in the steel industry from 1998 to early 2001. Those losses, along with falling investment and employment, met the condition of ‘serious injury’. So the U.S. was willing to protect the steel industry by setting a tariff of steel to many developing countries. President Bush made other supplier countries including Europe, Mexico and China crazy and stressful. Then, these small countries did not want to stand the deadweight loss (especially the big hurt to native consumption). In response, many European countries pushed tariffs of juices, papers and meats to America, which almost caused the greatest loss and political impact in America in 2002.

In general, I criticize someone sets trade barriers policy on the developing world. Because trade barriers such as taxes on food imports for farmers in poor-country players usually leads to vicious circle, dumping, overproduction on world markets. Thus, we need to support free trade and restrict government right on managing market-oriented economy.

Lessons Learned

Coming into this class I may have had some preformed opinions on international trade, mainly that cheap Chinese goods were going to hurt our economy. However in having Professor Bang for principles i knew i couldn't come into class and blindly argue from this perspective. Keeping as open a mind as possible in this class led me to some completely reversed thinking on several issues. The first of these issues that comes to mind is that overall, countries cannot me made worse off from trade from the Ricardian Model. This theory and others like it that we learned in the class led me to think of the economy in a more global sense. A single country can be as efficient as possible within their own borders but in the global economy we have today, that country will still be negatively impacted by the inefficiency of the other countries. My point is, is that I now look at the global economy and the need for efficiency amongst all countries of the world. How do we make this global economy as efficient as possible? I don't know but i do know/think now that we need to be mindful of the efficiency of the gobal economy and not just individual countries, or individual groups in those countries. I think one point in the class where i realized i needed to re-evaluate my stance occured when I realized I was agreeing with the unions in that we should restrict "cheaper" imports to save American jobs, well unfortunately for them, losing their jobs may be best for global efficiency.
Another valuable lesson I learned this semester was not to jump to conclusions but to realize every effect has a magnifying effect, meaning a change in one thing will cause changes in other things, even if those other things are seemingly unrelated; but its important to slow down and really think things through.

Sufficientarian Liberalism


I was reading an article on Bleeding Heart libertarians about Sufficientarian Liberalism 
. The concept is that government should abolish all barriers to market entry while simultaneously providing a safety net for the poor. We would provide no subsidies, tariffs, state-educations and barrier to immigration. The poor would be the only ones with wealth redistribution. The author Fernando Teson points out the Doctrine of Right by Kant. Which states that the state must be able to provide for those unable to provide for themselves.
            Through more efficient run markets we would see a closer perfect competition be reached over a period of time like we haven’t seen. This would reduce the waste the government spent on subsidies, privileges and other inefficiencies. Big government would be reduced to just programs that were in place to provide a safety net for those unable to provide for themselves. With the decrease to entry into a field the opportunity to create jobs could be enormous and not restrict growth because Crony-Capitalist have congress providing a safety net for their own private gain. With more opportunities and less spending through this deregulation we would see a dramatic shift in improvement in welfare as whole. The author does mention that this is a very open idea where the finer details are yet to be established.
            The thought that deregulation of business and government aid to business could actually improve welfare as a whole is a very interesting concept. Is it possible that this could be a perfect median between Republicans and Liberals where socially the needy are taken care of and the private sector is deregulated? Thoughts?

Wednesday, December 4, 2013

Agreeing to Disagree?

Before Thanksgiving, I flippantly made the point to the class that "agreeing to disagree is not an equilibrium." This is actually a pretty classic result in game theory, and was originally "proven" in 1976 by Robert Aumann and has become known as "Aumann's agreement theorem." A shorter and slightly more intuitive (read: less topological mathematics) can be found here
Here is the basic argument: Two people start with the same "priors" (i.e. would believe the same thing if given the same information), but then receive different information (and therefore have different posterior beliefs). Assume that these beliefs are not represented by single points, but rather by probability distributions taking values over a range of possible "truths."[1] Also assume that the information sets of the agents are "common knowledge" (i.e. each agent knows the other’s opinion and knows that the other agent knows his opinion). If this is the case, then honest agents who exchange information (each had different information at the start) can never disagree.
There is some criticism of the result with respect to the "common knowledge" assumption, but there have been some extensions of the theorem that relax this assumption slightly and still retain the basic result. 
Another interesting point, by Robin Hanson and Tyler Cowen, is that most disagreements are likely to be dishonest because people are deceived into thinking that they are “better arguers” than others. This means that people are not in fact truth-seekers in arguments. They conclude with tips for being more truth-seeking in arguments. They include:
1.     Do not assume that you are more rational than others.
2.     Adopt a moderate opinion (of course, now we can disagree about what constitutes a “moderate” opinion!).
3.     Become aware of signs of self-deception. Signs include: self-interest, emotionality, informality, difficulty articulating arguments, stubbornness, and ignorance of cognitive biases.
I would also add that the greater the degree to which someone is arguing on the basis of conviction rather than fact, the higher the likelihood that they are self deceived. But I suppose that’s an argument for another day.




[1] It is important to represent the posterior beliefs as probability distributions because the whole point of the theorem is that the agents are honest truth seekers (which implies that they do not believe themselves to know "truth"). More on honesty later.