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Thread: Dubious Assumption #2: There are no externalities.

  1. #1

    Default Dubious Assumption #2: There are no externalities.

    An externality is a missing price tag. More precisely, it is the economists' term for when the price of a product does not reflect its true economic cost or value.

    The classic negative externality is environmental damage, which reduces the value of natural resources without raising the price of the product that harmed them. The classic positive externality is technological spillover, where one company's inventing a product enables others to copy or build upon it, generating wealth that the original company can't capture.

    If prices are wrong due to positive or negative externalities, free trade will produce suboptimal results.

    For example, goods from a nation with lax pollution standards will be too cheap. So its trading partners will import too much of them. And the exporting nation will export too much of them, overconcentrating its economy in industries that are not really as profitable as they seem, due to ignoring pollution damage.

    Positive externalities are also a problem. If an industry generates technological spillovers for the rest of the economy, then free trade can let that industry be wiped out by foreign competition because the economy ignored its hidden value. Some industries spawn new technologies, fertilize improvements in other industries, and drive economy-wide technological advance; losing these industries means losing all the industries that would have flowed from them in the future.

    http://www.ronpaulforums.com/showthr...92#post3202492
    Last edited by tangent4ronpaul; 04-10-2011 at 09:10 PM.
    Public education is not education ... it is schooling.
    Our military is not defense ... it is warmongering and empire building.
    Government police do not protect ... they control.
    Regulations do not regulate ... they protect the status quo.
    Government banks do not distribute money based on effort ... it is gifted to close friends ... and some of it trickles down.

    The result is war, poverty, fear, chaos, and hopelessness for most people with abundance for a few elite.
    -Travlyr



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  3. #2

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    I think this much is certainly true. If you've got slave labor producing a product (via force) then there is no way you can price your product to compete if you are respecting people's human rights.

    I'd be very interested to hear a defense of free trade with a producer who is exploiting their workers, I can't imagine there is one.

  4. #3

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    Quote Originally Posted by BrendenR View Post
    I'd be very interested to hear a defense of free trade with a producer who is exploiting their workers, I can't imagine there is one.
    There is and it's very obvious. Americans shouldn't be restricted from trading with Cubans because it violates the rights of Americans.
    Last edited by low preference guy; 04-10-2011 at 09:31 PM.

  5. #4

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    Quote Originally Posted by BrendenR View Post
    I think this much is certainly true. If you've got slave labor producing a product (via force) then there is no way you can price your product to compete if you are respecting people's human rights.
    Comparative advantage applies regardless of the reason a product costs less. If it's due to technology or low wages, it still holds that you should shift your production to those things in which you have a comparative advantage. That's what happens naturally when the government doesn't intervene.
    Last edited by low preference guy; 04-10-2011 at 09:33 PM.

  6. #5

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    Quote Originally Posted by low preference guy View Post
    There is and it's very obvious. Americans shouldn't be restricted from trading with Cubans because it violates the rights of Americans.
    I don't see that as obvious. I'll have to disagree. For the same reason that someone using slave labor within the US should not be allowed to operate that business, someone outside the US should not be allowed to either.

    They are operating an illegal enterprise and they should be shut down (or trade restricted as it were).

  7. #6

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    Quote Originally Posted by BrendenR View Post
    I don't see that as obvious. I'll have to disagree. For the same reason that someone using slave labor within the US should not be allowed to operate that business, someone outside the US should not be allowed to either.
    Are you saying that whenever an American buys a products from a foreigner, the U.S. government should verify that the product wasn't made with what you call slave labor?

  8. #7

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    Strawman.

    Who said there are no externalities?

    Externalities are dealt with by internalizing them into the price structure not by regulations on trade. If Chicago reverses the Chicago river and sends its sewage to St Louis and the Mississippi the solution is not to prohibit trade between Illinois and Missouri. The solution is to sue Chicago for polluting St Louis, hence internalizing the externality.
    Truth forever on the scaffold, Wrong forever on the throne,--
    Yet that scaffold sways the future, and, behind the dim unknown,
    Standeth God within the shadow, keeping watch above his own.
    ‫‬‫‬

  9. #8

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    Quote Originally Posted by low preference guy View Post
    Are you saying that whenever an American buys a products from a foreigner, the U.S. government should verify that the product wasn't made with what you call slave labor?
    No, I wouldn't say that.

    The problem I have is that I believe the rights of men to be inalienable. That does not apply just to Americans.

    Therefore, if the rights of someone are being abused, we should not turn a blind eye to that.

    I honestly don't know what the solution should be, but to simply ignore that seems quite anti-liberty to me.

  10. #9

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    I think you should think about it better.

    Quote Originally Posted by BrendenR View Post
    The problem I have is that I believe the rights of men to be inalienable. That does not apply just to Americans.

    Therefore, if the rights of someone are being abused, we should not turn a blind eye to that.

    I honestly don't know what the solution should be, but to simply ignore that seems quite anti-liberty to me.
    How is that different from saying: I think not stopping Gaddafi is quite anti-liberty to me.

    The U.S. government SHOULD ignore it, because its role is to protect the rights of Americans. Otherwise, the U.S. will be the policeman of the world and will go bankrupt.

    That doesn't mean however that an INDIVIDUAL should ignore it. You're free to help those oppressed abroad with your money and limb.

  11. #10

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    Quote Originally Posted by BrendenR View Post
    No, I wouldn't say that.

    The problem I have is that I believe the rights of men to be inalienable. That does not apply just to Americans.

    Therefore, if the rights of someone are being abused, we should not turn a blind eye to that.

    I honestly don't know what the solution should be, but to simply ignore that seems quite anti-liberty to me.
    It sounds to me like you want to fight someone else's fight for them. No matter how shitty it is that you think people there being forced into 'slave labor' is, they have to want freedom much more so than you. We're just one country. Us putting a trade embargo on say, cigars, isn't going to stop people from around the world from buying them... perpetuating the system regardless of what we try to do to change that.

  12. #11

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    Quote Originally Posted by low preference guy View Post

    That doesn't mean however that an INDIVIDUAL should ignore it. You're free to help those oppressed abroad with your money and limb.
    And get an all expence paid vacation at GITMO for your troubles for aiding a foreign terrorist organization.
    Public education is not education ... it is schooling.
    Our military is not defense ... it is warmongering and empire building.
    Government police do not protect ... they control.
    Regulations do not regulate ... they protect the status quo.
    Government banks do not distribute money based on effort ... it is gifted to close friends ... and some of it trickles down.

    The result is war, poverty, fear, chaos, and hopelessness for most people with abundance for a few elite.
    -Travlyr

  13. #12

    Default

    Quote Originally Posted by low preference guy View Post
    How is that different from saying: I think not stopping Gaddafi is quite anti-liberty to me.
    I am not saying that we should go to foreign nations and do anything.

    My position is that the US should not be the counter party to a transaction that involves the abuses of people's rights.

    For example, if I were to shoot you, take your gold, and fly off to France to sell it, what should the outcome be? I have violated your right to life.
    By the same token, if I were to enslave you, take the gold you mine, and fly off to France to sell it, I have also violated your right to life.

    The product is not mine to sell.

    It has nothing to do with wanting to use the government to some ends, but simply to enforce the law once the transaction reaches our shores, it becomes our problem.

    Let me pose a question to you:

    If property is illegally obtained outside the US, and is brought into the US, should the seller be free to engage in all and any economic activity with that product?
    Last edited by BrendenR; 04-10-2011 at 10:07 PM.

  14. #13

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    My position is that the US should not be the counter party to a transaction that involves the abuses of people's rights.
    Today, every country abuses people's rights. That means we won't trade with anyone, even ourselves.

    Quote Originally Posted by BrendenR View Post
    If property is illegally obtained outside the US, and is brought into the US, should the seller be free to engage in all and any economic activity with that product?
    I'm not sure what the mechanism is regarding suing in a country for something stolen in some other country. But in principle, it has to be proven that the specific person stole that specific property before the U.S. attempts to seize those products and return them to their rightful owners. You can't assume somebody is guilty without proving it.
    Last edited by low preference guy; 04-10-2011 at 10:12 PM.

  15. #14

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    Quote Originally Posted by low preference guy View Post
    Today, every country abuses people's rights. That means we won't trade with anyone, even ourselves.
    I'd like to make a distinction between the individuals participating in the abuses and the country as a whole. I'd never advocate for not trading with a country as a whole. The companies and individuals involved would need to be treated separately. Innocent until proven guilty.


    I'm not sure what the mechanism is regarding suing in a country for something stolen in some other country. But in principle, it has to be proven that the specific person stole that specific property because his products are returned to their rightful owners. You can't assume somebody is guilty without proving it.
    Absolutely. Innocent until proven guilty. I would never advocate for anything else. I'd expect that an accusation would be made, evidence would be presented, right to face accuser, etc. all of these are important components that I absolutely believe in.





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