Koch Scholars Jan. 25 event

An interesting point brought up this evening by Chelsey Funk was her observation that a divide exists between politicians and economists, and more cooperation between the two would be beneficial. Most of the cooperation that does exist happens between a politician and his handpicked economic advisor who will give him the economics he wants to hear. I think the biggest reason for the disconnect between economics and politics is the long-term nature of economic policies and the short-term focus on re-election that happens in politics, necessitating quick action with quick results and benefits. Protectionism is a tempting choice because in the short-run it secures employment and shows an applauded sense of patriotism. The reality, as presented both by Adam Smith and Russell Roberts, is that protectionism hurts consumers in the long run because products remain expensive, innovation is hampered, and progress becomes limited. However, Smith is quick to realize the short-term implications of removing all barriers to foreign trade when he says, “Were those high duties and prohibitions taken away all at once, cheaper foreign goods of the same kind might be poured so fast into the home market, as to deprive all at once many thousands of our people of their ordinary employment and means of subsistence.” (469) For this reason, few politicians will remove tariffs or similar limitations on imports because the eventual benefits could take years or even decades to manifest themselves, and the consumers and future generations being harmed by protectionism don’t have as prominent a voice as those losing their jobs to foreign competition. I see the problems of shortsightedness in nearly every aspect of politics, and the solution to such a problem is something I frequently puzzle over.

An aspect from both “The Choice” and “The Wealth of Nations” that I found to be particularly relevant to today is the idea of trade balance. Whenever I hear the United States’ trade deficit talked about in the media, politics, or conversation, it is always assumed to be a negative thing that is damaging our domestic economy and creating a vulnerable spot in our national security. The reasoning always made sense to me, but Roberts clearly rejects such a notion. He says, “It is tempting to say that America runs a trade deficit because foreign nations won’t let their citizens buy American products. But as long as foreigners want to buy more American assets than Americans wish to buy foreign assets, America will run a trade deficit even if every country in the world was free of all trade barriers and welcomed American products as freely as their own.” (73) Roberts further stresses that “the most important things to remember about trade balances … is that they are the result of economic factors and not the cause.” (77) Adam Smith borrows an interesting analogy from Thomas Mun seeking to clarify misunderstandings surrounding foreign trade. He says, “If we only behold the actions of the husbandman in seed-time, when he casteth away much good corn into the ground, we shall account him rather a madman than a husbandman. But when we consider his labours in the harvest, which is the end of his endeavors, we shall find the worth and plentiful increase of his actions.” (431-432) Alas, the nature of politics blurs our vision of the harvest and we fail to recognize, “Trade with China and India makes America a richer country in both the financial sense and in the sense of expanded opportunity to live a meaningful life." (Roberts, Preface)

Kelsey White