Sunday, January 09, 2011

Classic Milton Friedman: Free Trade, Protectionism

Milton Friedman gives a concise and lucid lecture in favor of international free trade at Utah State University in 1978.


22 Comments:

At 1/09/2011 3:35 PM, Blogger juandos said...

"Why should we object them [Japanese]foreign aid?"...

Outstanding simplicity of an explanation!!

 
At 1/09/2011 3:52 PM, Blogger Ron H. said...

"Why should we object them [Japanese]foreign aid?"...

Especially since that foreign aid is in the form of millions of Japanese taxpayers helping pay a little bit toward the price of my new car?

 
At 1/09/2011 4:12 PM, Blogger juandos said...

"Especially since that foreign aid is in the form of millions of Japanese taxpayers helping pay a little bit toward the price of my new car?"...

LOL!

Which also reminds me of something Ron H, why do new Pacific Rim manufactured cars have different 'new' car smell versus a new car (regardless of who made it) made/assembled domestically?

Spent three days with a friend of mine car shopping and dang if there wasn't a distinct difference between cars made here vs there...

One thing both smells had in common though was 'money'...:-)

 
At 1/09/2011 4:21 PM, Blogger Benjamin said...

What is the free trade argument against a global monetary authority? Capital should cross borders freely--really, shouldn't there be a global currency?

It seem to me if you call for free trade, then you have to call for a global currency and global monetary authority.

 
At 1/09/2011 4:26 PM, Blogger Benjamin said...

Free trade with a budding Nazi Germany?
Okay, let's help Iran build up some nukes.
North Korea can buy our missiles, do we really care?

 
At 1/09/2011 4:33 PM, Blogger Prof J said...

Benjamin,

Global free trade would call for no intervention in the money market either. That means free banking with competitive note issue, not a global money monopolist.

 
At 1/09/2011 8:12 PM, Blogger Benjamin said...

Prof J-

American states prosper under intra-national free trade and one monetary authority. No one proposes 50 monetary authorities and currencies. (Although it would be fun to have "Montana Moose" of "California Bears" bills and coins).

Dr. Perry has used the USA model as the model for the world.

It seems a reasonable extension of the USA model to the world, that the world would have a global monetary authority. Logically, it makes sense.

I think the only reason to oppose a global monetary authority is atavistic nationalism, of the exact type bashed by free traders.

Oh Brave New World, bring unto us the Globo-Yuan, a currency good anywhere.

 
At 1/09/2011 8:31 PM, Blogger Ron H. said...

"It seem to me if you call for free trade, then you have to call for a global currency and global monetary authority."

No, Benji,

What Prof J. said.

As Craig said on another thread, there used to be a global currency called gold. Everyone understood it, and there was no "global monetary authority". Like any other commodity, money should be freely traded.

 
At 1/09/2011 8:36 PM, Blogger Ron H. said...

"...dang if there wasn't a distinct difference between cars made here vs there...

One thing both smells had in common though was 'money'...:-)
"

Hadn't noticed a different smell, but I'm sure you're right. Different plastic content I guess. You're right about the money thing...

 
At 1/09/2011 8:44 PM, Blogger juandos said...

"Hadn't noticed a different smell, but I'm sure you're right. Different plastic content I guess"...

Hmmm, that's an obvious possibility now that you mention it Ron H...

We're doomed, doomed I tell you...

Reuters says so!

 
At 1/09/2011 8:47 PM, Blogger Prof J said...

Benjamin,

I'm afraid I'm not being clear. Each state having it's own currency wouldn't be much different from what we have on an international scale now.

In nations that had free banking, the state wouldn't have control over the money. So, let's say you were importing goods to the U.S. from Taiwan, and both countries had free banking. You may not need any more than one currency: you could do it in Bank One bucks, or whatever. In other words, currencies would be unrelated to political border.

 
At 1/09/2011 8:58 PM, Blogger Ron H. said...

Thanks for the link, juandos. Doomed is right, but I don't believe it's from foreign economies, but from the imaginings of "leading thinkers in the dismal science", not from foreign economies.

from the Reuters article:

...squandering global primacy.""

What are these idiots talking about? Why should anyone worry about the size of the Chinese economy? There are 4 times as many people there.

 
At 1/09/2011 9:30 PM, Blogger DaveinHackensack said...

Prof J.,

You may not have seen this comment of mine in a previous thread, but I asked you this,

"If tariffs are violation of free trade because they restrict imports, why isn't currency devaluation, which does the same thing?"

 
At 1/09/2011 9:37 PM, Blogger Prof J said...

Dave,

I had not seen this: "If tariffs are violation of free trade because they restrict imports, why isn't currency devaluation, which does the same thing?"

but I'm happy to respond. It is a violation of free trade. And Brazil is pissed off at the U.S. about it.

And, I know what you're thinking - China is unfairly underpricing their goods. This is a grand benefit to those who import goods from China, which includes not only U.S. consumers, but U.S. manufacturers who get intermediate goods from China. Who suffers? The Chinese people.

So I think it is absolutely awful that the Chinese government treats their people that way. We shouldn't stop trading with the Chinese people because of this though. Look at what just a little bit of freedom of trade has done for them. Less intervention by the Chinese government in their economy is fully desirable, though. I am concerned at the pace of the Chinese transition.

 
At 1/09/2011 11:47 PM, Blogger Benjamin said...

Well, Prof J, now you are getting at the heart of the matter!

If nations can devalue their currencies, if China can peg the yuan, then it is obvious we need a global monetary authority, and one world currency, so we can really, really have free trade. You have made my point for me!

For real free trade, we need an all-powerful WTO, and one global central bank.

It need not be on the gold or silver standard; as explained by Milton Friedman, that is similarly atavistic thinking.

 
At 1/10/2011 2:56 AM, Blogger Ron H. said...

benji,

"For real free trade, we need an all-powerful WTO, and one global central bank."

You're trolling here tonight, right, benji?

Otherwise, your ignorance of money is astounding. Let me recommend this light reading to help you gain some understanding so you can stop embarrassing yourself.

 
At 1/10/2011 8:00 AM, Blogger Prof J said...

Benjamin,

This: "If nations can devalue their currencies, if China can peg the yuan, then it is obvious we need a global monetary authority, and one world currency, so we can really, really have free trade. You have made my point for me!"

Does not follow logically as the only option. It is not at all obvious that the Euro-type situation is the only way to fly. After all, with competitive currencies, nations would not be able to manipulate exchange rates either. Furthermore, the political economic implications of a supra-state structure are quite mind-boggling.

 
At 1/10/2011 10:54 AM, Blogger Sean said...

"Why should we object them [Japanese]foreign aid?"...

Outstanding simplicity of an explanation!!


When someone offers you a very simple explanation why everyone who disagrees with them is horribly wrong, you know they are leaving out something important.
In this case, the most notable assumption is full employment.

 
At 1/10/2011 12:59 PM, Blogger juandos said...

"In this case, the most notable assumption is full employment"...

O.K. sean I'll bite, what's YOUR definition of 'full employment'?

I don't think any time in our country's history has there ever been full employment...

 
At 1/10/2011 2:00 PM, Blogger Benjamin said...

Seems to me, we cannot truly have free trade with supra-national authorities governing trade laws and the global money supply.

Ergo, to get real free trade, we need a powerful WTO and a global currency and central bank.

 
At 1/13/2011 9:32 AM, Blogger dredlox said...

That was pretty glorious. I had never seen him speak in person, he's witty. Nice points. Substitute China for Japan and tires for steel and it all sounds very familiar

 
At 1/14/2011 3:28 AM, Blogger Emil Perhinschi said...

Except Japan did not buy US goods, but with the cheap green pieces of paper Japanese companies gained by selling underpriced steel they subsidized something else or speculated on the property market in Tokyo ... of course the Japanese salaryman paid for this, and is still paying, even if Japanese companies can't afford now to subsidize steel but have to pay the debts incurred while subsidizing it.

 

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