Tariff Musings

Economists have been beating the drum for free trade for at least two and a half centuries, at least since Adam Smith published The Wealth of Nations. People refuse to learn, or they just don't care. The new tariffs--calculated incoherently from meaningless data--will bring a big price tag. The Tax Foundation estimates a 0.8% hit to GDP and almost 670,000 lost jobs.

So why does protectionism remain so stubbornly popular even though it has been thoroughly discredited (and do note: I suspect a lot of people criticizing Trump were cheering Obama when he said he wanted to renegotiate NAFTA in 2008)? There are a lot of reasons, but here are two hypotheses:

1. We're underrating the rhetorical and psychological importance of machismo. It's not enough to prosper by providing financial services and trading them for manufactured goods. It's much more important that people do macho, muscular, sweaty jobs that build muscle and make your back ache. I get the sense that Trump feels less masculine if he's superintending a nation of shopkeepers rather than a country filled with hard-hatted factory workers who can beat the shopkeepers up without much of a problem.
2. Politicians lust after power. Is Trump playing 4-D chess with trade policy? Maybe, but a simpler and more likely explanation is that Trump loves nothing more than raw power. Of course, every politician loves bending people to their will, but Trump appears to be much more frank about it. As always, SMBC is brilliant on this: I like the audience response to the demagoguing politician: "We liked the part where you yelled about experts in a folksy accent but not the part where you proposed a solution that might work and didn't involve hurting enemies."

And speaking of demagoguery, it's always a good time to read Bryan Caplan's How Evil Are Politicians? Essays on Demagoguery. And, of course, Mere Economics.