I loved this one. I got into it with Don years ago on CafeHayek.
I had just finished a book called Free Trade Doesn't Work by Ian Fletcher and wasn't sure whether Fletcher's argument held water. I decided to use the internet to throw Fletcher at a legitimate academic economist and rabid free trader. I chose Don Bourdeax.
The argument I used with him? "When we import something, we can pay for it with stuff we make now, stuff we make later, or stuff we've already made. The first one is exports; the second is bonds; the third is hard assets. #2 has to be paid back and #3 you will eventually run out of, so you should attempt to maximize 1." This was Fletcher's basic case that I found so convincing and eye opening.
Don didn't. He deleted the comments on that blog post, but after going back and forth with him 4-5 times (using Fletcher's arguments) Don was simply talking himself in circles and saying nothing. I finally decided Fletcher must be right since the smartest libertarian economist in the room didn't have an answer.
Don's final response to me: https://cafehayek.com/2017/10/free-trade-not-founded-religion.html (as a separate post) sounds a lot like his responses to you: "it's obvious and you're just too dumb to see it." Isaac Asimov once opined, "violence is the last refuge of the incompetent", but I think personal insults are a good indicator too.
So in a weird way, Don Bourdeaux helped make me skeptical about free trade.
BTW: For all social media's problems, the internet is amazing. How else can a schmuck from Sacramento have a public debate with the chair of the George Mason economics department? (And, if I do say so myself, kick his butt -- with help from Ian.)
"The investment, innovation, jobs, capacity, skill, and so on associated with the production of goods for export all have social and economic value for the nation... Economists literally do not understand this, and pride themselves on not understanding it."
This cuts straight to the rot at the heart of modern economics. It doesn't matter whether they're colored in blue, red, or yellow & black—today's economists fashion themselves as priests in a temple most people can't enter, then pontificate about free trade as though the real world operates on their chalkboards.
The trouble is they've abandoned reality for ideology. They only model frictionless markets in a world where nations, borders, families, and actual human beings still matter. This isn't merely ridiculous...
It's intellectual malpractice dressed up in mathematical clothing.
Their fantasy has little connection to how economies function for working people.
Thanks for the analysis, Oren. Someone needs to speak plainly about what they do.
Speaking of banal, I’d offer the DonOrenomics policy in the ag sector. Tariffs harm the industry, farmers complain, so Don takes tariff revenue and sends them welfare checks as a political payoff. Food stamps for those growing our food I guess, or a new form of taco tariff. Meanwhile, Don touts his big trade agreement with Xi. The one where they extract concessions from us, and in return they merely agree to buy the same amount of soybeans next year that they did last year. Art of the deal I guess.
I wonder if establishment elites in the MAGA “new” right understand the impact of food prices on the workin stiffs they purport to care about. Oren seems more interested in arguing with fellow elites over economic arcana. His defensiveness is tiring. In any event, voters don’t seem to appreciate Oren’s good news. Don’s polling on the economy is at Joepa’s level and dropping. No wonder he’s furiously tacoing.
What all these economists can't seem to understand is that disconnecting trade from mutual defense and rule of law creates a tragedy of the commons. Its like the people back in the 80s whining about single moms and the decline in morals. While ignoring how are welfare policies rewarded their behavior.
Our current trade policies amount to rewarding Mexico for its corruption with more factories. While we punish Canada for helping defend the global supply chains by taking away their factories.
Don is only half right, but half is better than being all wrong and to pig headed to admit your theories are failing in the real world.
You’re essentially saying Trump is a broken clock who is right twice a day.
The problem is that he’s wrong on everything else, and that everything else is causing tremendous harm to the country. His latest sellout - caving to the tech bros in his government to lift export controls on NVIDIA GPU’s to China - is going to do far, far more damage to national defense than the trade deficit is.
In reality what he's doing on immigration is in the same vein. Stopping the game that rewards employers who figure out ways to use illegals and asylum seekers rather then rewarding those that innovate to reduce the labor needed in the first place.
Same with ending the corrupt and openly racist DEI games. Racism itself was always corrupt and held us back, reversing to racism against whites wasn't an improvement.
Same with shutting down the ever growing grift of NGOs sucking at the state and education departments.
Again, not a big fan of Trump but when your choices are more of the same ideological morons from their equally blinded bubbles, you can put up with a loud mouth buffoon for a few years.
The problem is that there is no better way to discredit a decent idea or policy than putting Trump in charge of executing it. The few decent policy instincts he has are going to be radioactive for a generation because he is so personally corrupt and only cares about a given policy to the extent it helps him.
More realistically, the rest of the world is going to figure out Trump was just slightly ahead of the curve. Go back to my original comment. The current system is falling apart. Italy, France or Germany can't afford to spend enough on defense if companies can just put their headquarters in Ireland, get access to the EU market but not have to pay for it's defense.
Same on immigration. It was supposed to save European welfare states but is in reality costing more in welfare and criminal justice.
The current system is not falling apart. It may be showing signs of strain, and there are certainly some negative effects that have come into clearer focus in the past decades. But keep in mind this system has performed remarkably well over the last 70 years - Americans are a lot wealthier now than they were decades ago. This means that whatever system replaces it has to be better - not just as good or less good. That's a high bar, and Trump, who is undisciplined, unfocused, and uninformed on nearly every decision he makes, seems not to care about this.
Hey Oren - If you're going to accuse Boudreaux of sophistry, then its probably best to avoid sophistry in your rebuttal. Why did you choose $100B in the production of airplanes as your example of an item that could be manufactured domestically for the greater benefit of society? Why not choose $100B in cheap plastic toys instead?
The reason, as you well know, is that the benefit of the US producing $100B of a high-tech item like airplanes is far, far more beneficial to the American worker than the production of $100B of cheap toys would be. In fact, if the U.S were to run a trade surplus because we are the world's leading producer of cheap plastic toys, then the $100B in IOU's we issue today on the capital accounts side would be something we'd all very much wish we still had.
In a roundabout way, your rebuttal actually answers Boudreaux's questions. You would obviously think very differently about a U.S trade surplus if it was the result of a manufacturing base that mostly used cheap low skilled labor to produce cheap goods. So not all trade surpluses are created equal.
Trade surpluses can be bad, or they can be good. And they are good only if they meet your criteria for being good - which is that they have to be the result of the U.S producing high tech items requiring high skilled labor. And for whatever reason, you think that this is somehow preferable to the U.S running a trade surplus in the export of high skilled, high tech services. As Boudreaux's questions suggest, you're just cherry picking the best possible examples of how to re-order the U.S economy, without ever bothering to consider that the economy you envision on paper might not at all be the one that you get.
"If they hope to reclaim power, they’ll need to nominate candidates who credibly believe in securing the border and enforcing our immigration laws as a matter of sound public policy. It’ll be a tall task."
Nonsense. They just need to have candidates who can pretend well - which the D's are incredibly good at. The Democrats need uncontrolled immigration and need most of the migrants to settle in blue states, because they need to game the 2030 Census to give themselves more House seats. Remember, illegal aliens don't vote, but must be counted for purposes of apportionment under the clear language of 14A.
Sad that you still receive inane feedback regarding the policies you propose, especially from economic professors at an otherwise respectable University (where my daughter recently graduated, but thank goodness not in the field of economics). As valuable as book-learning is, it still can’t beat a healthy dose of common sense.
This is a roundabout way of encouraging you, Oren. You’re doing great work and we’re proud of you.
I am probably nit picking here but feel compelled to correct a factual error in your news letter. You make the statement that being in the U.S. illegally automatically makes one a criminal. It does not. If one over stays their visa, i.e. entered the country legally and over stayed it is not a criminal offense. It is a civil offense and is more analogous to a speeding ticket or possession of a small amount of Marijuana.
Brillaint breakdown of Boudreaux's airplane/treasury bonds comparison. The whole idea that an economist would treat producing goods and printing IOUs as equivalent value is wild when you think about what that means for long-term industrial capacity. I've been in manufacturing forlike 8 years and the differnce between building tangible products versus financing feels pretty obvious on the ground.
I loved this one. I got into it with Don years ago on CafeHayek.
I had just finished a book called Free Trade Doesn't Work by Ian Fletcher and wasn't sure whether Fletcher's argument held water. I decided to use the internet to throw Fletcher at a legitimate academic economist and rabid free trader. I chose Don Bourdeax.
The argument I used with him? "When we import something, we can pay for it with stuff we make now, stuff we make later, or stuff we've already made. The first one is exports; the second is bonds; the third is hard assets. #2 has to be paid back and #3 you will eventually run out of, so you should attempt to maximize 1." This was Fletcher's basic case that I found so convincing and eye opening.
Don didn't. He deleted the comments on that blog post, but after going back and forth with him 4-5 times (using Fletcher's arguments) Don was simply talking himself in circles and saying nothing. I finally decided Fletcher must be right since the smartest libertarian economist in the room didn't have an answer.
Don's final response to me: https://cafehayek.com/2017/10/free-trade-not-founded-religion.html (as a separate post) sounds a lot like his responses to you: "it's obvious and you're just too dumb to see it." Isaac Asimov once opined, "violence is the last refuge of the incompetent", but I think personal insults are a good indicator too.
So in a weird way, Don Bourdeaux helped make me skeptical about free trade.
BTW: For all social media's problems, the internet is amazing. How else can a schmuck from Sacramento have a public debate with the chair of the George Mason economics department? (And, if I do say so myself, kick his butt -- with help from Ian.)
"The investment, innovation, jobs, capacity, skill, and so on associated with the production of goods for export all have social and economic value for the nation... Economists literally do not understand this, and pride themselves on not understanding it."
This cuts straight to the rot at the heart of modern economics. It doesn't matter whether they're colored in blue, red, or yellow & black—today's economists fashion themselves as priests in a temple most people can't enter, then pontificate about free trade as though the real world operates on their chalkboards.
The trouble is they've abandoned reality for ideology. They only model frictionless markets in a world where nations, borders, families, and actual human beings still matter. This isn't merely ridiculous...
It's intellectual malpractice dressed up in mathematical clothing.
Their fantasy has little connection to how economies function for working people.
Thanks for the analysis, Oren. Someone needs to speak plainly about what they do.
Speaking of banal, I’d offer the DonOrenomics policy in the ag sector. Tariffs harm the industry, farmers complain, so Don takes tariff revenue and sends them welfare checks as a political payoff. Food stamps for those growing our food I guess, or a new form of taco tariff. Meanwhile, Don touts his big trade agreement with Xi. The one where they extract concessions from us, and in return they merely agree to buy the same amount of soybeans next year that they did last year. Art of the deal I guess.
I wonder if establishment elites in the MAGA “new” right understand the impact of food prices on the workin stiffs they purport to care about. Oren seems more interested in arguing with fellow elites over economic arcana. His defensiveness is tiring. In any event, voters don’t seem to appreciate Oren’s good news. Don’s polling on the economy is at Joepa’s level and dropping. No wonder he’s furiously tacoing.
What all these economists can't seem to understand is that disconnecting trade from mutual defense and rule of law creates a tragedy of the commons. Its like the people back in the 80s whining about single moms and the decline in morals. While ignoring how are welfare policies rewarded their behavior.
Our current trade policies amount to rewarding Mexico for its corruption with more factories. While we punish Canada for helping defend the global supply chains by taking away their factories.
Don is only half right, but half is better than being all wrong and to pig headed to admit your theories are failing in the real world.
You’re essentially saying Trump is a broken clock who is right twice a day.
The problem is that he’s wrong on everything else, and that everything else is causing tremendous harm to the country. His latest sellout - caving to the tech bros in his government to lift export controls on NVIDIA GPU’s to China - is going to do far, far more damage to national defense than the trade deficit is.
In reality what he's doing on immigration is in the same vein. Stopping the game that rewards employers who figure out ways to use illegals and asylum seekers rather then rewarding those that innovate to reduce the labor needed in the first place.
Same with ending the corrupt and openly racist DEI games. Racism itself was always corrupt and held us back, reversing to racism against whites wasn't an improvement.
Same with shutting down the ever growing grift of NGOs sucking at the state and education departments.
Again, not a big fan of Trump but when your choices are more of the same ideological morons from their equally blinded bubbles, you can put up with a loud mouth buffoon for a few years.
The problem is that there is no better way to discredit a decent idea or policy than putting Trump in charge of executing it. The few decent policy instincts he has are going to be radioactive for a generation because he is so personally corrupt and only cares about a given policy to the extent it helps him.
More realistically, the rest of the world is going to figure out Trump was just slightly ahead of the curve. Go back to my original comment. The current system is falling apart. Italy, France or Germany can't afford to spend enough on defense if companies can just put their headquarters in Ireland, get access to the EU market but not have to pay for it's defense.
Same on immigration. It was supposed to save European welfare states but is in reality costing more in welfare and criminal justice.
What doesn't work eventually stops.
The current system is not falling apart. It may be showing signs of strain, and there are certainly some negative effects that have come into clearer focus in the past decades. But keep in mind this system has performed remarkably well over the last 70 years - Americans are a lot wealthier now than they were decades ago. This means that whatever system replaces it has to be better - not just as good or less good. That's a high bar, and Trump, who is undisciplined, unfocused, and uninformed on nearly every decision he makes, seems not to care about this.
I actually like reading Boudreaux for several reasons, but this is a well-deserved skewering.
Hey Oren - If you're going to accuse Boudreaux of sophistry, then its probably best to avoid sophistry in your rebuttal. Why did you choose $100B in the production of airplanes as your example of an item that could be manufactured domestically for the greater benefit of society? Why not choose $100B in cheap plastic toys instead?
The reason, as you well know, is that the benefit of the US producing $100B of a high-tech item like airplanes is far, far more beneficial to the American worker than the production of $100B of cheap toys would be. In fact, if the U.S were to run a trade surplus because we are the world's leading producer of cheap plastic toys, then the $100B in IOU's we issue today on the capital accounts side would be something we'd all very much wish we still had.
In a roundabout way, your rebuttal actually answers Boudreaux's questions. You would obviously think very differently about a U.S trade surplus if it was the result of a manufacturing base that mostly used cheap low skilled labor to produce cheap goods. So not all trade surpluses are created equal.
Trade surpluses can be bad, or they can be good. And they are good only if they meet your criteria for being good - which is that they have to be the result of the U.S producing high tech items requiring high skilled labor. And for whatever reason, you think that this is somehow preferable to the U.S running a trade surplus in the export of high skilled, high tech services. As Boudreaux's questions suggest, you're just cherry picking the best possible examples of how to re-order the U.S economy, without ever bothering to consider that the economy you envision on paper might not at all be the one that you get.
"If they hope to reclaim power, they’ll need to nominate candidates who credibly believe in securing the border and enforcing our immigration laws as a matter of sound public policy. It’ll be a tall task."
Nonsense. They just need to have candidates who can pretend well - which the D's are incredibly good at. The Democrats need uncontrolled immigration and need most of the migrants to settle in blue states, because they need to game the 2030 Census to give themselves more House seats. Remember, illegal aliens don't vote, but must be counted for purposes of apportionment under the clear language of 14A.
Sad that you still receive inane feedback regarding the policies you propose, especially from economic professors at an otherwise respectable University (where my daughter recently graduated, but thank goodness not in the field of economics). As valuable as book-learning is, it still can’t beat a healthy dose of common sense.
This is a roundabout way of encouraging you, Oren. You’re doing great work and we’re proud of you.
I am probably nit picking here but feel compelled to correct a factual error in your news letter. You make the statement that being in the U.S. illegally automatically makes one a criminal. It does not. If one over stays their visa, i.e. entered the country legally and over stayed it is not a criminal offense. It is a civil offense and is more analogous to a speeding ticket or possession of a small amount of Marijuana.
I withdraw my comment. It is incorrect. The law was changed in 2023 to criminalize visa over stays.
Brillaint breakdown of Boudreaux's airplane/treasury bonds comparison. The whole idea that an economist would treat producing goods and printing IOUs as equivalent value is wild when you think about what that means for long-term industrial capacity. I've been in manufacturing forlike 8 years and the differnce between building tangible products versus financing feels pretty obvious on the ground.
I actually like reading Boudreaux for several reasons, but this is a well-deserved skewering.