Ep. 203 Deeper Economic Analysis of Slavery, Free Trade vs. Welfare, and Debt Repudiation

31 August 2019     |     Tom Woods     |     8

Because Krugman is a bore, Tom and Bob field questions from the listeners. They handle objections about their recent arguments concerning the economics of slavery, clear up apparent contradictions in the libertarian handling of free trade and the welfare state, and explain Rothbard’s view of debt repudiation.

Related Articles

The Left Argues Slavery Was an Economic Blessing. Here’s Why They Are Wrong,” by Bob Murphy

Repudiating the National Debt,” by Murray Rothbard

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  • Jacob Norton

    Am I wrong in thinking the simple answer of why welfare hurts recipients and Chinese TVs doesn’t is just the incentives it creates?With welfare you have an incentive to stay unproductive, while with Chinese TVs you have an incentive to find labor that’s more relatively productive.

    • Jason Bray

      This would be true if Chinese TVs cost was merely the result of labor being more productive. When you take into account subsidies, a reasonable way to view this is that the Chinese government is paying Americans not to employ manufacturing people through the mechanism of cheaper TVs. We just “as a society” have accepted that we prefer cheaper TVs to a larger manufacturing sector. Of course, “society” can’t decide anything, so another way to think of it is: we’re talking about a large trade union (China) bribing Americans not to hire other Americans but to hire their people instead.

      Of course, the US tax code is penalizing Americans for hiring Americans through the corporate income tax, so manufacturing workers are screwed on both ends of the deal.

    • The NAPster

      I was thinking about this slightly differently. To benefit from welfare payments, you don’t have to do anything productive (to receive them). To benefit from cheap Chinese TVs, because it involves a purchase, you first have to produce and contribute to the overall pool of wealth, for which you get paid, and then you can take your income and purchase the cheap TV.

  • John the Economist

    On China sending us free stuff vs. the welfare state

    There is not much difference between the two with regard to material wellbeing, taking a consequentialist approach. We object to the welfare state because it lowers overall efficiency–to take a non-Austrian shortcut, it lowers GDP per capita. Taking the world, as a whole, Chinese protectionism lowers world GDP per capita.

    Libertarians make the “Chinese welfare” argument against protectionism in opposition to more simpleminded arguments that say Chinese protectionism is bad for us materially. And, yes, this argument is vulnerable to the welfare state argument that Chinese protectionism is bad for us spiritually. (Though the welfare state is bad materially and spiritually.)

    The same material/spiritual argument can also be used to oppose technology. People in 1900 worked harder and that may have built more character and resulted in “better people” than today’s mouse clicking office worker. I learned how to work on cars from my dad in a poorer family than my kids grew up in. I, more affluent, took the car to the mechanic more while raising my kids, so they learned less. They weren’t the fictional welfare recipient with zero ambition, but that is only a matter of degree.

    My kids are less self-reliant thank I am in a great many ways. This is to their detriment in one way. But, to paraphrase Bastiat, is it better to work on your car or to have a car that runs?

    As our society becomes more affluent, we specialize more, do less work, and do easier work. As economists, we should confine our policy recommendations to the material, though, while, perhaps recognizing the spiritual.

  • Drew

    This is the way I would consider the welfare stuff. Both the Chinese subsidies and the welfare would shift resources away from their most effective uses. They play a role of stifling the shifting towards the current final equilibrium state. (Just a note, in the case of pay day loans such loans shift towards equilibrium). A constant factor would incentivize interactions and disincentivize others so that the constantly shifting arrangements are not serving only the interests of all people involved, but also this outside factor. The shifting of resources that results from Chinese subsidies hurts people (relative to its non-existence) in ways that are difficult to pull apart (though to some degree it is possible). One thing that can be said about the subsidies is that tariffs and other policies like these cannot in principle correct for the impact of the subsidy. The best corrective force is to remove the subsidy. All other attempts merely worsen the problem, further destroying the market. The same thinking applies to welfare. The only difference is that the idea of using a corrective policy is not what is being argued about, but the changing or removing of the policy. I think that this difference explains the tension, the arguments are about different topics entirely. When distilled to the central points they are not different. With welfare a specific impact is explained to be partially the result of the welfare policy. The structure of economic relations are changed by this policy. These changes are bad. To the degree that the claims about welfare and things like one parent families are true, parenthood must be a decision that is financial in nature. Of course psychic profit plays a role even in these cases, but if financial factors explain changes from what would otherwise exist the values fulfilled must be partially financial. Financial resources are taken from one place and put in the hands of these families in a way that incentivizes particular relationships within this family. This is the most immediate impact. Even if the recipient is assumed to benefit from the welfare all the other people could potentially be worse off, especially the children.

  • davegrille

    Slavery becomes more inefficient as time progresses.

  • https://alazycowboy.com/ Bill Huber

    Slavery was an important part of the United States’s economic success in 18th- and 19th-centuries but probably not the most important factor. Both Don Boudreaux with his Youtube video, The Hockey Stick of Human Prosperity, and Deirdre McCloskey and her books on the growth of middle-class merchants offer better explanations for the economic success between 1800 and 1900 than slavery.

    Another way of looking at this issue is who won the Civil War and why? The North had 21 million people and the South had 9 million people in 1860. Of this 9 million, 4 million were slaves. The North had more people, guns, food, and clothing to fight a war with the South. Once the North found a general who understood his logistical advantage, the war quickly ended. Wars are won by the side with superior logistics. The North was the economic powerhouse despite having no slaves and almost no black people.

    Despite this disastrous Civil War, according to Angus Maddison, the United States had a greater population than any country in Western Europe by 1870. The United States lost 620,000 men in the Civil War and they had more than made up for that loss by 1870. He also estimates that the GDP of the United States in 1872 exceeded any country in Western Europe. This is quite an accomplishment considering that the South was still a mess in 1872. The population growth, the industrial revolution, and the GDP gains of the middle class are much better explanations for economic success than slavery.

  • NoMoreFed

    When libertarians say that we are getting cheap stuff from China, it is typically in response to someone who is arguing for more U.S. government involvement because we (Americans) are somehow getting screwed over by China.

    It is interesting to note that it is libertarians who most often come up with good counter arguments against typical libertarian positions. We certainly get counter arguments from others, but they aren’t usually worth anything.

    I also liked Bob’s example of payday lenders. This is why I have never felt really comfortable defending them from an aspect that they are helping the poor. They may be helping some people, but I see them as mostly preying on people and making their situation worse. I defend payday lenders from a libertarian/ voluntaryist position.