Saturday, December 17, 2016

Trump Goes to New Levels to Display His Lack of Understanding of Basic Economics

Donald Trump tweeted this out and apparently has a new slogan, "BUY AMERICAN and HIRE AMERICAN," to reinforce that he is totally ignorant of the basic economic principle of comparative advantage.




  1. Robert, the Trumpista-to-the-bitter-end Lou Dobbs said on national cable TV that Comparative Advantage is a myth, a 'theory' invented by academics, just a few days ago. You have read comments here from some whonsay that Comparative Advantage is only possible when the playing field is 'level'. I say again, thanks to El Trumpo, the economically-ignorant feel emboldened enough to come out and showcase their incompetence with glee. One is torn between laughing at them or crying out of hopelessness.

  2. Sadly, until the Empire stops Striking at everyone, many of these trade issues are of much less significant consequence comparatively. The only advantage goes to the MIC.

  3. One thing that seems to be missing from the discussion on comparative advantage/ buy American is that of quality.

    Countries such as China may have a comparative advantage over America in a lot of production, but what China does produce is to a large extent utter crap.

    I recently bought a can opener that was made in China. It retailed at the grocery store for $7.99. It lasted a few weeks and now refuses to open cans.

    I went to the local specialty kitchen store, found one made in America (apparently the only one) and bought it for $12.99. So far it is a pleasure to use.

    The Bay Bridge in the San Francisco Bay Area was replaced at a cost of over $6 billion. The bridge was manufactured in China, imported to the California and erected. The stories are legion as to the poor quality of Chinese steel. It's rusting away fast. Specifications on bolts that anchor the bridge were ignored and are now shearing off. Bureaucrats in the state government gave pass after pass on quality and now those cumulative exceptions are mounting into a significant maintenance problem. I'm betting that the bridge will end up having to be replaced at some point, well before California was planning to do so.

    When I worked at Gateway Country Store, I frequently dealt with customers who raved about their Gateway 2000 computers. Nothing ever went wrong with them. But Dell found ways to lower prices and quality and competed heavily on price. Gateway felt obligated to follow and plunged into the price war. Cheaper computers were sold, but the hardware did not last nearly as long. Customers who were brand loyal to Gateway 2000 were not so enamored with their cheaper, faster, but problem plagued computers.

    I found it interesting that several years later, Dell admitted that it had a massive $300 million capacitor problem. They spent years blaming the customer for the hardware issues. Dell kept demanding cheaper capacitors from their Chinese suppliers, the quality went down and they had lots of problems.

    Apple Computer seems, at least while Steve Jobs was alive, to have insisted on quality throughout the production process of their products. They are powerful enough to follow through and demand quality through the production process.

    China certainly has a comparative advantage in producing crap but not quality. Unfortunately Americans shop price, until it comes back to haunt them. I've had my fill of cheap prices and poor quality products. I end up replacing the cheap products so frequently that I wish I'd bought the more expensive quality item the first time around.

    I think American companies could bring manufacturing back to America and succeed if they emphasize and compete on quality versus cheap Chinese crap.

    1. Great example with Gateway. Loved my first Gateway 2000 PC purchased in 1995. Was not so enamored with my third machine purchased in 2004.

      I now buy custom PCs from a custom builder up in Washington state. They cost a lot more, but are well worth the added expense.

    2. You're correct. The economists and equally minded folks arguing for comparative advantage never seem to have that actual experience of doing the overseas manufacturing. By the time the policing of suppliers and even company owned assembly plants is done, when all the prints are tightened up and not making the assumptions that are made in the US, western europe, and Japan, the cost savings are trivial compared to before. If the cost spent on doing all the policing is factored in the cost savings might disappear unless it's a product made in considerable volumes.

      I've got some stories of the things I've experienced. When there is a massive cost reduction from China there's generally a good reason for it.

      The surviving american companies, at least the suppliers I deal with have found various niches. Some emphasize the quality. That is they do cost more but they remove so many headaches that they cost less. Others compete on productivity. That is, they do more with less people, but their quality while still better than their Chinese competition is lower but acceptable for the end products. Their price of course reflects that and there will be less problems. Policing them is far easier and cheaper too.

    3. @I Dissent,

      --- One thing that seems to be missing from the discussion on comparative advantage/ buy American is that of quality. ---

      The reason is missing from the discussioj is because "quality" just like any other feature, is in the eye of the beholder. It's not relevant.

      --- China certainly has a comparative advantage in producing crap but not quality. ---

      Blah, blah, blah. You may call it 'crap'. For millions of people around the world, those products increase their quality of life affordably. Your OPINION on the quality of certain products is not relevant. Besides, you completely misunderstand the concept. Coparative advantage has to do with opportunity costs, not quality.

  4. Watch much of that "comparative advantage" slowly start to melt away when corporate taxes are lowered to 15% and regulatory overheads reduced. Doesn't sound much like comparative advantage, does it? Sounds more like a strawman.

    1. I'll take you on that bet, because I know you have no idea of what you talk about.

    2. Even if the US became an ancap paradise for businesses, there would almost certainly still be things that would make more sense to import than produce domestically.

  5. None of the people pushing Comparative Advantage as "settled" (what next, labeling critics "Comparative Advantage Deniers"?) have actually read or responded to the increasing body of criticism of it.