Isn’t this just playing a trick with system boundaries though?
If I hire my son to do my yard work instead of my neighbor, how does that make my son objectively worse off?
Within system/family, obviously this has increased wealth compared to hiring my neighbor.
Without system, it has only made me worse off to the proportion that I have "overpaid" my son. But because it's zero-sum, my son has benefited to the exact proportion that I've been made worse off.
Edit: Back to the context of globalization, "overpaying" my neighbor to build my car only makes me worse off to the same proportion s/he has been helped. When you factor in the concept of preference for psychological distance, that might be a worthy tradeoff. I.e., there's a psychological basis for valuing the financial well-being of my son/neighbor over the abstract person in another country* and this action seems logically consistent with that psychological framework.
* This isn't to say the decision is morally justified. That's a different argument than the economic one.
> Isn’t this just playing a trick with system boundaries though
We agree. Consider the world to be your street and your country your neighbor and your houses. Paying your neighbor more to keep the money local doesn't work to make your "country" richer. It just helps concentrate wealth with your neighbor. Mercantilist protectionism is about redistributing, not increasing, domestic resources.
Right, but isn't there value in concentrating wealth to those who you have psychological proximity with?
Consider a more dire twist: you have money to pay for a life-saving operation for either your own child or another child on the other side of the world. Are you saying there is should be no personal preference in this scenario?
I'm saying there are perfectly reasonable expectations to concentrate that wealth due to human psychology once you move away from the academic and abstract.
> isn't there value in concentrating wealth to those who you have psychological proximity with
Yes. That's why I said the difference isn't invalid. It's just more like a hidden redistributive tax.
In small doses, this is fine and a way democracies repay their patrons. In larger doses, it leaves everyone poor. Too poor to afford a life-saving operation for anyone around.
Ah, I see you point. Sorry it took me awhile to get there :)
Regarding "it leaves everyone poor", how is the case if it's zero sum? It seems like it comes down to how you define your metric of 'poor'. It seems like it presupposes there isn't enough money to go around, so it's better to have a few people rich and the rest destitute, rather than have everyone just be marginally poor.
Or are we getting into productivity incentive territory here?
Trade isn’t zero sum. Ricardian mechanics is what overturned mercantilism. You paying more for your neighbour to do work than someone down the street deprives you of money and everyone of economies of scale.
Doesn’t this break down once your utility function goes beyond strict economics? E.g., economics may say it’s best to let Taiwan specialize in semiconductors, but that may not be optimal once you factor in other dimensions like national security. Humans are not Homo Economicus
> economics may say it’s best to let Taiwan specialize in semiconductors, but that may not be optimal once you factor in other dimensions like national security. Humans are not Homo Economicus
And those other dimensions come at a cost. National security seems like a reasonable thing to pay a cost for. Enriching an oligarch does not. A lot of protectionism is about the latter.
Sure, just like the hypothetical yard work has a cost. I think what you’re illustrating is that protectionism doesn’t make people poorer per se, but it’s bad when it’s abused for individual purposes rather than broader purposes.
> what you’re illustrating is that protectionism doesn’t make people poorer per se
It makes people materially poorer and redistributes wealth, typically up. That is a fair price to pay in some circumstances, e.g. bolstering defence manufacturers.
So on some dimensions, protectionism can make people better off (eg more secure). It seems your issue isn’t that it makes “everyone” poorer (there seems to be a contradiction between your previous and last statement), but more so you aren’t comfortable with how the decision is made (eg by fiat)
If you son can make 4x the hourly rate doing something else and does not do that because he is doing yard work, then you have decreased wealth. The key is in the if.
I agree that forced labor completely changes the scenario. Nobody is forcing my son to do yard work in this scenario though. Both the neighbor and son are willing, but only one can do the work.
If I hire my son to do my yard work instead of my neighbor, how does that make my son objectively worse off?
Within system/family, obviously this has increased wealth compared to hiring my neighbor.
Without system, it has only made me worse off to the proportion that I have "overpaid" my son. But because it's zero-sum, my son has benefited to the exact proportion that I've been made worse off.
Edit: Back to the context of globalization, "overpaying" my neighbor to build my car only makes me worse off to the same proportion s/he has been helped. When you factor in the concept of preference for psychological distance, that might be a worthy tradeoff. I.e., there's a psychological basis for valuing the financial well-being of my son/neighbor over the abstract person in another country* and this action seems logically consistent with that psychological framework.
* This isn't to say the decision is morally justified. That's a different argument than the economic one.