Protectionism: a Euphemism for Crony Capitalism

While protectionism seems to have strong supporters within both major political parties, it often falls short when put into practice.  George Will's Washington Post editorial shows just how difficult it is to implement protectionist trade policy in the modern economy. Multinational corporations with international supply chains create an economic impact that extends well beyond the borders where their headquarters are domiciled. It is very difficult, if not impossible, to punish intended targets without causing significant collateral damage. At best, it is a futile attempt to appease a nationalist base. At worst, it is an opportunity to perform a favor for a special interest.

I wonder if the 7000 direct Bombardier employees or the thousands of indirect employees supported by $3 billion in materials Bombardier purchases from the US suppliers every year feel protected by the tariffs. Do more expensive airplanes and the resulting higher ticket prices help Delta Airlines and its customers sleep more soundly at night? 

Quadrupling the cost of an airplane seems like a high price for the American consumer to pay to protect Boeing's opportunity to create a competing plane in the future. Unfortunately, this is just one example of cronyism created by protectionism.

Like Mr. Will at the end of his article, I am left wondering,

 Who will protect Americans from the radiating mischief of protectionism?

Venmo Socialism

While CNBC's Ali Montag's weekend article warns readers about Venmo Socialism as it pertains to rising brunch cost, the impact of the economics lesson extends beyond the table. 

Water consumption, corporate tax code, taxpayer funded private stadiums, and large itemized personal income tax deductions are a few pertinent examples where costs and benefits are not divided equally. Even worse, they create a perverse incentive to increase consumption to further maximize the benefit for the recipient at the expense of the larger group.

However, splitting the bill is not inherently flawed. Paying back a friend for buying concert tickets next to each other, roommates pooling their money to buy a larger TV, a town using tax dollars to build a park are examples where pooling resources allows the group to increase their benefits without increasing their individual costs. Just like at brunch, it gets harder to evenly distribute the benefits as the size of group grows.

I hope the next time you come across a special interest asking for special consideration through the tax code, it raises the same ire as paying "your share" of your brunch-mate's two extra mimosas.

EconTalk on Populism

While they get a little off topic, Professor Philip Auerswald and Econtalk host Russ Roberts discuss the recent rise of populist movements across the globe.  Professor Auerswald's asserts that the density of urban communities enables cities to evolve at a faster pace than their rural neighbors.  It will be interesting to see how society and its leaders address this growing divergence. Click here to listen to entire episode.