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PaperclipPerfector  1mo ago (text post)   32492 thread views

Culture War Roundup for the week of April 7, 2025

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Handwaving Freakoutery: Woke Tariffs - Wherein the United States suffers an outbreak of Critical Trade Theory

Also, what math educator Matt Parker calls "mathiness."

The Great Awokening of the prior decade was founded in part on the False Cause Fallacy. Our major institutions for the better part of the last ten years were operated by wokerists, who used an Intersectional Matrix of Culturally Encouraged Race and Gender Prejudice to counteract what they viewed as hidden unmeasurable forces such as “systemic racism.” They couldn’t point to the systemic racism, but they knew it must be there because of the imbalance in socioeconomic metrics, and they denied any other possible explanation for the imbalance. Once the False Cause was in place, the devout wokerist was forced to fight the hidden prejudice with overt reverse prejudice, because they couldn’t conceive any other cause.

...

The idea of a “reciprocal tariff” sounds tough, and fair, and based, and go-America-punch-flag-eagle, and in concept could be pretty popular if sold in the proper way to the voting base of the United States. It’s certainly “unfair” when some countries tariff our goods to protect their own industries while we don’t tariff their goods to protect our industries. It certainly seems reasonable to treat other countries in the same way they treat us. But are the value of other countries' goods artificially depressed because their businesses don’t have to pay for health insurance for their workers? Or because their workers ride public transportation and don’t need cars? Or their goods are made by child slaves? Or so forth?

...

[Image of "reciprocal tariff" formula]

Let’s walk through this. 𝜏 is the tariff. ε is the price elasticity of import demand, ϕ is the elasticity of import prices with respect to tariffs, m is imports, and x is exports. If some smooth-brain were to set ε equal to the inverse of ϕ, say for instance at something like 4 and ¼, then those cancel and the tariff is just [trade deficit] divided by [imports]. It has nothing to do with how much they tariff us, and everything to do with how much stuff they ship us and how little we ship them. And this is exactly what Trump did:

[Graph of predicted vs actual tariff]

The amount they tariff us doesn’t even show up in the equation. There’s nothing “reciprocal” about it, unless you presume that all trade imbalance between two countries must be de facto evidence of systemic unfair trade practices. Critical Trade Theory. Wokery all over again, applied to international trade. There’s no possible reason that Cuba could grow a better banana than East Atlanta, right?

Math educator Matt Parker also made a video about the formula, criticizing it as "mathiness:" Superficial use of a mathematical formula to make something look well reasoned. He's not an economist, so he rightly didn't go very far with this criticism, but he cited a study on the effects of the 2018 trade war to show how complicated demand elasticity is, then pointed out that asterisks aren't even a "proper" multiplication symbol, they're just what's used on a qwerty keyboard. Is there any good economic analysis showing that ε is equal to the inverse of ϕ? If so, why isn't it being publicized by the WH? If not, why bother including them in the formula?

And what's the deal with "Critical Trade Theory?" Are trade deficits a good way to measure non-tariff trade barriers? If so, how? If not, why is the WH doing it?

Certainly bilateral (pairwise) aren’t, otherwise you end up with the triangle problem (A sells to B, B sells to C, C sells to A, everyone concludes they are getting screwed). Even overall trade differences aren’t useful because of off-trade movements. The US receives tons if money licensing IP that doesn’t show up in trade. If anything, Marvel licensing Hulk undie production in Bangladesh for sale in Australia ought to count twice in our favor instead of zero times.

It might be easier at this point to just enumerate tariffs or other trade barriers. They exist, free traders have been chipping away at them for ages. That seems more honest.

The US receives tons if money licensing IP that doesn’t show up in trade.

Are you sure that's not classified in the accounting as an export? There are tons of "invisible trade" services that are properly tracked as exports, like local tourism.

It is counted in service exports but services were not included in Trump's formula, only goods trade.

God it's even more retarded than I imagined.

Coca Cola licenses their brand and recipe to Mexico. I buy a delicious Mexican Coke, but we only count it one way.

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