Macroeconomics is hard because we define some things tribally first, then do the economics second … and wonder why it doesn’t make sense.
I was discussing this just this morning in response to a student’s question about whether or not (international) trade agreements are beneficial or not.
That’s a really hard thing to assess because most people presuppose that trade can’t take place without governments. But that has it backwards. Trade is between pairs of people and firms. Then the government decides that some of those trades are different from others.
Don’t believe me? Think about these questions.
- If an American trades with an American, is it (international) trade?
- If an American trades with a Mexican, is it (international) trade?
- If an American trades with an American who happens to be in Mexico, is it (international) trade?
- If an American trades with an American and they both happens to be in Mexico, is it (international) trade?
- If an American trades with a Mexican who happens to be in America, is it (international) trade?
- If an American trades with a Mexican who happens to be in America illegally, is it (international) trade?
If you can answer all those questions correctly, and do it rapid fire, you may have a chance of understanding the arbitrariness of international trade policy. But, if like most people, you can’t … you’ll probably fall for a lot of tribalistic mumbo-jumbo about trade.
The mere fact that I had to add the word “illegally” because that distinction makes a difference should give you pause. It gets worse. Consider these:
- If an American trades with a Mexican who happens to be in Mexico, is it (international) trade?
- If an American trades with a Mexican who happens to be in America legally, is it (international) trade?
- If an American trades with a Mexican who happens to be in America legally but can’t find their visa, is it (international) trade?
- If an American trades with a Mexican who happens to be in Mexico (which is obviously legal, but whether or not they could find their visa would be unimportant), is it (international) trade?
All of these distinctions emphasize the tribalism of international trade policy.
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On PRI’s “The World” this afternoon, I heard two clergyman discussing justice in Northern Ireland.
"It's Jonathan Sachs who says peace causes a crisis of identity," Farren said, quoting the prominent British rabbi.
"When we're fighting, we know who we're not. We might [not] know who we are, but we certainly know who we're not. And we're not the other crowd."
"We create differences to shore up our insecurity," he added. "The tribal way we're living in our world, it's everywhere.
I love that.
A lot of the problems in understanding economics is that the economics is actually way down our list. We don’t even know who we are, so we focus on what we’re not. And then later on, after organizing our world through the circular hole of that world view, we try and pound a square peg of economics into the hole.