Category Archives: International

Lee Alan Dugatkin and Lyudmila Trut – How to Tame a Fox (and Build a Dog): Visionary Scientists and a Siberian Tale of Jump-Started Evolution

Lee Alan Dugatkin and Lyudmila Trut – How to Tame a Fox (and Build a Dog): Visionary Scientists and a Siberian Tale of Jump-Started Evolution

Coauthored by one of the lead scientists on a still-in-progress 60-year fox domestication experiment in Russia. They tell a compelling story filled with ups and downs, joy and heartbreak, backroom politicking, and all manner of close calls. They also offer a trove of insights into genetics and the process of domestication they have learned from domesticating a new species.

The researchers bred wild foxes and selectively bred the tamest ones. Selecting for this single trait came with an entire package of other new traits in just a few generations. Besides increased docility, the descendants of tame foxes also developed different coats and markings, smaller brains and jaws, reduced stress hormones, and changed vocalizations. They also retained youthful traits longer, or even permanently–geneticists call this neotony. The process exactly mirrors what happened to dogs as they were domesticated from wolves.

Strangely enough, some humans also exhibit neotonous traits, such as retaining blue eyes or blonde hair into adulthood.

Non-tame foxes bred from the same parents were also kept for breeding as an experimental control. They developed none of these traits.

Another insight is that humans are a domesticated species—we did it to ourselves, and reap the benefits to this day. Domestication is arguably a two-way process, with other species such as wheat domesticating us at the same we domesticated it. The story of the great fox experiment also shows the love that people and animals can have for each other, which warmed this pet owner’s heart.

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Ronald Coase and Ning Wang – How China Became Capitalist

Ronald Coase and Ning Wang – How China Became Capitalist

China’s post-Mao transformation has been incredible, but suffers from a lack of policy certainty. Fits and starts, stops, and reverses happen at seemingly random times and places, making long-term investments extremely risky. More importantly, China’s growth is ultimately limited by a lack of a viable marketplace of ideas, both in politics and in business. If China liberalizes, its future is bright. if not, then not.

Coase was 101 years old when this book was published. He was a fully contributing coauthor; his intellectual fingerprints are all over this book, from pointing out the limitations of blackboard economics to his love of Adam Smith’s Theory of Moral Sentiments. An incredible accomplishment, and a useful one for this analyst.

Best Books of 2018: Factfulness

Re-posted from cei.org.

Review of Factfulness: Ten Reasons We’re Wrong About the World-and Why Things Are Better Than You Think (Flatiron Books, 2018) by Hans Rosling with Ola Rosling and Anna Rosling Rönnlund.

Think Julian Simon, Matt Ridley, and Steven Pinker’s data-driven optimism, mixed with Michael Shermer and Bryan Caplan’s awareness of human cognitive biases, as told by a kindly, avuncular Norwegian. The book reads easily, is visually savvy, and has a friendly, non-polemic tone.

Rosling, who passed away of cancer while writing this book, wanted it to be his last, grand statement. He wants people to simultaneously believe two things: that the state of the world can be both bad and getting better. Hundreds of millions of people still live in absolute poverty. But for the first time in history, the global absolute poverty rate is now below 10 percent. Improvement is coming so fast that the number of people in poverty is going down even as population increases.

Most people think in binaries—left and right, good and bad, and so on. Rosling encourages nuance. Rather than a simple binary of rich and poor countries, Rosling uses a four-level framework. Level one is absolute poverty—subsistence farming, little or no electricity, crude sanitation, high disease rates, and low life expectancy. Level four is where the rich countries are—the Anglosphere, most of Europe, and the Asian tigers. When people think of rich and poor countries, they tend to think of either level one or level four countries. As it turns out, most people in the world are middle class—they live in level two and level three countries. In varying degrees, these countries offer better health and sanitation than level one countries, along with some industrial development, education for children instead of labor, some degree of political and lifestyle freedom, and so on.

One thing I especially like about Rosling’s framework is that countries can level up. Prosperity is a process, not an on/off switch. And the number of levels is theoretically infinite. Rosling chose to use four levels, but a more granular analyst can use as many levels as they want. More importantly, it may well be that what Rosling describes as a level four country today will be startlingly poor a century from now. Most of the world will have leveled up to the equivalent of level five or higher.

Rosling also provides an important public service in teaching people how to look at data. The most important example is the lonely number fallacy:

Never believe that one number on its own can be meaningful. If you are offered one number, always ask for at least one more. Something to compare it with. Be especially careful about big numbers. (p. 130)

I used this advice in my review of Trump economic advisor Peter Navarro’s coauthored book with Greg Autry, Death by China. The data won’t allow Navarro and Autry to make the case they want, so they have to resort to trickery:

Navarro and Autry give just such a lonely number when they argue that, “On [President George W.] Bush’s watch alone, the United States surrendered millions of jobs to China.” (p. 10) Let’s give that large, lonely number some company. In January 2001, when Bush took office, the U.S. labor force was 143.8 million people. When his term expired in January 2009, it was 154.2 million people, despite the economy being in recession. The data are here.

So even if “the United States surrendered millions of jobs to China,” those losses were outweighed by gains elsewhere, most of which have nothing to do with trade policy.

Keep this in mind whenever you see a scary number in a news story—if it doesn’t come with company or context, it’s analytically useless at best.

Rosling’s book has been warmly received by a politically diverse audience, and rightfully so. Rosling’s optimism is based on widely available data, not his ideological priors. In areas where the world is not improving, he is quick to point to them as a reform priorities.

More importantly, the data show that the world’s arrows are almost all pointing up. Few people realize this—as Rosling humorously shows, most people perform worse than chimpanzees on a simple multiple choice quiz about human well-being. The errors are not random—they are overly pessimistic in participants across countries and in every demographic category.

Rosling was as effective as anyone in trying to correct pessimistic bias with facts, not least through his easy-to-understand bubble charts. Rosling’s son, Ola Rosling, and daughter-in-law, Anna Rosling Rönnlund, are carrying on his work with their group Gapminder—see, for example, their tour of Dollar Street that shows the various gradations between countries in levels one through four.

Things are bad in many places, but getting better. In fact, for most people in most places, living standards today are the best they’ve ever been. It is up to us to see that the process continues. To do that, we need to be aware of both the facts on the ground and our inborn cognitive biases that prevent us from seeing those facts clearly. From there, action. Use your head, not just your heart. You need both.

U.S.-China Trade Deal at G20 Small Move in Right Direction

Nobody knew what to expect going into the G20 summit in Argentina, especially from a planned meeting between Chinese President Xi Jinping and U.S. President Donald Trump. The headlines coming out of the meeting are largely positive. China is ending its 40 percent tariff on U.S.-made autos, while the U.S. will delay for 90 days a rise in tariffs on $200 billion of Chinese goods from 10 percent to 25 percent, previously scheduled for January 1.

During that 90-day period, the U.S. hopes to convince China to reform a number of its protectionist trade policies. But after that, anything goes.

President Xi is walking back a policy that was only just put in place as a direct retaliation to U.S. tariffs, and is leaving other retaliatory tariffs in place. On the U.S. side, the 10 percent Trump tariff that inspired the retaliations will remain in place.

The takeaway is much the same as from the July meeting between Trump and European Commission President Jean-Claude Juncker. As I noted then:

[N]either side is lowering any barriers. And neither side’s promises involve making things better. They have agreed to not make things worse. But in a bizarre, only-in-this-administration kind of way, nothing is better than nothing.

China aspires to become a global economic power. To become one, it must liberalize. The new U.S. tariffs have pushed China in the opposite direction. Its trade policies are now even more protectionist than before. This is not changing as a result of the meeting.

Moreover, after the 90-day ceasefire expires, China’s government will likely retain its intellectual property theft, forced technology transfer, and government ownership and control policies. On this point, I sincerely hope my prediction is wrong. For as long as they are in place, these policies will hinder poverty eradication in China, while causing difficulties not just with the U.S., but with China’s trading partners throughout the world.

On the U.S. side, President Trump’s trade policies will also remain unchanged. Admittedly, they are stimulating some sectors of the economy. Lobbyists who work on the Commerce Department have reported 879 clients so far this year, up 40 percent since the end of the Obama administration. But intended beneficiaries, such as General Motors and its employees, are finding the Trump tariffs less than helpful.

The G20 summit and the Trump-Xi meeting could have gone much worse. But the headlines should not be so congratulatory. Productive meetings and negotiations would yield not just a ceasefire, but actual disarmament. That remains the goal—for in a trade war, the weapons fire inward.

Trade Restrictions Will Not Improve National Security

One of the most persuasive arguments trade protectionists use is the national security argument. It serves as a “get out of jail free” card with many conservatives, and progressives will also often let slide policies with national security implications. When it comes to trade, it turns out that not only do trade barriers fail to improve national security, they actually hurt it in the long run—as Iain Murray and I briefly spell out in our recent study, “Traders of the Lost Ark.”

When a country goes to war, one of its first actions is to blockade the opposing country’s trade. If protectionist logic held, this would stimulate the blockaded country’s domestic industry to new heights.

There is also the matter that an effective blockade is impossible in a global market:

As noted, trade helps industries diversify their supply chains. China might refuse to sell steel to the U.S., but some steel buyers would happily turn around and resell Chinese steel to American buyers for a profit. The OPEC oil cartel learned this lesson the hard way, when its own member countries undercut its attempts to fix the global price via restricted supply.

But suppose an effective blockade were in place. Without trade barriers to ensure a viable domestic industry, how would the military fare? Quite well, as it turns out. The U.S. military is the world’s largest. In fact, it is so large that it outspends the world’s next seven largest militaries—combined. Even at its current size, the military only accounts for about 3 percent of domestic steel consumption. Automobile production uses 26 percent, or almost 9 times as much. Construction uses 40 percent, or more than 13 times as much steel as the defense industry. Security hawks should be arguing against steel tariffs, not for them.

Finally, politicians often play the national security card frivolously. This hurts foreign relations, not just the economy. President Trump, for example, cited national security concerns in raising steel tariffs against Canada. When Canadian Prime Minister Justin Trudeau asked Trump during a phone call what national security threat Canada posed to the United States, Trump was reduced to mumbling something about the War of 1812. The phone call was an embarrassing and avoidable low point in relations with our closest neighbor and one of our staunchest allies in the world.

In sum, national security concerns do not justify trade barriers. By harming growth, they leave fewer resources available for defense. Blockades are impossible in a global market. And even if they were, the U.S. has more than ample infrastructure to meet any military needs domestically. And by sending negative foreign policy signals, trade barriers strain relations with needed allies and make war with enemies more likely, not less.

For more, read the full “Traders of the Lost Ark” study.

New Paper: Traders of the Lost Ark

With the sudden reversion to mercantilist trade policies over the last year and a half or so, my colleagues and I decided some economic archaeology was in order. So Iain Murray and I, with contributions from Fred Smith, Marc Scribner, Daniel Press, and Ryan Khuranaco-wrote a a new “principles of” paper, “Traders of the Lost Ark: Rediscovering a Moral and Economic Case for Free Trade,” which you can read online for free here. Daniel Hannan was kind enough to wrote a foreword.

Iain wrote a short blog post explaining our goal for the paper here.

Press release here.

The American Spectator’s Johnny Kampis did a nice writeup here.

As did World Trade Online, though it’s behind a paywall.

The paper was also mentioned in Politico’s Morning Money and Morning Trade newsletters.

The full paper is here.

Trump’s Trade Meeting with European Commissioner Juncker: Better than Nothing

Tariffs are the greatest!

-President Trump, July 24, 2018

I have an idea for them. Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies!

-President Trump, also on July 24, 2018

Many trade-watchers are breathing a sigh of relief about President Trump’s meeting yesterday with European Commission President Jean-Claude Juncker. The result was essentially a cease-fire. Juncker agreed that the EU would not impose a retaliatory car tariff it has been considering. In return, Trump agreed not to further raise steel and aluminum tariffs. These are both good things. But neither side is lowering any barriers. And neither side’s promises involve making things better. They have agreed to not make things worse. But in a bizarre, only-in-this-administration kind of way, nothing is better than nothing.

President Juncker also promised that the EU would buy more U.S. soybeans and natural gas, as though he has control over EU consumers’ spending decisions. He also pledged to work toward a US-EU bilateral trade agreement. Negotiations for such a deal will almost certainly last longer than Trump’s presidency, even if he wins reelection. This could be precisely why Juncker made the promise—Trump saves face, which is important to him, while Juncker can kick that can down the road until the White House has a less mercurial occupant. So even the actionable takeaways from the meeting amount to essentially nothing.

What does the new EU ceasefire mean? It is probably more of a strategic shift than anything else. The president’s biggest target on trade issues is China. To get China to reform its bad-faith trade policies—here the president has a point—will require both internal reform in China and international pressure. The U.S. is hardly the only country upset with the Chinese government’s penchant for intellectual property theft, disdain for property rights, and need for state control. And that’s ignoring the Chinese government’s human rights record, which we shouldn’t.

Trump’s tariffs are alienating allies the U.S. needs to achieve its policy goals against China. So rather than shifting toward free trade, what Trump is likely doing with the EU meeting is simply prioritizing the Chinese theater as the most important front in his imagined war.

While I dislike the phrase “trade war,” it may be an apt description for the way the Trump administration views trade. The analogy is obviously incorrect; trade is based on mutual consent, while war is the opposite. But the president and several of his advisors don’t see the issue the same way most people do. To them, trade really is like a war with winners and losers, fought at the level of nation-states and regional alliances. For one side to win, another side must lose.

Trade doesn’t work that way, of course. People only agree to a trade in the first place unless everyone involved expects to benefit. And, as even the best analysts sometimes forget, countries do not trade with each other, people do. But, with apologies to Larry Kudlow and a few other sound thinkers, the president hasn’t exactly chosen the best advisers on trade issues. So here we are, in a self-created trade war.

I no longer believe the president when he says he wants free and open trade (there are many other skeptics). Trump’s nationalism and zero-sum, adversarial thinking won’t allow it. So while it’s good that his trade battle against the EU won’t be escalating any further for the time being, that doesn’t mean Trump is admitting that his protectionist policies aren’t working. He is sacrificing one battle to gear up for a larger trade war against China. After all, Trump has the power to lower tariffs right now with the stroke of a pen, but he is not doing so. The Juncker meeting is likely the first step in doubling down against China, and that could hurt the United States economy, and the world’s, for years to come.