Free Trade Blog

In todays's modern world, almost no country has the ability to be self-sustaining. Not only does this mean increased amounts of work required, but people would also need to be specialized enough to complete jobs they normally would not do in order to produce everything needed. Additionally, producing everything domestically, while creating jobs at home, would also drive up the prices of most goods because domestic production would be more expensive. Luckily, most countries are not forced to experience this issue because they participate in trade with a multitude of other countries. Simply put, trade makes countries richer by enabling them to use time and resources wisely to specialize in the production of goods that they can make most efficiently. Countries decide what to produce based on comparative advantage, meaning they choose to specialize in whatever they are able to make the best and most efficiently. Trade also contributes to lower prices for many goods, particularly imported, because other nations have different work regulations and less costs go into making the item, so the overall price is cheaper as long as no tariffs are imposed. This eventually leads to a higher standard of living because consumers have increased purchasing power, similar to as if their incomes had increased. Trade is clearly beneficial to developed countries, but what most fail to realize and actually argue against is the fact that trade also helps poorer countries. Engaging in trade gives these poorer countries, which usually do a lot of manufacturing with cheap expenses, access to foreign markets and opens the door to trade with other countries, often times richer ones with money to spend. While there are some disadvantages associated with trade, its benefits clearly outweigh the cons. It has positive impacts on wealthy countries, poor countries, many industries, and many consumers. Right now, trade is helping many countries flourish and maintain a high standard of living but if more bans were imposed, we would see a decrease in both these things.

Flaws With The Gold Standard

Members of the  Republican Party have been considering returning to the gold standard in order to back our currency. For decades this was how our monetary policy was; however, a return to the gold standard would have many more negative consequences than good. Returning to the gold standard would render the central bank powerless to control inflation and recessions. By backing the dollar with gold, interest rates will automatically go up when the resource is scarce, and of course they would go down with a greater supply. Therefore, the Fed wouldn't be able to regulate interest rates along with the state of the economy because they would be dictated by the amount of gold we have. This inflexibility disregards the Fed's ability to control inflation and the state of the economy. Currently, it is able to keep inflation in check by increasing interest it pays on reserves, increasing the money supply, and dictating how much banks can lend out. Additionally, under the gold standard prices were easily and frequently subject to change due to changes in the balance of trade or gold supply. With our current monetary system, the price level has been far more stable. For example, prices between 2008 and 2012 experienced 23 times less variance than prices with the gold standard. If the US were to return to the gold standard it could be disastrous. Gold is not abundant enough to be a medium of exchange for this country. Going back to it could cause massive deflation because the money supply would be greatly decreased, not to mention the fact that the economy would nearly collapse because of the high levels of household debt. The US' economy has been much stronger since adopting a fiat currency. This has resulted in more stable prices and the Fed has the power to control inflation, increase the money supply, and promote economic growth when necessary. Returning to a gold standard would undo all of this and only hurt the economy. It is a thing of the past and best left there.

The Robber Barons' Bum Rap

When learning about US history, all students are taught about the oil, railroad, and banking tycoons, such as Rockefeller, Vanderbilt, and Gould, respectively. It is most commonly discussed how these businessmen accrued massive fortunes by buying out competitors and forming trusts. Due to these actions, the government created new laws specifically to prohibit the formation of monopolies in order to protect competition. Consequently, these industrialists were branded with the title "Robber Barons" and were accused of twisting business practices in unethical ways at the expense of the economy just to amass their personal fortunes. Upon deeper inspection, however, it becomes apparent that these business savvy entrepreneurs were actually the cornerstone of American industry and revolutionized the economy. Through ruthlessness, diligence, efficiency, and an uncanny business sense, they were able to organize and run their companies in the most efficient manner possible. By doing so, not only did they increase profits, but also managed to greatly lower prices for consumers. Many choose to portray these entrepreneurs as immoral, unpleasant villains, but in actuality, these men made America what it is today by revolutionizing industry and taking risks when others would not. They recognized that there was an opportunity to take advantage of cheap labor and resources and the lack of government restrictions, and so, they formed some of the largest enterprises America had seen. What truly drove these men was the game itself, or competition in business so to speak. Large personal profits were a by-product of their policies, but not what the industrialists cared about. Big business always was most important to them, as evidenced by the fact that many of the millionaires donated significant amounts of their vast fortunes. Primarily they were business men, but after that they were philanthropists. For example, Rockefeller gave away over half of his fortune, and as a result, Rockefeller Center bears his name. Likewise, dozens of other landmarks, such as Carnegie Hall, New York University, the Morgan Library, and the Metropolitan Museum of Art were only made possible by the charitable endowments these entrepreneurs provided. Despite being called greedy, unethical, and ruthless, these men were some of the most charitable philanthropists to come along in American history and should be remembered for their generosity, brilliance, and motivation above all else.

Economics: Science or Art?

Economics is a social science in that it focuses on the study of society and the social relationships that individuals have within it. Like other sciences, economics relies on the scientific method of forming a hypothesis and testing situations and developing models in order to support or refute the hypothesis. After studies are conducted, then theories and generalizations can be made. While an important part of the field is deriving theories and principles from information arranged in cause and effect order, these conclusions will not always hold true for every participant in the economy. Generalizations can be made about the tendencies of the typical consumer or firm, but there will always be a few who do not fall perfectly in line with economists' conclusions. This being said, however, economics is still a crucial science and helps explain real-world situations. It can be used to aid: politicians and governments in making policies; consumers in attaining maximum satisfaction of their wants; and businesses to reach full efficiency so no asset is under-utilized. Because economics is such an important field in explaining the way society works to fulfill the wants and needs of people, its achievements deserve to be recognized through the Nobel Prize foundation.

Home Ownership for All?

In America, the government has put great emphasis on owning a home being a crucial aspect in achieving the American dream and contributing to society. Government has encouraged ownership through tax deductions on mortgage payments. Companies sponsored by the government also provide cheap financing for those looking to buy a house but don't offer this opportunity to people renting. There are various advantages to owning a house not just for the homeowners, but also society itself. Home-owning encourages people to save more money in order to pay off the mortgage, and this saving in general enables them to accumulate wealth. The economy also tends to do better when housing prices are up because people feel as though they have more money and are willing to buy more goods and services. Social benefits also arise from house ownership. Those who own homes tend to be more involved in their community, have more stable lives, and their children perform better in school.
Despite the many advantages of owning a home, it is accompanied by drawbacks as well. The risk of negative equity can be detrimental and may result in a person losing their entire savings and having their credit destroyed. This is because homes are bought on margin and consume mass amounts of money. Once you own a house, it is quite difficult to make money off of it since housing is not a liquid asset. The entire house must be sold, not just a room or two, making it hard to make a profit. But in the end, it would seem as though the benefits outweigh the disadvantages of owning a home. This is not to say, however, that renting is necessarily bad. Renting can be very helpful and practical for young adults who are just starting out. It enables them to move from place to place more easily without being tied down to one area. Later on in life, home ownership becomes more practical when a family and permanent job come into the picture because it provides a sense of stability and security.

Does Money Buy Happiness?

According to Sharon Begley, the conventional wisdom that money buys happiness is false but crucial to the survival of the economy because it persuades people to continue buying goods and services that they either want or need. She states that the only time when money can significantly impact one's happiness is when it brings him across the threshold between poverty and the middle class. I agree with this statement because enough money to live comfortably drastically changes how one views everything if he was previously living in poverty and struggling to make end's meet. The things that give life meaning, such as family, friendship, good health, and enjoyment, contribute far more to overall happiness than any amount of wealth. However, for many income still plays a vital role in their lives and often determines what direction they will take. Some will choose the job with a higher salary over the one they get more enjoyment out of. Money is an extremely persuasive thing, and since it is necessary to have in order to survive, many figure that their best option is to do whatever will provide them with the most of it. While wealth does enable one to live comfortably and prevents him from worrying about putting food on the table, it is also accompanied by drawbacks. Money expands one's choices, but this means more time spent over second-guessing if the product you bought was really the best choice compared to other brands. Additionally, wealth can consequently make someone more materialistic, and he will always be waiting for the next best thing to buy but never truly be content with what he already owns. Begley brings up many valid points in the article, all of which I agree with. Too much emphasis is put on wealth and income; however, people will always want frivolous things that they think will bring happiness and will buy them if they can be afforded.