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April 21, 2011

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Alan Beattie

What happens if the fishing village along the coast builds a similar road but does not charge a toll, thus seizing the dried fish trade?

Jamieloois

Since when was weakening the WTO (if that is indeed what's going on) a bad thing? The set-up of the WTO, all of its accords and the GATS in particular were all brought to us by Jeffrey Sach's 'wrong economic model of the world', the same one that brought us the onging global economic crisis and precipitated the 'Arab Spring'. Ironic though it is that the anti-democratic and oligopolistic corporatization of the world that is at the centre of all that the WTO does should have precipitated discounted gucci such an uprising against repression,the fact remains that the way that the WTO was conceived and built is antithetical to everything discount gucci handbags democracy is supposed to stand for. 2945abc45 0421

Simon Lester

Or, what if, in response to the toll booth, that other village puts up its own toll booth at the end of the road, imposes a high tariff on imported dried fish, and the people of the other village find alternatives to the now very expensive dried fish?

Simon Lester

Perhaps it would be worth establishing some kind of inter-village organization, which could serve as forum for the different villages to discuss trade issues, and, possibly, make commitments to keep tariffs and other forms of discrimination to a minimum.

Alan Beattie

What SL said. We could call it, I dunno, the World Tolls Organisation or something, get some French dude in to run it.

Dani Rodrik

Yeah, yeah, I get it. The GATT is a great idea. Which is exactly what I say in the book. The WTO, on the other hand, is a different animal. Read the book, please?

Alan Beattie

I understand that, but the parable doesn't end with multilateralism of any description saving the day. It ends with unilateral tolls ensuring a happy ending.

Jamieloois

I think your FT was quite good. I want to add one hiphone important thing, though. And that is, we should not forget that the ongoing bogus KCK trial is also almost entirely a product of wholesale Gulenists and that lousy newspaper that calls itself Zaman, just like this new wave of journalist arrests, and the Sledgehemmer case. Let us not forget that hundreds of elected Kurdish politicians and activists are in prison right now for doing nothing more than exercising their fundamental human rights. 2945abc45 0422

Jean-Marc Desperrier

Hi,

I love village parables for economy, I've seldom seen it used by economists, but I've always thought it's a great way of going from too complex to handle to something very simple, and then reintroduce the complexity step by step, to get to understand economic phenomenons much better.

Here, the need for regulation comes from a clearly identified limited resource.

So your solution is not the optimal one. The optimal solution should be pinpointed on this limited resource whereas the toll on the road isn't. The toll impacts and limits a lot of trade that has no relation with that limited ressource.

I think what's needed instead is a fishermen syndicate, and catch share agreement.

Do you know there's actually an island that works exactly this way ? (saw that on TV, don't remember what place it is unfortunately, and can't find the right keyword to locate it on the internet).
Their main resource is sea cucumber fishing. It's very easy to overfish sea cucumbers because they basically don't move and are a very easy catch. It's their island, they have their own laws, so they decided that if you're not a member of the fishermen syndicate you can't fish them, and there's a severely limited access to that syndicate membership. Newcomers only have temporary membership, it takes many years to get the permanent one, and they reserve themselves the right to let temporary members go if the resource level drops. But it works to protect the sea cucumber resource, and the syndicate also invests to have foreign expert come and analyze the sea cucumber population to help them determine what the adequate fishing level is.

But in most cases, the problem is that limited resources aren't so clearly identified and they are dispute on what the adequate fishing level is. Red tuna in the Mediterranean sea is a good example, it sounds simple at first but it's very hard to identify the precise fishing level. And next the fishermen don't want to respect the limit because they claim they are cheaters, some countries that are not part of the catch share agreement and are fishing freely, etc.

On the opposite hand, you get many people convinced and acting on the belief that many things are limited and that rules to limit access to it is absolutely required. This is the whole story of immigration. What is the limited resource that must be protected by limiting immigration ? Here in France nationalists, and unfortunately also Sarkozy's right-wing government, are quite open about what is limited : Jobs. We have a restricted amount of jobs, and foreigners taking them will create more unemployment. Of course many rather hide behind the argumentation that the foreigner overwhelm our health system. Well what if they work ? Doesn't that finance the health and social care they need ? A large majority of immigrants are young men that need little health and social care so there's a large positive disproportion between the amount of work they are able to produce and their social cost.
Of course when you make it illegal for them to work, you force them into illicit work, which mean that they won't be paying the tax that finance health and social care, and you have created the very problem you denounce.

Sorry if it looks like a lengthy aside, but it follows very logically. If you say we need commerce restrictions and toll to protect limited resources, then you need to realize a lot of people consider jobs themselves are a limited resource, and that's why they want restrictions and toll everywhere.

Account Deleted

and here comes heavy armoured cavalry to ransom the peacefull and rich village, telling them they are a threat to the planet order and they need to pay for the village protection!

Blakedw

What actually happens is that the fishermen buy the election of a new shaman. He then rules that the fishermen have property rights over the lake and the fishermen agree amongst themselves to limit overfishing to maintain higher prices for fish. They use the extra profit to buy the votes of the village council to ensure that there are no tolls on imports of the goods which fishermen want to buy.
Adam Smith only used the phrase "invisible hand" once in his writings. It was not about the internal division of labour within society but about whether external trade restrictions were needed to ensure activity at home. His argument was that there were so many risks and uncertainties about doing business abroad that there was an enormous home bias working in favour of domestic activity. The whole of post-war globalisation has been about reducing this home bias. But a bit of home bias is actually a good thing.
By the way, after a few years the village feasts are cancelled. The fishermen obtain proof from a number of independent economic research institutes which they fund that the feasts remove the incentive from non-fishermen who thus are unwilling to take jobs in domestic service at lower wages.

MediaWatchBlog

Hi,
I did a translation of the piece into German. You can find it here: http://epo-mediawatch.blogspot.com/2011/04/und-alle-lebten-glucklich-und-zufrieden.html. I hope it is ok for you...

Best regards,
Uwe

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That's the parable of trade and seek! LOL! An economy like that is win-win situation, but it is never easy to achieve. Although it ended up like a fairy tale with a happy ending, it's good to point out that fairy tales don't exist. You know what that means.

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