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Comment by doktrin | Hacker News Reader

> Aren't we opening up a can of worms by praising the idea of creating needless regulations to keep the status quo simply because it's perceived to be more local?

Yes, potentially. It would be disingenuous to ignore that possibility, but regulation that favors local competitors does seem to have worked out well for China. If they hadn't actively pushed for home grown alternatives to the SV-based behemoths their tech sector might quite conceivably not be where it is today.

I'd be interested in hearing of counter-cases, preferably specific to tech. As it stands, my operating hunch is that some level of protectionism is beneficial - but I'm far from an expert on the subject.

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Protectionism _destroys wealth creation_, hands down, period. The cost of protectionism is that the service you are "protecting" is now more expensive to your own citizens. It's a tax. The industry also knows that it now has two options to get more money--- be a better business, or continue to get favors from the government.

Sugar is 3x as expensive in the US as it is in latin america. Why? We have restrictions on imports, and thus we have to have american companies growing sugar. We are missing out, and if we could remove those protectionist laws, we wouldn't have all our food companies relying on HFCS. (I'm not saying that HFCS is any more unhealthy than sugar, but it would help give consumers a choice.)

Let's ponder about China. Chinese entrepreneurs already have an at-home advantage of knowing chinese customs and culture and legal frameworks. If they were not protectionist, then they could be benefitting from cheaper products, which would allow them to accumulate capital faster, which allows them to create new businesses faster. Additionally, the level of success required for their business is not at a "playpin" level-- if they can be successful in the hypothetical non-protectionist chinese market, then they can be successful anywhere in the world with an open market. It's also really important for business people to be getting the proper signals from the market-- i.e., what quality of product they need to provide and at what cost. If you're performing protectionism, you're giving people false numbers.

Protectionism is a strong benefit for a few that comes with a weak detriment to many. Sometimes that benefit is worth it and other times it isn't. Sometimes I feel like the "all protectionism is bad" argument only gets brought out on HN because emerging market countries haven't produced enough quality coders yet. When programmers can be exported as easily as sugar farmers and textile workers, I think we'll see that protectionism is not an inherent evil, but a qualified tradeoff that society at large needs to decide on.

Nope! I'm a software engineer, but I understand the economics. If companies can get better code from overseas, then they are welcome to do so. I also understand that most of my value comes not from the code I write, but from being able to talk about the code in native english, and to offer trade-offs to product-owners, and to coordinate effectively with my engineering coworkers. Communication takes less than half of my time, but it is half the job.

If I am writing the same code as someone in the 3rd world, I do not deserve to be paid more simply because I'm American. That is arrogance.

I'd be very interested in hearing you explain the economics in your own words.

And just to be clear what you're saying is that you're fine with workers in 3rd world countries (who are poor) and workers in 1st world countries (who are rich) meeting in the middle? Do you support unlimited H1B visas?

I do support unlimited H1B visas, and I would also want to liberalize H1B visas even more. I think that, because it's hard for a worker with a H1B visa to start their own company or to move between companies, the company that is sponsoring the H1B has more negotiating power. (i.e. "well if you don't work hard enough, we can effectively have you deported") and are thus able to exploit their workers more. The limitations I would want on borders are checks for criminal background, and some kind of verification that the people immigrating understand liberal democracy and civil liberties and want to share in that system.

So, there's this idea of comparative advantage. Two companies are both producing widgets, but for some reason one company can produce goods cheaper than the other. The reasons might be things like technology, company or regional culture, training of employees, cost of resources, or geography. If no trade is allowed, then the company with the comparative example can only operate within it's own region. If trade is allowed, then everyone gets the benefit of the cheaper product. Furthermore, the economy is more efficient now!

An example: If it costs Company A $2 to make a widget, and it costs Company B $3 to make a widget, then trading will lower the price. Company B may still be able to be in business, but consumers will get the benefit of competition between the two and having lower prices. Furthermore, because Company A probably selling more widgets now that we've allow trade, the economy is also more efficient, because we're spending less money just producing widgets.

The idea that trade is beneficial is widely accepted. ( http://www.igmchicago.org/surveys/free-trade ) Protectionism is just one example of an anti-trade policy, so it follows that protectionism is bad, inefficient, and a tradeoff in which there are a few local winners, but at the cost of global efficiency, and as a direct tax on the people living in the region that's "protected".

Khan Academy on trade & comparative advantage: https://www.khanacademy.org/economics-finance-domain/microec...

A longer essay about the topic, which addresses the common arguments for protectionism (i.e. infant industries, spillover effects, national security, unequal exchange): http://www.e-ir.info/2012/08/28/the-causes-and-effects-of-ec...

Alright so here's my problem with this view: free trade is not pareto efficient, it's kaldor-hicks efficient which is to say that everyone is only better off if we take some of the winnings from the winners of free trade and distribute it to the losers. What would this look like in practice? Textile Company ABC Corp. sells shirts for $20 at a low profit margin. To increase profits it moves its shirt factory from America to Cambodia for cheaper labor and now they can sell shirts for $15. Because of the Kaldor-Hicks efficiency of trade what we should do in this instance is tax that shirt back to say $18 and give that tax money to the now unemployed american workers (at least for a while as a stop-gap) and boom everyone is better off. This way shirts are cheaper and the textile workers are the same as they were (but now with $2 cheaper shirts as well). But is what we're talking about even free trade anymore? Essentially we're taxing cambodian shirts but not american ones! But that's what our theory tells us is the way you do it to actually make everyone better off as a result of free trade. And then of course we don't live in magic, frictionless econ land so in the real world everybody now gets a shirt for $5 cheaper improving their lives a barely tangible amount but the american textile workers have had their lives totally upended and no redistributive tax is ever implemented and some politician who got an econ minor while earning his Business degree gets on TV and says: "Free trade makes everyone better off, it's just economics."

And that's why I say it's a case-by-case scenario. In my example above we've added like two or three real-world factors and ended up so far from the simple world of comparative advantage that we're barely even talking about the same hypothetical anymore. I don't mind protectionism in some instances because I know that we won't implement our economically perfect, kaldor-hicks tax and because of that free-trade has had and will continue to have distinctly negative effects on real people and real families.

EDIT: apologies about the textwall.

Textwall is fine =]

I wasn't actually familiar with Kaldor-Hicks improvement by name, but that was definitely the idea I was getting at! Kaldor-Hicks improvement is defined in a funny way (i.e. could taxes be added such that we have no losers), but it seems like a proxy for "there is a net benefit / overall people are getting wealthier".

There is also now excess money in the wallets of the consumers. Consumer savings rates are pretty steady, so they're still going to spend money. The rest of the economy will benefit from that, and should be able to find a good use of our unemployed american t-shirt maker. America exports a lot of machines, especially those machines used in developing world factories.

I'm okay with there being losers, as long as the gains are more. Because in every industry this choice between "a sliver more wealth for everyone and a few losers" builds in aggregate. And I'm in favor of global improvement-- I have no (nationalistic/whatever) allegiance to the people who happen to be living near me.

Your problem is that there are losers at all. Do you feel like we should have banned the car, for the sake of stablehands and horseshoe cobblers? Do you think we should have banned the light bulb, for the sake of candle makers? I know these examples are about technology improvements rather than laws, but it's the same principle-- greater good, with the side benefit of free choice.

And I'd say you misunderstand my point which is not that I have a problem with some people losing, I have a problem with a few losers losing almost everything. It's almost a negative lottery, where if you come up snake-eyes your job is deported and now you're competing with thousands of other laid off individuals with almost exactly your same experience to find the few applicable jobs that are available. Except that even in a negative lottery you could choose not to play.

>should be able to find a good use of our unemployed american t-shirt maker.

This is just a total handwave though. There's nothing in your economic theory that says these people are going to find good employment, it's just wishful thinking. We had jobs, we sent them somewhere else, now there's less jobs. Plenty of people who worked at the car plants will never have another job as good. I don't know the history but I'd say that there probably plenty of cobblers who never found as good of employment again either.

>I have no (nationalistic/whatever) allegiance to the people who happen to be living near me.

That puts you in a tiny minority though. Most people aren't true globablists.

>Do you feel like we should have banned the car, for the sake of stablehands and horseshoe cobblers?

No, because then most of us lose (we don't get cars), I feel we should have taxed cars and redistributed that money to unemployed stablehands and cobblers though. Then we all win!

Let me pose to you a hypothetical example. ABC Corp sells $20 shirts in America. It moves its shirt factory from America to Cambodia. It still sells its shirts for $20. Its new profits are greater than the lost wages of the americans it laid off. If all that profit were distributed to one person, say the CEO would you still think it morally good?

I think that example might get at the heart of our disagreement.

> Protectionism _destroys wealth creation_, hands down, period. The cost of protectionism is that the service you are "protecting" is now more expensive to your own citizens.

It sounds like you're reciting from an econ 101 textbook here. Let's speak a little more concretely. Take an Uber competitor - do you really envisage a dramatic price difference, particularly once you take Uber's war-chest gouging out of the equation? They still have to compete with local competitors (i.e. cabs), so there doesn't appear to be tons of wiggle room for this tax on consumers.

Even allowing for a slight consumer advantage from a globally competitive ride sharing service, I don't think you've conclusively demonstrated that those negatives necessarily outweigh the benefits of fostering local business. Put plainly, I perceive more benefit in my neighbor having a job than I do in saving $1 on a 10 minute ride sharing trip across town.

> Additionally, the level of success required for their business is not at a "playpin" level-- if they can be successful in the hypothetical non-protectionist chinese market, then they can be successful anywhere in the world with an open market

Sure, this hypothetical company is hypothetically competitive - but how competitive is it going to be if it doesn't exist in the first place? Seems more than a little unrealistic for any company to tackle Google on an even playing field.

You are conveniently forgetting about the ruthless practice of operating at a significant loss while lying to investors about a grandiose vision of the future. Large corporations regularly do this: overpromise local jobs, undercut everyone else by operating at a loss, and either have to bail out of the market or move on if they themselves are bought out. The result is both the local market is gone and then the local jobs are gone once these foreign companies leave.

If companies are operating at a significant loss, then that's just a subsidy from their investors to the common person. I use Uber because, hey, I'm happy to take money from dumb VCs.

Why wouldn't local markets be able to correct? If Uber collapsed, people would still need to get rides from A to B. If Uber collapsed, couldn't most of us make a rudimentary ride-requesting app in short order?

Cause and effect. Uber operates at a significant loss at the whims of VC investment. Operations undercut competition so the competition may have to close down shop and sell off assets or get bought out by the monopoly of the area. When this is the case (monopoly) then you have unfettered control over how pricing works.

Uber has to eventually make a choice about whether they need to cut costs, jobs or assets at some point in the future; or just wait it out until all the other competition dies out and they are the monopoly of the area.

But, as a result of pulling out of a city, a location, or a reduction in services, you have twofold problem:

1. Loss of jobs 2. Loss of local companies

(or adding the monopoly scenario) 3. Loss of price gouging prevention

Now what makes this type of market more feasible to resiliency is that the assets are distributed (i.e. owned by actual people). So if Uber did have to bail out, people could feasibly still work anyways. This is different than other models where major assets and investments are required to even operate at all.

That being said I worry about how long this is going to last. Uber is operating with the expectation that there will be fully automated self-driving cars and drivers will be unnecessary. This seems to indicate, at least to me, that the distributed asset model would go away (unless all cars are self-driving).

It's an interesting thing to consider, whether their future depends on continued reliance on VC subsidies (which is going to run out), and whether it relies on significant investment in self-driving assets, or whether it relies on everyone having self-driving vehicles. But perhaps part of the math is to balance the book by pushing more in that direction. (At least that's the pitch to the VCs). Basically, I am skeptical that this is sustainable to operate this way at a loss for so long that eventually they will have to increase prices or cut operations. In the case of the monopoly scenario, you have no way to competitively prevent price gouging (however temporary it might be).

My hope is that some aggregator services come along and turn the model into something more distributed with an open-pricing model based on efficiency metrics like operating cost for a self-employed/freelance driver.

> Protectionism _destroys wealth creation_, hands down, period.

That just makes you sound stupid.

Copyright, Trademarks and Patents are protectionist devices that contribute billions to the economy and keep a ton of people employed.

Yes, they have their problems, but saying that they destroy wealth is idiotic.

Intellectual Property, DRM and holding my data hostage agaisnt my will are all forms of protectionism, and if you were to remove that, how much would Uber be worth? They have the software and "network effects", but without their driverless car play or the fact that I should be free to have an OpenID that would work between services (and carry my ratings, same for drivers) how great would Uber be?

You're right that protectionism stops innovation, but innovation is not always directly linked to wealth creation, and protectionism comes in many forms, including corporate protectionism.

How does Uber use IP, DRM, and data-hostaging to make itself worth more? :confused:

Having OpenID doesn't seem like a right you can demand. Idk. If you want to, choose a service that provides that. You're right that there's a network effect, but it's a network effect that's been freely given by consumers.

I'm not a pro-Uber shill. I'm kind of hoping that their self-driving car play fails, and that the market corrects itself. (i.e. Uber bankrupts!)

What do you mean corporate protectionism? Corporations don't have the power to pass laws and force people to do things against their will. Those powers only reside in the government. I'm absolutely anti-cronyism and anti-lobbying. I think the best situation we could be in would be one where the government does not have power to meddle in the market, because we would not even have to worry about special interests getting into politician's pockets, because politicians would have no special favors to give in return.

Markets control almost everything. How would governments not interfere in the market ? Would you not grant IP, considering IP is clearly a form of protectionism ?

Freely given can have a lot of interpretations. I would say that Uber is buying network effects using VC money by depressing prices for the goods they are selling.

In the end though car transportation will probably be as profitable of a business as airplane transportation - that is not much. The idea that strapping an app and bending regulations will allow Uber to make more money than its competitors seems like a fantasy to me - the price of entry being low enough and regulations being the same for all, Uber Will be the United Airlines of 2070.

The idea that Uber has any right to the data I've put into it is ludicrous as well to me - if I produce data I should have a right to it, and in a fully interchangable manner. anything else is an engineer's defense to monopoly by database, which I increasingly feel like should be illegal.

>> Sugar is 3x as expensive in the US as it is in latin america. Why? We have restrictions on imports, and thus we have to have american companies growing sugar.

not sure this example applies to China blocking FB for example. they are 1 - creating job opportunities for their devs and 2 - taking the piece of the pie straight from FB and putting it into their pockets. (+ probably whatever data they want to collect on their citizens instead of FB doing that).

some protectionism is "good". the problem I have with it is it skews the playing field unless all players do the same thing.

Sure, but then let's have that discussion. Let's not hide it behind other regulations.

> Sure, but then let's have that discussion

Well, we're on a discussion forum so that would be appropriate.

> Let's not hide it behind other regulations.

In my experience, it's the exception and not the norm for entities (be they governmental or otherwise) to plainly state their motivations. I think it's unrealistic to expect that to change anytime soon.

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