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Mercantilism: The theory that explains Trump’s trade war
Mercantilism, the oldest thing in economics, is back in a big way.
- The use of tariffs by the Trump administration has confused more than a few leading economists.
- The policy and the motivations behind them do reflect an economic theory with a long tradition: mercantilism.
- Understanding mercantilism can help us understand why there is a call for more tariffs, and what might happen to the economy as a result of them.
What is mercantilism?
Those of you who didn't sleep through history class might remember that the early modern period was shaped in part by an economic theory called mercantilism. Not so much an ideology as it was a rationalization for policies that countries were implementing, it drove colonization and imperialism for much of the 17th and 18th centuries before being replaced by capitalism.
The idea was to maximize the value of your exports and minimize the value of your imports in order to increase the amount of wealth your country had. This was accomplished by preventing imports of finished products by means of tariffs, the promotion of domestic manufacturing, and strict control over the money supply. These policies were best expressed in France under Jean-Baptiste Colbert, who reorganized the entire French economy to follow mercantilist theories, and in England and during the 17th century.
There was also a significant national security element to mercantilism, since a bad trade deal would reduce your economic standing compared to another country and potentially place you at a military disadvantage over the long run. This reinforced the idea that every country was out for themselves and motivated countries to try and maximize the amount of wealth they had; preferably at the expense of everybody else.
How is this different from the economics that came afterward?
There are several differences, not only in the policies each philosophy endorses but how Mercantilism views trade and economic interactions compared to how we see them now.
While today most economists view trade as a win-win interaction, with each trading partner focusing on making a lot of something they can make well and then trading for what they lack, mercantilists viewed trade as a zero-sum game. In every trade, there was a winner and a loser. Each country strove to export only finished products and import as little as possible.
Mercantilists also wanted to make a country as close to self-sufficient as possible, as part of their goal to minimize imports. This runs counter to modern economic theories that suggest a country should produce what it is best at making and import what it cannot make cheaply.
Lastly, while modern economic theories argue that increasing productivity will lead to economic growth, Mercantilists argued that an endlessly positive balance of trade alone was the key. This point was so important that nobody even realized this was impossible until David Hume came along.
How does Donald Trump follow this?
The rhetoric he uses when he tries to rationalize the tariffs hits all of the mercantilist concerns on the head. Tariffs against the industries of American allies are framed as issues of national security, free trade agreements are viewed as bad deals, trade surpluses are emphasized as a sign of economic progress.
Even his love of tariffs as a tool harkens back to old-timey economic theories, even economists who call themselves neo-mercantilists don't advise the use of tariffs.
However, he isn't exactly doing it right. Mercantilists like Colbert tried to get raw materials as cheaply as possible while placing tariffs on finished products to encourage domestic production. Currently, the United States is putting tariffs on things like steel that are used to make other products. This, while potentially having economic or political payoffs, is nonsensical from a mercantilist perspective. They would place the tariffs on cars and washing machines, not steel.
What does this mean for the future?
There is a reason that Mercantilism went out with the 18th century.
At the scale of the entire economy, tariffs tend to increase prices and lower employment. They can, however, preserve jobs and profits in the protected industries as intended. The Trade Partnership, a trade and economic consulting firm, estimated that the steel and aluminum tariffs will cost 100,000 jobs while only 30,000 are gained.
Former Chairman of the Federal Reserve Alan Greenspan called the tariffs "insane" and compared them to excise taxes, which are taxes on production. He further questioned the ability of anybody to win a trade war, saying "There are victors and there are losers in a tariff fight. But that doesn't say that a more important issue is both are losing, it's just the winner loses less."
On the other hand, they are doing the job they are supposed to be doing. The prices of the tariffed goods are rising to a point where some consumers to choosing to buy from American producers again. If these purchases will be enough to stave off the job losses predicted in other sectors of the economy is another question.
The global tendency towards free trade is unlikely to end anytime soon, for the reasons mentioned above. However, the current trend of closing markets and starting trade wars is not without some precedent in history. The final effect of these tariffs on the global economy remains to be seen, but history and economic theory suggest we should be in for a bit of excitement.
Trade, diplomacy, culture: How America can lead the world
A new study finds that dogs fed fresh human-grade food don't need to eat—or do their business—as much.
- Most dogs eat a diet that's primarily kibble.
- When fed a fresh-food diet, however, they don't need to consume as much.
- Dogs on fresh-food diets have healthier gut biomes.
Four diets were tested<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNTU5ODI1MS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY1NjY0NjIxMn0._w0k-qFOC86AqmtPHJBK_i-9F5oVyVYsYtUrdvfUxWQ/img.jpg?width=980" id="1b1e4" class="rm-shortcode" data-rm-shortcode-id="87937436a81c700a8ab3b1d763354843" data-rm-shortcode-name="rebelmouse-image" data-width="1440" data-height="960" />
Credit: AntonioDiaz/Adobe Stock<p>The researchers tested refrigerated and fresh human-grade foods against kibble, the food most dogs live on. The <a href="https://frontierpets.com.au/blogs/news/how-kibble-or-dry-dog-food-is-made" target="_blank">ingredients</a> of kibble are mashed into a dough and then extruded, forced through a die of some kind into the desired shape — think a <a href="https://en.wikipedia.org/wiki/Food_extrusion" target="_blank">pasta maker</a>. The resulting pellets are sprayed with additional flavor and color.</p><p>For four weeks, researchers fed 12 beagles one of four diets:</p><ol><li>a extruded diet — Blue Buffalo Chicken and Brown Rice Recipe</li><li>a fresh refrigerated diet — Freshpet Roasted Meals Tender Chicken Recipe</li><li>a fresh diet — JustFoodforDogs Beef & Russet Potato Recipe</li><li>another fresh diet — JustFoodforDogs Chicken & White Rice Recipe.</li></ol><p>The two fresh diets contained minimally processed beef, chicken, broccoli, rice, carrots, and various food chunks in a canine casserole of sorts. </p><p>(One can't help but think how hard it would be to get finicky cats to test new diets. As if.)</p><p>Senior author <a href="https://ansc.illinois.edu/directory/ksswanso" target="_blank" rel="noopener noreferrer">Kelly S. Swanson</a> of U of I's Department of Animal Sciences and the Division of Nutritional Sciences, was a bit surprised at how much better dogs did on people food than even refrigerated dog chow. "Based on past research we've conducted I'm not surprised with the results when feeding human-grade compared to an extruded dry diet," he <a href="https://aces.illinois.edu/news/feed-fido-fresh-human-grade-dog-food-scoop-less-poop" target="_blank">says</a>, adding, "However, I did not expect to see how well the human-grade fresh food performed, even compared to a fresh commercial processed brand."</p>
Tracking the effect of each diet<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNTU5ODI1OC9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY3NjY1NTgyOX0.AdyMb8OEcjCD6iWYnXjToDmcnjfTSn-0-dfG96SIpUA/img.jpg?width=980" id="da892" class="rm-shortcode" data-rm-shortcode-id="880d952420679aeccd1eaf32b5339810" data-rm-shortcode-name="rebelmouse-image" data-width="1440" data-height="960" />
Credit: Patryk Kosmider/Adobe Stock<p>The researchers tracked the dogs' weights and analyzed the microbiota in their fecal matter.</p><p>It turned out that the dogs on kibble had to eat more to maintain their body weight. This resulted in their producing 1.5 to 2.9 times the amount of poop produced by dogs on the fresh diets.</p><p>Says Swanson, "This is consistent with a 2019 National Institute of Health study in humans that found people eating a fresh whole food diet consumed on average 500 less calories per day, and reported being more satisfied, than people eating a more processed diet."</p><p>Maybe even more interesting was the effect of fresh food on the gut biome. Though there remains much we don't yet know about microbiota, it was nonetheless the case that the microbial communities found in fresh-food poo was different.</p><p>"Because a healthy gut means a healthy mutt," says Swanson, "fecal microbial and metabolite profiles are important readouts of diet assessment. As we have shown in <a href="https://academic.oup.com/jas/article/92/9/3781/4702209#110855647" target="_blank">previous studies</a>, the fecal microbial communities of healthy dogs fed fresh diets were different than those fed kibble. These unique microbial profiles were likely due to differences in diet processing, ingredient source, and the concentration and type of dietary fibers, proteins, and fats that are known to influence what is digested by the dog and what reaches the colon for fermentation."</p>
How did kibble take over canine diets?<p>Historically, dogs ate scraps left over by humans. It has only been <a href="https://www.thefarmersdog.com/digest/the-history-of-commercial-pet-food-a-great-american-marketing-story/" target="_blank">since 1870</a>, with the arrival of the luxe Spratt's Meat Fibrine Dog Cakes—made from "the dried unsalted gelatinous parts of Prairie Beef", mmm—that commercial dog food began to take hold. Dog bone-shaped biscuits first appeared in 1907. Ken-L Ration dates from 1922. Kibble was first extruded in 1956. Pet food had become a great way to turn <a href="https://www.dogfoodadvisor.com/choosing-dog-food/animal-by-products/" target="_blank">human-food waste</a> into profit.</p><p>Commercial dog food became the norm for most household canines only after a massive marketing campaign led by a group of dog-food industry lobbyists called the Pet Food Institute in 1964. Over time, for most households, dog food was what dogs ate — what else? Human food? These days more than half of U.S. dogs are <a href="https://www.nytimes.com/2014/08/03/magazine/who-made-that-dog-biscuit.html" target="_blank">overweight or obese</a>, and certainly their diet is a factor.<span></span></p><p>We're not so special among animals after all. If something's healthy for us to eat—we're <em>not</em> looking at you, chocolate—maybe we should remember to share with our canine compatriots. Not from the table, though.</p>
New study suggests the placebo effect can be as powerful as microdosing LSD.
- New research from Imperial College London investigated the psychological effects of microdosing LSD in 191 volunteers.
- While microdosers experienced beneficial mental health effects, the placebo group performed statistically similar to those who took LSD.
- Researchers believe the expectation of a trip could produce some of the same sensations as actually ingesting psychedelics.
Psychedelics: The scientific renaissance of mind-altering drugs<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="92360c805fe66c11de38a75b0967f417"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/5T0LmbWROKY?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>For the study published in eLife, the team recruited 191 citizen cosmonauts to microdose either LSD or a placebo over the course of several weeks and note the psychological effects. Volunteers were already microdosing LSD, so there was no true control. Each volunteer was given instructions on creating their own low-dose gel capsules, some containing LSD, others not. Then they mixed the capsules in envelopes so they didn't know if they were taking the real thing or not.</p><p>The trial design was ingenious: each capsule featured a QR code that was scanned after the addition of ingredients but before they were placed in the envelope so that researchers knew what they were ingesting.</p><p>The problem: volunteers sourced their own LSD. Lack of quality control could have had a profound effect on the results. </p><p>The results: LSD microdosers reported feeling more mindful, satisfied with life, and better overall; they also noticed a reduction in feelings of paranoia. </p><p>The catch: the control group felt the same thing, with no statistical difference between the groups. </p><p>Lead author Balázs Szigeti comments on the findings: "This suggests that the improvements may not be due to the pharmacological action of the drug but can instead be explained by the placebo effect." </p>
Credit: Alexander / Adobe Stock<p>Psychedelics are notoriously difficult to control for given the intensity of the experience. Yet there is precedent for the above findings. A <a href="https://link.springer.com/article/10.1007/s00213-020-05464-5" target="_blank">2019 study</a> found that 61 percent of volunteers that took a placebo instead of psilocybin felt some psychedelic effects, with a few volunteers experiencing full-on trips.</p><p style="margin-left: 20px;">"Several stated that they saw the paintings on the walls 'move' or 'reshape' themselves, others felt 'heavy. . . as if gravity [had] a stronger hold', and one had a 'come down' before another 'wave' hit her."</p><p>The Imperial team believes the expectation of a trip might have been enough to produce similar results. Senior author David Erritzoe is excited for future studies on the topic, believing they tapped into a new wave of citizen science that could push forward our knowledge of psychedelic substances.</p><p style="margin-left: 20px;">"Accounting for the placebo effect is important when assessing trends such as the use of cannabidiol oils, fad diets or supplements where social pressure or users' expectations can lead to a strong placebo response. Self-blinding citizen science initiatives could be used as an inexpensive, initial screening tool before launching expensive clinical studies."</p><p>As investments into the psychedelics market explode, with one company <a href="https://www.bloomberg.com/news/articles/2021-03-03/thiel-backed-magic-mushroom-firm-atai-hits-2-billion-valuation" target="_blank">reaching a $2 billion valuation</a>, a recurring irony appears in the long arc of psychedelics and research: the power of our minds might be enough to feel greater life satisfaction and a deeper sense of mindfulness. If that's possible with a placebo, we have to question why the rush to create more pharmacology is necessary. </p><p>This is, mind you, a separate conversation over the role of psychedelics and rituals for group bonding. The function of group cohesion around consciousness-altering substances will continue to play an important role in many communities. </p><p>Of course, we should continue to explore the efficacy of psychedelics on anxiety, depression, suicidal ideation, PTSD, and addiction. <a href="https://bigthink.com/surprising-science/antidepressant-effects" target="_self">Pharmacological dependence</a> is a stain on the psychiatry industry. Whether or not psychedelics can be prescribed for daily use remains to be seen, but we know a moneyed interest is expecting a return on investment—the above company, ATAI Life Sciences, raised $157 million in its Series D round. </p><p>When it comes to wellbeing, some things money just can't buy. How we navigate the tricky terrain of mainstreaming psychedelics remains to be seen. </p><p>--</p><p><em>Stay in touch with Derek on <a href="http://www.twitter.com/derekberes" target="_blank">Twitter</a> and <a href="https://www.facebook.com/DerekBeresdotcom" target="_blank" rel="noopener noreferrer">Facebook</a>. His most recent book is</em> "<em><a href="https://www.amazon.com/gp/product/B08KRVMP2M?pf_rd_r=MDJW43337675SZ0X00FH&pf_rd_p=edaba0ee-c2fe-4124-9f5d-b31d6b1bfbee" target="_blank" rel="noopener noreferrer">Hero's Dose: The Case For Psychedelics in Ritual and Therapy</a>."</em></p>
What makes some people more likely to shiver than others?
Some people just aren't bothered by the cold, no matter how low the temperature dips. And the reason for this may be in a person's genes.