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Friday, April 07, 20061144420500

Bloggers, Mexico, and Productions Posibility Curves

In response to my posts in favor of uniting the Continent , Drawing North America and James Madison Wants Union with Mexico, my blogfriend Chirol from Coming Anarchy expressed the fears of many when he commented:

Little ole East Germany has already dragged the western part down (and still does). The whole of Mexico would ruin us.


In other words, because America is rich and Mexico is poor, economic union would be a disaster.

The opposite is true, as can be seen with an
example from the blogosphere....


Imagine Blogger A both writes posts and draws charts: he can spend all day either writing 12 posts, drawing 8 charts, or some combination thereof





PostsCharts
120
82
45
08


Visually, his productions possibility curve looks like

production_possibilities_0


Now imagine Blogger B is no better than Blogger A in drawing charts, but is worse than Blogger A in writing posts. Compared to Blogger A's first-tier blog, Blogger's B always seems to lag behind. He can at most draw 8 charts, but only write 9 posts





PostsCharts
90
62
35
08


And his productions possibility frontier:

production_possibilities_1


If both bloggers operate independently, their two production limits look like:

production_possibilities_2


However, if they team up -- they can get A LOT more done. The actual mathematics is vector addition, which I won't bore you with, but the final production frontier looks like

production_possibilities_3


As you can see, the production frontier now bows out -- even though one blogger was at least as good, if not better, than the other at both tasks, they get more of what they want if they trade than if they don't. Working together, trading, both bloggers get more than if they had stuck to themselves.

The benefit increases the greater the difference between the bloggers. Two twin bloggers trading wouldn't get much out of it, but the more they are different from each other (the more they complement each other), the more the benefits.

This example isn't just true for graphics and posts -- it's true for anythings produced. For instance, to calculate trade with America and Mexico you would give America an advantage in producting things with equipment (because America has more cpaital). The same advantages of trade will hold through.

How to explain Chirol's example, then, of economic harm to Germany after reunification? Simple: socialism. If in our example the government way paying bloggers not to post, or making laws that prevented chart-production, the economy would be harmed. But under socialism the economy is harmed anyway.

Learn more about the productions possibility curve, and the benefits of free trade

Comments

There is no anarcho-libertarian country in existence. There never has been. Socialism may be the problem and it may be restraining economic wellbeing irrespective of economic union but that just means that we need to ask whether there are special problems with union arising from our mutual concessions to socialist thought. The ultimate answer, I believe, will be yes. The pain will be real. The extra pain might even be enough to instill radical changes to our laws that are neither well thought out nor conducive to our long-term wellbeing.

But there are other difficulties. Political union involves the melding of multiple basic traditions of law. Unless Mexico wholly trashes its legal system, we're going to have to deal with a great deal of political pathology injected into our discourse. People will move, mix, and vote and they will vote as they are used to voting. US politics will move massively to the left and that's not without its own costs.

The project for political union might make sense one day. It won't be in my lifetime though.

Posted by: TM Lutas | Friday, April 07, 2006

TM Lutas,

Anarch-libertarianism is a straw-man, so I will not address that.

More seriously, we see that the EU's eastern advance has helped that Continent, while Germany's absorption of her neighbor hurt her. Therefore, the maximum level of regulation before incorporation of Mexico-style states seems to be somewhere between Brussells and Bonn's. As we're nowhere near either, we should be safe.

It'd be interesting to know how much the Mexico's State Oil Company (pemex) distorts that country's politics. It's disolllution (either to private investors or somehow divided between the Mexican States) would be wonderful for sound government there.

Curtis also wondered about the effects of voting patterns of Mexicans who move north, and I addressed that. [1] Suffice to say, movers will be more energetic and economically productive, while those who stay (if Mexico follows Poland's example) will be split between those who wish to grow fast to catch up (economic conservatives) v. those who wish to protect their culture (social conservatives). Throughout Eastern Europe center-left and populist governments win from time to time, but this is more "caboose breaking" than a change of direction.

Our union allows states to have their own political traditions (Nebraska's unicameral, Lousiana's traditional pseudo Code Napoleon, Catholic "community" law in the Southwest, etc). This wouldn't apply any less to absorbed Mexican states.

You're right that there will be pains. These are best addressed early.

[1] http://tdaxp.blogspirit.com/archive/2006/04/05/james-madison-wants-union-with-mexico-to-avoid-being-like-fr.html#c743765

Posted by: Dan tdaxp | Friday, April 07, 2006

What advantage would the United States receive by merging with Mexico that it doesn't already receive through NAFTA? We already have free trade with Mexico and therefore our productions levels are at their fullest. Merger would only lead to drawbacks with no potential further gain.

Posted by: Nick | Saturday, April 08, 2006

Dan--FYI:

"Requiem in Pace"
http://skellmeyer.blogspot.com/2006/04/requiem-in-pace.html

[snip]
"The American Way of Life that we so ardently embrace has been in existence for almost forty years, and it won’t survive another decade. This isn’t the first time that it has died, of course, and it won’t be the last. But it is time to write the obituary for this particular version..."
[snip]
...
[snip]
"The Minuteman Project boasts over 1000 members. The march in Los Angeles alone was one half-million strong. Unlike demonstrations of Muslim violence in Europe, America’s demonstrations have been peaceful, enormous and Catholic. The Minutemen have lost.

America as we knew it in the 1980’s and 1990’s, is dead. It will not return anymore than the America of the 1780’s will return..."
[snip]

"Running the Numbers"
http://skellmeyer.blogspot.com/2006/04/running-numbers.html

Would love to get your opinions on these, if you won't mind.
Thanks.

Posted by: Jayson | Saturday, April 08, 2006

What happened to my comment from yesterday?

Posted by: Chirol | Saturday, April 08, 2006

Nick,

For developed countries, the benefits of free-trade-in-labor far exceed the beenfits of free-trade-in-capital or free-trade-in-goods.

Without going into the details here (maybe they'll be later posts), the benefits of free trade in labor (labor mobility) come from the fact that developed countries are service-sector economies, so many types of work must be done on location. A second factor is the support ratio between workers and retirees -- as our population ages, our support ratio goes down. Importing workers drives it back up.

The "drawbacks" most often mentioned are things like increased education spending -- which is backwards, because education is an investment in a more productive citizenry.

Jayson,

I think I generally agree with those posts. Running the numbers attacks the myths of illegal immigration, while "Requiem in Pace" outlines America's choice: Mexicans or Muslims?

Chirol,

Do you mean your comment on "James Madison Wants Economic Union with Mexico" [1] ? I went through my email notification and didn't see any comment from you after that.

[1] http://tdaxp.blogspirit.com/archive/2006/04/05/james-madison-wants-union-with-mexico-to-avoid-being-like-fr.html#c739401

Posted by: Dan tdaxp | Saturday, April 08, 2006

Dan - The difference between success and failure isn't Brussels and Bonn's economic regulations (though shouldn't we be saying Berlin?). The difference is in their flexibility. The FRG has failed to adjust its domestic laws sufficiently to take into account the new reality of a mass of E German workers. Brussels didn't have to make such severe adjustments because the national governments of the former E. Bloc shouldered a considerable portion of the burden.

NAFTA approximates the Brussels situation, a North American union would approximate the challenge to the FRG. It is a very open question whether DC is bold enough, flexible enough, to change our laws sufficiently so that we could thrive on this change. On balance, I think not.

Posted by: TM Lutas | Saturday, April 08, 2006

TM,

If I am undestanding you correctly, you are saying that Bonn government engaged in a maximum rule-set export to her new member states (Brandenburg, &c), thus making their rehabilitation a "national" issue. However, Brussels engaged in a minimal rule-set export to her new member states (Poland, etc), making their rehabilitation local issues. You conclude that the Brussels path makes sense, but the Bonn path doesn't.

I agree completely.

In "Drawing North America" [1] I argued a union with Mexico would naturally increase the flexibility of the USA's member States. A centralized, inflexible attempt to grow the Mexican states would be as the Establishment's historic attempt to do the same to the old Confedereacy. [2] In the South's experience, it was only when economically they asserted their flexibility that they were able to grow. The same would be true for the Mexican states.

NAFTA is certainly better than turning the Continent into a centralized, French-style Republic, but it is not optimal. NAFTA does not allow us to reap the benefits of free movement of labor, and impedes (by not increasing remittances from increased mobility) free movement of capital for Mexico. Additionally, it fails Mexico by not exporting our explicit ruleset (our extremely functional Constitution), and fails us by not allowing us to export the same Constitution.

[1] http://tdaxp.blogspirit.com/archive/2006/03/29/drawing-north-america.html
[2] http://www.theatlantic.com/issues/54jan/kennedy.htm

Posted by: Dan tdaxp | Saturday, April 08, 2006

Dan - You don't quite grasp the difference. There's only so much change that can be done before politicians start losing office. The eastern expansion of the EU was, in large part, rule adjusted in Prague, Warsaw, et al and these politicians adopted the massive changes in national legislation (the EU required "acquis communautaire") in large part by hand waving and saying "not us guv, it's those people in Brussels you should be mad at". Berlin/Bonn had no scapegoat to pass blame to and so reforms stalled.

So who will be the scapegoat in this US/Mexico union? Without one, what makes you think that US and Mexican politicians are any better than FRG ones?

Posted by: TM Lutas | Saturday, April 08, 2006

TM,

The essential difference is that German reforms required the OK of Berlin/Bonn, while European reformed required only the OK of the new member states.

Again, Washington is much closer to Brussels than Berlin/Bonn. Indeed, Washington is more hands-off and less regulative than even Brussels.

Therefore, not only is our dynamic system better than the FRG, it's even better than the EU.

Or are you saying that the EU's body of laws was a heavier ruleset export than the FRG's body of laws? That seems dubious.

Or, perhaps you are arguing that certain structural changes are needed in Mexico's economy -- preferably changes made before Union (so that politicians could blame each other). Fine -- there's no reason we couldn't have minimal requirements like that. I already mentioned pemex's privatization as a potentially good news, so I would see nothing wrong with Mexico having to dissolve ownership in Pemex before accession.

Am I understanding correctly?

Posted by: Dan tdaxp | Saturday, April 08, 2006

Dan - Nope, not quite. The EU enlargement process has meant changes both in EU law (CAP adjustments for instance) and in the E. European capitals. Similarly, NAFTA requires adjustments (with face saving scapegoating of the other two partners) in multiple governments. We absorb Mexico and it's just going to be us, no scapegoats available safely beyond political retribution. This lack of external boogie men will slow down necessary reform, extending pain and limiting gain.

Mexico's reforms would need to bring their 30+ states at least into the same zip code as the US UCC, for instance. This is a lot bigger than simply privatizing Pemex. We managed, with Louisiana, to just compartmentalize them as "the weird state" when it came to their inclusion of French legal principles and organization. Mexico is too big to compartmentalize and the effects would be unpredictable for the enlarged entity.

Posted by: TM Lutas | Saturday, April 08, 2006

TM,

I do not understand.

Why must Mexican states adopt the UCC? They're not Uniform anyway (common law interpretations of the same UCC sections differ between the states, even when the legislatures have ratified the same text), there's no requirement that state's update their laws with the UCC, etc. Indeed, the UCC exists at all because that class of law is not a federal matter.

If our political & economic union is truly built "out of simple parts connected by well-defined interfaces, so that most problems are local," it's important not to compromise that flexibility in the name of Uniform Codes.

Indeed, that approach strongly reminds me of Synchronization, and the rest of hierarchical problem solving. It's not fit for a complex adaptive system like reality. Complex adaptive systems are not predictable, and that's exactly why uniformity is a bad philosophy. [2]

Further, the argument that there not not "external boogie men" is incorrect. A substantial portion of my home state's, South Dakota's, politics is oriented against the "external boogie men" (the only state to take the mandatory drinking age to the Supreme Court, now the first state to try to directly bring Roe to the Court, etc). The claim that there are "no scapegoats available safely beyond political retribution" is just wrong. South Dakotan voters currently have no say as to what Representatives or Senators Massachusetts elect, and I cannot conceive of a process that would allow Mexican voters to veto the Congressmen from other States.





[1] http://zenpundit.blogspot.com/2006/04/on-modularity-other-day-i-was.html#114451986248841540
[2] http://tdaxp.blogspirit.com/archive/2006/03/17/review-of-global-brain-by-howard-bloom.html

Posted by: Dan tdaxp | Saturday, April 08, 2006

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