Friday, January 20, 2017

American Intelligence Test: Tariffs: When Used Are Their Own Economics Test

The economy is going to be a big terrain to explore. There are going to be any number of tests that delve into some valley or crevasse to explore the economic flora and fauna unique to that area, and there will be opportunities to climb to the summit of some financial peak to survey the broader economic landscape.

This AIT will look at the idea that the US will tariffs to deal with unfair trade situations and to deal with corporations out-sourcing of jobs to other nations. It should be noted that global trade arrangements and corporate jobs out-sourcing can sometimes be related, but there is no hard ‘laws of physics’ requirement linking the two in each and every case.
So with that said let’s proceed to examine if the use of tariffs as an economic policy to address and solve some of the nation’s problems.
Question A:   Select which of the following statements that are true regarding a US tariff.
(1). Tariffs are costs paid by companies that import products into the US.
(2). Tariffs are taxes.
(3). Tariffs are used to protect the products of US corporations/businesses from foreign competitors.
(4). Tariffs create more jobs in the US’s economy.
(5). Tariffs will reduce trade-imbalances between the US and foreign nations that tariffs are applied to.
(6). Tariffs improve the US’s competitive position in the global economy.
(7). Tariffs encourage innovation and competition in the US economy.
(8). Tariffs can be used by multi-national corporations to disadvantage US production (thus jobs)..
Answer - A:  2, 3, 8
Rationale -A:       2, 3 and 8 are true statements.

Tariffs are taxes, they generate revenue to the federal government. [Note: There as some variants of tariffs that are more a restraint of trade that stops or limits it.]

Tariffs are intended to protect domestic business(es) for any number of reasons which could have good consequences, bad consequences, or both. The intention is not a guarantee of results.

Multi-national corporations have a multifaceted relationship to tariffs. Since they are on both sides of the tariff boundary, these companies can use the tariff to their advantage on either or both sides.

Answers 4, 5, 6, and 7 are “maybes”. They may be true sometime and may not be true sometimes; it will depend upon other factors than just whether there is a tariff or not.

4 – Jobs may be created by imposing a tariff, or jobs may be lost, or it may not make any difference at all. It all depends upon the reaction of the consumers to the cost increase brought on by the tariff.
5 – Trade imbalance is determined by what is imported and what is exported and how the tariff affects both, plus any counter-reaction that the country(ies) might take to the tariff being imposed.
6 – Again the tariff creates a new condition which might promote actions that improve the US’s competitiveness, but there is also the possibility that the US’s competitive position could be damaged.
7 – This is a desirable objective but there is no guarantee that the imposition of a tariff will spur innovation or competition.

Answer 1 is incorrect. Tariffs are paid for by consumers. The consumer could be the end-users buying the product, or intermediaries who buy a product that becomes part of their product (like steel used to make a car). In the end, the cost of the tariff is paid for by the consumers (public). This is a basic economic ‘law of physics’ principle in that everything is paid for by consumers, since there isn’t any other entity that buys products.
Question B:   When a tariff is imposed by the US it must be applied to some entity’s product. Indicate if it would be appropriate to apply a tariff (A) or not (N) to the entity(ies) described in each of the following statements:
(1). A foreign company that is dumping products into the American market below the cost to produce the product.
(2). A country or group of countries producing a product that threatens US industries for the same/equivalent products.
(3). US multi-national businesses that use foreign facilities to produce their products.
(4). Foreign businesses that produce competitive products outside the US to those of US companies that produce those products in US-based facilities.
(5). US businesses that have to compete with products imported from other nations
(6). An alternative product made by a foreign company that disrupts the marketplace for products that are manufactured by US companies.
(7). US multi-national businesses that produce some products in US facilities and other products in foreign facilities that are imported to the US.
(8). A US start-up that is attempting to break into the marketplace supplied by imports from foreign companies.
Answer - B:  Appropriate choices: 1     [See ‘If and Only If’ for conditional A’s]
Not appropriate choices: 2, 3, 4, 5, 6, 7, 8
If and Only If, then these can be included as an A: 2, 3, 4, 8
Rationale -B:      
A – 1. Dumping is one of the conditions that warrants a tariff since it creates an actual unfair-trade situation to US industry.

N – 2, 3, 4, 5, 6, 7, 8. All these are instances of a competitive marketplace environment. Goods are made by domestic and international companies and they compete with each other. Some of the companies may be multi-nationals and so are both domestic and foreign in nature, if they compete with other domestic or multi-nationals in the US market then they are engaged in competition that exists to benefit the consumer.

Instance 6 is not only anti-competitive but is closer to protectionism to serve business interests than providing economic value to the US. If a US firm introduced the alternative (disruptive) product then it’s just business and the economy and consumers benefit.

If and Only If – 2, 3, 4, 8. These instances could fall into a tariff-able situation if they represented industries that were deem crucial to national security, economic stability, or maintaining a competitive global position.

Instance 7 is more complex. Applying a tariff to the foreign products may have consequences to the domestic products.
Question C:   Can a tariff on one product/industry have detrimental impacts on other domestic products/industries?         Yes  |  No
Answer - C:  Yes
Rationale -C:       Tariffs attempt to protect the product/industry it is defined to serve, but there are costs. The only reason a product/industry needs protection is that its foreign competitor(s) are selling their product cheaper. The tariff raises the price in the domestic market to remove that advantage. If demand for the product remains unchanged then there is less money available for other products in the US’s marketplace. This means that revenues going to other products are reduced with impairs the economy to whatever extent this operates recursively from product to product. If the overall demand for the protected product/industry is reduced because its price is higher the benefit(s) i.e., like jobs, that was anticipated is lowered.

The truth about tariffs is that there is no guarantee that in the short-term it will be good for the economy or that in the long-term it will be good for the economy; nor is there a guarantee that it will be bad. Hopefully there is someone who benefits at least for some period of time. But in the end, it’s a choice that a nation/government makes for some set of reasons. If the reasons are sound, prudent and rational; and if the consequences are as well understood as they need to be then hopefully the right choices are made to impose or not impose a tariff.
Question D:   If tariffs increase jobs and are thus good for the economy, then what would that logic indicate the US should do?
Indicate which statements follow from the logic of the statement being true.
(1). Tariffs should only be used when there is significant underemployment.
(2). Tariffs should be used whenever the economy isn’t growing fast enough.
(3). Tariffs should be used on all products for which there are US companies engaged in that business.
(4). Every product imported into the US should have a tariff on it.
(5). Tariffs should only be used to protect key industries.
(6). Tariffs should only be used when US imports exceed US exports.
Answer - D:  3
Rationale -D:       3 - If tariffs are always good for the economy, then they should be used in every case that they can be. Clearly the truth is that tariffs are not ipso facto good, there are conditional requirements that must be met to even give them a chance of being beneficial.

Some Conditional Requirements: Items 1 and 5 are instances that might warrant a tariff. But even these are only factors that might be used to determine if there are sufficient benefits to that will off-set the costs.

Item 4 is just a more extreme concept than 3 is, and the logic that would justify 4 is even less tenuous than that which invalidates 3. Just because ‘stupid’ isn’t fatal every time, doesn’t mean that ‘more stupid’ is safe.

Items 2 and 6 are already stated as conditional reasons to apply a tariff, so they self-violate the original premise. Plus you need to agree on what it means for the economy not to be growing ‘fast’ enough, and if the import/export trade imbalance is always a problem that impairs the US’s economy.

Question E:    Since other countries also impose tariffs on US products does that increase or decrease jobs in the US?    Increase   |   Decrease
Answer - E:  Decrease
Rationale -E:       This assumes that the logic of tariffs is a ‘fundamental’ economic force that is universal, i.e., it applies everywhere. If we agree that tariffs are a tit-for-tat situation, then other nations can and will apply ‘retribution’ tariffs which would have some impact on the US economic and jobs environments. As tariffs are basically a regressive action the net of tariff causes tariff (or worse a recursive: causes … causes …) is to reduce jobs ever where. Like any ‘curative’ agent, tariffs may provide some benefit at a cost that is worth the price, if the cost is limited and the benefits can eventually out-pace the cumulative costs. Unlike the people who make the decisions to use a tariff or not, the tariffs are indifferent to desired outcome and wishful thinking. Tariffs are just another step in the chain of ‘cause and effect’ that feeds into the economy.
Question F:    Tariffs have historically been directed at specific items or category of items. What reasons would be appropriate for determining that a product, goods, or service should be protected with a tariff?
(1). When they are essential to maintaining a core infrastructure necessary to sustaining minimal capabilities to support national security and defense needs.
(2). Protecting infrastructure that the economy is dependent upon: power, food, finance, telecommunication/internet, water, …
(3). Employment – Jobs: when unemployment is creating a national issue/risk for which the federal, state and local governments cannot find a better solution.
(4). When the US needs to sanction another nation for some non-economic reason.
(5). Protect consumers from dangerous products that are imported into the country.
(6). Enable US companies that are struggling to enter into a competitive market that is supplied by imported items to gain a market-share with tariff-based price support.
Answer - F:  1, 2, 3, 4, 5, 6
Rationale -F:        All of these items (1 to 6) could be a reason to enact a tariff; and they would be appropriate if the assessed cost incurred from the tariff were judged to be worth the reason to do so.
Question G:   Who pays for a tariff?
(1). Foreign country
(2). Foreign company
(3). Federal government
(4). US Businesses
(5). Consumers
(6). You
Answer - G:  5 and 6

Rationale -G:       Item 5 (the consumer) is the aggregate term for 6 (You). In the abstract it’s everyone who buys things, but subjectively that’s you. Even if you don’t buy the item being tariffed directly, you pay for it if it is embedded in products that you do buy, or it impacts the cost of other products that you buy, or it reduces the income/profits from products that you get benefit from.

The other items may also be impacted because of a tariff but they ultimately translate into you for domestic instances and your foreign counter-parts for the foreign entity.

Friday, January 13, 2017

Climate Change, Is It a Hoax, or Is the Hoax a Hoax?

Climate Change is a long standing public issue that has coalesced into a highly divisive issue in America’s political landscape. This is one of those irrational oddities since the majority of the public (that includes Republicans, Democrats and independents) believe that Climate Change is real and that the country (and its government) should be doing something about it. There is a subset of politicians, and of course their corresponding constituencies, that believes that Climate Change is a hoax, a conspiracy, or foreign plot being orchestrated to destroy America.
This bipolar reality creates a natural and obvious context for an American Intelligence Test. While Climate Change may be another irrational political issue that provides funding opportunities for incumbents and contending candidates, Climate Change isn’t at its core really a political question. You should thus be aware that the test isn’t simply about whether Climate Change is real or not on the political front. Further, just because politicians have simple answers to this or other issues has never been a reliable indication of intelligence, and usually is more an indicator of the incompetency of politicians than it is any demonstration of politicians understanding of an issue.
So, if you think you can weather the test, just click and start.
Question A:   What is the Climate Change issue?
Select the statement closest to your advocated position.
(1). Climate Change is a hoax and has no scientific basis.
(2). Climate Change is a shift in the earth’s weather (temperature, precipitation, humidity, sea-level, …  and other factors that characterize the “physics” of weather) on a global basis, and that is sustained over decades, centuries or geological eras.
(3). Climate Change is a shift in the earth’s weather (see 2. above) that is caused by human activities and that would not have occurred without that activity.
(4). Climate Change is a shift in local/regional weather (see 2. above) but need be reflected globally across the planet.
(5). Climate Change is a shift in local/regional weather (see 2. above) that is caused by human activities and that would not have occurred without that activity, but need not be reflected globally across the planet.
(6). Climate Change is any shift in the earth’s weather (see 2. above) that is different than it has been over the last ten years or less.
(7). Climate Change is any shift in local/regional weather (see 2. above) that is caused by human activities and that would not have occurred without that activity, but need not be reflected globally across the planet and is different than it has been over the last ten years or less.
(8). I don’t know.
(9). My definition of Climate Change is substantively different than any of the above.
Answer - A:  3 is the correct answer.

Answer 2 is a close second but misses the issue.

None of the other answers are adequate to score positively on the test, and no answers receive negative scores (thought this may be a procedural mistake).
Rationale -A:       The “issue” is “man-caused” Climate Change, and gains its energy from disagreements over whether it warrants global, national and social efforts to affect its impact on the earth and nations.

Answer 2 is not “the issue” in America because the “issue” is related to the ‘man-caused” aspect of Climate Change. Answer 2 is a generic definition about how a ‘change’ in climate would be quantified regardless of cause. There may be questions and issues around whether the Climate is changing irrespective of human activity, but that is not the political issue that makes the headlines and constitutes the question that the public fights over.

Answers 4 and 5 are at best a sub-set of 2 and 3 respectively, but not the main issue argued about.

Answers 6 and 7 are not adequately distinguishable from variations in the weather that can occur but are not indicative of a change in the normal state rather than just being different from one year to the next.

Answer 1 is not the “issue” but an assessment on the issue. This answer reflects negatively on the likely outcome of your test results.

Answer 8 suggests that you need not proceed if you know so little of the issue.

Answer 9 indicates you have a less than commonly recognized definition. This answer is thus non-responsive.
Question B:   Is Climate Change occurring? 
Answer each sub-question Yes or No or IDK (I don’t know)
(1). Generic Climate Change - globally (as in by Answer A-2)?  Yes  |  No  | IDK
(2). Climate Change from human-activity - globally (man-caused)?  Yes  |  No  | IDK
(3). Generic Climate Change – regional/local (as in Answer A-2)?  Yes  |  No  | IDK
(4). Climate Change from human-activity – regional/local (man-caused)?  Yes  |  No  | IDK
Answer - B:  1. Yes,   2. Yes,  3. Yes,   4. Yes
Rationale -B:       1. Data on the physical environment that characterize climate indicate a shift from what would be the ‘norm’. The changes are sufficient to establish a credible assessment of the Climate having changed and probable expectation that the change will continue. Plus, there is the scientific community, nationally and internationally, that have concluded Climate Change has occurred.

2. Given 1 above, then simple physics.

3. Consider the impossibility of 1 being true and 3 not being.

4. Integrate the logic of 2 and 3. You could just consider any major city.
Question C:   Which of the following person(s) or entities constitute an authoritative source you would recognize and trust regarding the validity of Climate Change?
(1). President of United States
(2). NASA
(3). National Academy of Sciences, USA
(4). National US news broadcast media
(5). American Institute of Physics
(6). Environmental Protection Agency
(7). Congress: The Senate
(8). Science departments of Private and Public Universities
(9). International Council for Science
(10). National Science Foundation
(11). Americans for Prosperity
(12). Russian Academy of Sciences
(13). Congress: House of Representatives
(14). United Nations Intergovernmental Panel on Climate Change
(15). American Enterprise Institute
(16). Politicians in general
Answer - C:  2, 3, 5, 6, 8, 9, 10, 12, 14
Rationale -C:       These entities strive to operate in the name of science and in service to humanity and the future. If you expect to be prepared for the future, you need have those who study and become experts in understanding reality. You can choose to follow a different route, but the best and brightest would point you to Darwin to contemplate the consequences. If you’re particularly religious and of a Christian faith the Bible teaches to go with science.

1, 7, 13 and 16 are generally not trusted by the public. What amount of reliance would you place in people you don’t trust? If they are just presenting the views of those entities noted above then you are not trusting in them, but in the sources.

11 and 15 are examples of entities funded by interest groups whose influence and objectives compromise a trusted confidence in their goals, results and efforts. Achieving a recognized level of respect and integrity as leaders in their field would be simple to do, but none of them have attempted to demonstrate their status as ‘best in class’ scientific organizations.

4 is not a source for the expertise on the issue. The media is a conduit for dissemination of the information that the experts produce. The media can succeed or fail at their job and thus cause turmoil but they do not change the science.
Question D:   What actions are appropriate or inappropriate for Congress or the Executive to take if they doubt/reject the scientific consensus and public consensus that Climate Change is occurring and a risk to the nation?
Indicate ‘A’ if an item is appropriate or ‘I’ if it is inappropriate.  Indicate with a “Y” on inappropriate actions that have been done by Congress or the Executive; and a “N” on appropriate action that have not be done.
(1). Promoting and increasing the funding of research programs in colleges and universities on Climate Change.
(2). Restricting the use of the term “climate change” in state or federal reports.
(3). Directing the EPA to collect additional information/data and perform additional analysis to provide a better understanding of the issue.
(4). Reducing agencies’ budgets for research and analysis related to climate change related work.
(5). Engaging in international efforts to establish initiatives to combat climate change.
(6). Prohibiting government agencies from engaging in climate research.
(7). Funding alternate energy research, production and use to combat Climate Change.
(8). Preventing/Restricting state and local legislatures and agencies from affecting climate programs on their own via overriding federal action.
(9). Incorporating IRS tax code incentives for investments in technologies or infrastructure that reduce causal factors that contribute to Climate Change.
Answer - D:  1. A, N
2. I, Y
3. A, N
4. I, Y
5. A, N
6. I, Y
7. A
8. I, Y
9. A, N
Rationale -D:       Items 1, 3, 5, 7, 9 would be reasonable actions to advance and improve the science and understanding of Climate and Climate Change. Even if you doubt the judgement and recommendations of experts, these are tasks that would be necessary if you wanted more information about Climate Change.

Items 2, 4, 6, and 8 are the polar opposite of advancing knowledge and information to resolve the issues that obstruct someone who doesn’t agree with the scientific community, and creates obstacles to sustain a state of ignorance.
Question E:    Politicians that oppose government actions on Climate Change often claim that it is an “unsettled scientific issue”. Answer the five sub-questions on this line of reasoning.
E-1: Based on who’s judgement are politicians claiming the issue is “unsettled?
(1). Their own understanding of ‘the science’.
(2). A consensus of the scientific community.
(3). A majority of the scientific community.
(4). Individuals, foundations and other entities funded by petrochemical companies
(5). Their respective electorate.
(6). Special-interest groups that contribute to their campaigns.
(7). The public policy position of their political party.
Answer - E:  E-1: 1, 4, and 6
Rationale -E:       E-1: 1, 4, and 6 are the most likely factors used by politicians since the motivating elements are not basically scientific.

Item 7 may be a second-tier factor if items 4 and 6 are less engaged in the politician’s campaign funding sources. Item 5 would only be relevant if their constituency were a statistical aberration.

Items 2 and 3 would imply politicians relied upon informed and reasoned judgement.

E-2: Which conditions are necessary to “settling” the scientific issue?
(1). Agreement of and with scientific entities and organizations that are recognized by the general scientific community as knowledgeable and competent in the subject.
(2). The news media accepts the issue as settled based on their sources and assessment of the scientific communities’ inputs.
(3). No entity or organization claiming expertise in the particular scientific area disagrees with the consensus position.
(4). Congressional committees’ agreement where they have jurisdiction over public policies related to the scientific issue.
(5). The majority of the public holds the same opinion as the majority of the scientific community.
(6). A “cause and effect” process/model that can predict future data / observations.

Answer - E:  E-2: 1 is the only necessary condition.
Rationale -E:       E-2: When dealing with a scientific issue, the only reasonable method of providing the current status and nature of the issue is to rely on the ‘best current’ knowledge the experts, authorities and communities in the field agree upon. The use of the “unsettled” concept is an insipid attempt to distract and confuse. There is no “settled” science, since the entire scientific enterprise is the active and continued exploration for a ‘better’ understanding and  better theories to more fully explain reality.

While item 6 is a desirable goal to achieve, it doesn’t prohibit others from claiming that it doesn’t “settle” the issue.

None of the other answers warrant an effort.

E-3: Whose judgement would be adequate to “settle” the science?
(1). Congressional committees’ determination based on their holding hearings with scientific leaders (of their choosing) and concluding the state of the issue: settled, unsettled or rejected.
(2). The general media and news outlets
(3). An international scientific forum
(4). Federal agency(ies) that have legislative responsibilities related to the scientific issue.
(5). President of the United States
(6). National scientific organizations, associations and universities that represent the research, educational, and oversight of their respective scientific, mathematical, technical, and engineering areas.
Answer - E:  E-3: 6
Rationale -E:       E-3: Item 6 is adequate because it possesses the relevant knowledge base to be applied to the decision. Item 3 is a superset that would include 6 and thus is redundant with 6, so “more than adequate”.
E-4: Is Climate Change an “unsettled scientific issue”?    Yes  |  No
Answer - E:  E-4: No
Rationale -E:       E-4: It wasn’t meant to be a trick question but even most groups that oppose the ‘man-made’ contribution to Climate Change position are willing to cede that the world’s climate has changed during the last several decades.
The continuation of their resistance to acknowledge a ‘significant’ contribution from human activity is a different issue. It is the human contribution issue that is the prevalent, popular and profitable point of contention.
E-5: Does human-activity contribute to Climate Change? Yes  |  No
Answer - E:  E-5: Yes
Rationale -E:       E-5: Consider how even the uninformed would explain how it is possible for human activity to have “no” influence on the world. To have an absolute zero impact on climate would require that mankind also has no impact on anything. It is not a possible reality.

At this point the argument will shift to mankind doesn’t make a ‘significant’ contribution to Climate Change. So now we are haggling over the price? If you don’t get the reference, that’s really unfortunate for you.
Question F:    Is Global Warming a current instance of Climate Change?  Yes  |  No
Answer - F:  Yes
Rationale -F:        If your answer was no because you do not support human-activity as a ‘significant’ contributing factor, then go back and read the question. Is your assumption valid? Do you know what assumption you made that misled you?

When the physical factors provide information/data that does not conform to a statistical rejection of the hypothesis that past data and current data are different then there is a change. Is it warmer? Look at the data.
Question G:   If the US government (Executive and Congress) were to hold a position that rejects that Climate Change is real and that Global Warming is a good description of its current state, what actions should the government take?
(1). Refuse to act prematurely and demand that the science be “settled”.
(2). Fund more research on Climate.
(3). Establish policies that account for the risks that Climate Change would pose if at some later date the science is “settled”.
(4). Fund research in areas that would deliver reductions in factors that are linked to Climate Change.
(5). Provide incentives (or increased incentives) for clean-energy investments.
Answer - G:  2, 4 and 5

Rationale -G:       These are proactive efforts that benefit the nation even if the government is in disagreement with the scientific experts and the most informed judgement on the issue.

Item 3 is at best a non-backward step, it would be the act of politicians trying to appear to be responsible while they delay work that may be crucial to the nation’s interests.

Item 1 is a measure of the incompetence of those in government, or a disingenuous position used to support other interests that would not pass a ‘red-faced’ test.