Friday, May 31, 2019

How Technology Has Changed The Distribution Of Income Among Musicians

See Music Superstars Are the New One Percenters: Huge stars like Beyoncé and Taylor Swift are dominating the concert-tour business like never before, as music’s top 1% takes home an increasingly large share of the pie by Neil Shah of The WSJ. Excerpts:
"A small number of superstars like Beyoncé and Taylor Swift is gobbling up an increasingly outsize share of concert-tour revenues, as music’s biggest acts dominate the business like never before.

Sixty percent of all concert-ticket revenue world-wide went to the top 1% of performers ranked by revenue in 2017, according to an analysis by Alan Krueger, a Princeton University economist. That’s more than double the 26% that the top acts took home in 1982.

Just 5% of artists took home nearly the entire pie: 85% of all live-music revenue, up from 62% about three decades earlier, according to Mr. Krueger’s research. “The middle has dropped out of music, as more consumers gravitate to a smaller number of superstars,” he writes in a new book, “Rockonomics,” set to come out in June. (Mr. Krueger died in March.)"

"Performers’ royalties—for acts big and small—are generally much smaller on streaming than on records, CDs or download sales, so artists have to turn to concert revenue for more of their income. And it’s only the superstars who have the ability to charge significantly more for tickets than their predecessors did a generation ago. That leaves non-superstar performers competing for a shrinking share of the concert pie.

The average ticket price in the U.S. jumped from $12 in 1981 to $69 in 2017, far outstripping inflation and driven by superstars, Mr. Krueger’s research indicates. Three tours alone—Ed Sheeran, Taylor Swift, and Beyoncé with Jay-Z—hauled in around $1 billion in concert-ticket revenue in 2018, up from the $600 million that 2008’s three highest-grossing tours brought in, according to Billboard Boxscore. Beyoncé and Jay-Z charged $117 a ticket on average, according to Pollstar, the concert publication. Taylor Swift? $119. (Ed Sheeran, by contrast, charged a relatively more modest $89.) 

Meanwhile, at the bottom of the industry, the lowest 2,500 acts ranked by revenue grossed an average of about $2,500 in 2017 from concert tickets, out of the 10,808 touring acts that year that Mr. Krueger studied. There were 109 acts in the top 1%."

"Performers today generally generate about three-fourths of their income from concert tours, compared with around 30% in the 1980s and 1990s. While many artists have tried to increase ticket prices to compensate for smaller recorded-music revenues, the biggest stars have the most leverage.

Concerts generated a record-setting $10.4 billion in revenue last year"

"While the share of concert tickets sold by superstars has stayed relatively constant, “the actual ticket prices themselves have risen quite dramatically compared to everyone else,”"

"streaming-music services and social-media marketing have helped small acts, making it easier for emerging artists to find fans. But for performers in the middle market, particularly in genres like rock—which isn’t as popular on streaming as hip-hop—the reduced earnings from recordings and increased need to tour can be tough."

"Music venues often take a cut of 20% or higher of the merchandise, he says. By the end of a tour, merchandise sales can determine whether it was financially successful or not."

"The concert circuit is so jammed with artists competing for tour dollars that there’s even been a shortage of tour buses."

Thursday, May 30, 2019

How the U.S. justifies & enforces sanctions on countries like Iran and how other countries try to get around the sanctions

See The Dollar Underpins American Power. Rivals Are Building Workarounds. Iran sanctions spur Europe and India to devise systems to trade with Tehran without using the U.S. currency by Justin Scheck and Bradley Hope of The WSJ. Excerpts:

"In congressional testimony in March, Treasury Department undersecretary Sigal Mandelker said that “those who engage in activities that run afoul of U.S. sanctions risk severe consequences, including losing access to the U.S. financial system and the ability to do business with the United States.”"

The dollar’s status dates back to the end of World War II, when the U.S. economy was the world’s most robust and dollars were plentiful. The currency’s liquidity, and the efficient U.S. banking system anchored by the Federal Reserve, mean trading in dollars is much less expensive and more convenient than using other currencies, says Craig Pirrong, a University of Houston professor who studies payment systems.

Here’s how it works: A Canadian lumber company sells boards to a French buyer. The buyer’s bank in France and the seller’s bank in Canada settle the payment, in dollars, via “correspondent banks” that have accounts at the Fed. The money is transferred seamlessly between the banks’ Fed accounts because their status as correspondent banks means they are seen as safe counterparties.

The use of these accounts, the U.S. says, means every transaction technically touches U.S. soil, giving it legal jurisdiction. Because using most other currencies is relatively inconvenient and expensive, many countries and companies will do whatever the U.S. requires to maintain access to dollars."

"It is needed because U.S. sanctions bar dollar transactions with Iranian banks, even on deals for unsanctioned goods. Once operational, Instex’s [Europe's workaround] members could expand it to cover any trade with Iran."

"The system aims to bypass the dollar by using the same mechanism underlying the age-old hawala money-transfer system popular in the Middle East and Asia, under which people pay cash in one office and a recipient draws the equivalent funds at a distant locale without money actually moving.

This is how the Instex system would handle the sale of medicine by a German company to an Iranian buyer: The German exporter wouldn’t get paid by the buyer, but by another European company that is separately importing goods from Iran. Similarly, in Iran, the buyer of the medicine would pay the exporter of the other goods. No dollars at all would be involved, which means the U.S. would have no jurisdiction."

"In 2013, less than 7% of trade between China and Russia was in yuan and rubles, the bank ING Groep reported last year. In 2017, it was more than 18%."

"Even if such alternative systems catch on, the dollar is likely to dominate international trade for years to come. In 2016, the most recent year for which data are available, the dollar was involved in 88% of the daily trades in the $5 trillion-per-day foreign-currency market"

"The euro is handicapped by political uncertainty in Europe, and the yuan by Chinese restrictions on currency flows and unease about that nation’s economy. Further bolstering the dollar’s standing is its role as the world’s main reserve currency, held by central banks globally. That creates a strong incentive to keep the currency stable and liquid.

“The rest of the world can’t do without the U.S. dollar,” says Daniel Drezner, a Tufts University professor who used to advise the U.S. Treasury."

Wednesday, May 29, 2019

Businesses intentionally display their social and environmental performance in addition to their financial performance to stakeholders

See It is all about the money when discussing ‘planet, people and profits’ by Prasad Padmanabhan. He is a professor of finance at St. Mary’s University.

Adam Smith's "invisible hand" suggests that if you follow your own self interest, you will promote the interests of society. I have had some posts on this issue of being selfish vs. being altruistic and if they can actually be separated before. So those links are at the end.

Adam Smith talked about the invisible hand and how profit seeking firms would provide what the public wanted. But what about trying to make the world a better place?

Here is an excerpt from The Wealth of Nations found at The Library of Economics and Liberty.
"But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it."
Now excerpts from Professor Padmanabhan's article, which says if companies want to make a profit, they have to do good.
"Rightly or wrongly, firms now believe that they should routinely report their performance along financial and nonfinancial lines to outside stakeholders. It seems important for them to prominently display their social and environmental performance in addition to their financial performance to stakeholders. Arguably, each generation of stakeholders believes it is more conscious about social and environmental issues than the previous generation. Hence, firms may seem to be pandering to the needs of these generational stakeholders by showcasing their nonfinancial performance as well.

Blue Apron and Plated are two firms offering meals that target young adults and provide information on their websites to appeal to these stakeholders. Plated, for instance, indicates that its produce is grown organically and its poultry and fish originate from sustainable sources. “Look,” it seems to say. “We are good custodians of the planet and take care of our stakeholders!”

Additionally, in today’s social media world, good and bad news about anything or anyone is instantly disseminated globally. Firms and individuals must increasingly manage information flow very carefully. Together, increased stakeholder focus on environmental and social issues, and the relative ease of information dissemination, can be a deadly combination for firms.

One faux pas on either of these counts can prove disastrous to a firm’s image. Witness the response to the United Airlines CEO’s apology blaming the victim in reaction to a video circulating on social media of a man dragged off a plane. And how about tweets from Adidas congratulating Boston Marathon survivors? It was forced to take down that ad after furor from Twitter followers who suggested this ad reminded individuals of the tragedy.

The cost to erase these errors in judgment proved extremely expensive to the firms involved. To avoid costly missteps like these, firms are more proactively inclined to expend valuable resources to hire people to manage their corporate social responsibility, or CSR, profiles and their advertising campaigns."

"But in today’s globalized, social-media-filled world, a firm cannot be profitable unless it takes care of the people and the planet. The most profitable firms of today are successful because they are good stewards of the planet and take good care of the people."

Research by my colleagues and me also indicates a direct link between a firm’s CSR activities and its future financial performance. We found evidence that current CSR activities for a group of service firms are strongly positively correlated with how much future profits the firms can generate from its assets, after controlling for other factors.

In another study, we found that global manufacturing and service firms use CSR dollars as strategic dollars to be spent carefully for maximum financial benefits.

Another related analysis found that banks offer lower interest rates on bonds to firms that follow good CSR principles relative to firms that do not. Bankers may feel good about firms that implement good CSR practices, but they still follow the money. They offer lower interest rates to such firms since they may recognize that such firms are likely to attract higher revenues in the future — lowering their business risks, which translates into more money — capital.

Ultimately, firms cannot make money unless they take care of their stakeholders. The harsh limelight of social media punishes irresponsible firms because potential, and even loyal, customers will avoid its products. Decreased revenues, in turn, lead to lower profits. Lower profits can negatively affect the stakeholders of the firm. It is essentially unimaginable for any firm today to earn sustained profits while being irresponsible custodians of the planet and/or not taking care of its employees and customers."
Related posts:

Why Doing Good Makes It Easier to Be Bad

Is it a retailer’s job to keep shoppers from their vices? (or Adam Smith vs. CVS pharmacy)

Can You Find Virtue by Investing in Vice?

What if companies pledge to adhere to social and environmental accountability guidelines?

Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!) 

Data show that socially responsible investments can outperform the S&P 500 index

Is altruism a result of selfishness?

Do you have to be selfish to make more money?

Does collective self-deception mask selfish behavior?

For a humorous view of this issue see

A Snickers a Day Keeps the Doctor Away: Why does CVS want to make my migraine cures hard to find? by Joseph C. Sternberg of the WSJ

Tuesday, May 28, 2019

Why Doing Good Makes It Easier to Be Bad

By Abbas Panjwani. He is a journalist at Full Fact, the UK’s leading fact-checking charity. He has previously written for the Sunday Times.

Adam Smith's "invisible hand" suggests that if you follow your own self interest, you will promote the interests of society. I have had some posts on this issue of being selfish vs. being altruistic and if they can actually be separated before. So those links are at the end.

But this article says that if you work in a "socially responsible company" it makes you think that it is okay to do something immoral, that somehow you have earned that right.


"Oscar Wilde, the famed Irish essayist and playwright, had a gift, among other things, for counterintuitive aphorisms. In “The Soul of Man Under Socialism,” an 1891 article, he wrote, “Charity creates a multitude of sins.”

So perhaps Wilde wouldn’t have been surprised to hear of a series of recent scandals in the U.K.: The all-male charity, the President’s Club, which raised money for causes including children’s hospitals through high-valued auctions, was forced to close after the Financial Times uncovered sexual assault and misogyny at its annual dinner; executives of Oxfam, a poverty eradication charity, visited prostitutes while delivering aid in earthquake-stricken Haiti, and were allowed to slink off to other charities, rather than being castigated for their actions; and ex-Save the Children executives Brendan Cox and Justin Forsyth stepped down from their roles at other charities, after allegations of sexual harassment and bullying toward junior female colleagues resurfaced.

You might wonder how people who seem so good by occupation could be so bad in private. The theory of moral licensing could help explain why: When humans are good, it says, we give ourselves license to be bad.

In a recent paper, economists at the University of Chicago reported that working for a socially responsible company motivated employees to act immorally. In one experiment, people were hired to transcribe images of short German texts and paid 10 percent upfront, with the remaining payment being delivered if they completed the transcriptions, or if they declared the documents too illegible to transcribe. When they were told that, for every job completed or marked illegible, 5 percent of their wages would be donated to Unicef’s educational programs, the instances of cheating rose by 25 percent, compared to where no charitable donation was offered. Cheating manifested in both workers not completing jobs (taking the 10 percent upfront fee and running) and also workers saying that documents were too illegible to transcribe (and so receiving the full fee).

“The share of cheaters [was] highest when we frame corporate social responsibility as a prosocial act on behalf of workers,” the researchers, John A. List and Fatemeh Momeni, found. When the workers felt a greater sense that their own actions would lead to charitable donations, like Robin Hood, they in turn felt enough license to steal, essentially, from their employer to give to charity. “The ‘doing good’ nature of [corporate social responsibility] induces workers to misbehave on another dimension that hurts the firm,” List and Fatemeh concluded."

Related posts:

Is it a retailer’s job to keep shoppers from their vices? (or Adam Smith vs. CVS pharmacy)

Can You Find Virtue by Investing in Vice?

What if companies pledge to adhere to social and environmental accountability guidelines?

Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!) 

Data show that socially responsible investments can outperform the S&P 500 index

Is altruism a result of selfishness?

Do you have to be selfish to make more money?

Does collective self-deception mask selfish behavior?

For a humorous view of this issue see

A Snickers a Day Keeps the Doctor Away: Why does CVS want to make my migraine cures hard to find? by Joseph C. Sternberg of the WSJ

Monday, May 27, 2019

Why honey prices have climbed about 25% since 2013

See You’ll Need a Lot More Money to Buy That Jar of Honey: Beekeepers are in a sweet spot as consumer trends shift away from cane sugar and high-fructose corn syrup by Lucy Craymer of The WSJ. Excerpts, with my comments in brackets:
"Honey prices are starting to sting.

Global honey prices are at their highest levels in years, due to a new wave of consumer demand for natural sweeteners [demand increases because tastes or preferences increased with the opposite happening for sugar] and declining bee populations that are hampering mass production [supply decreases]."

"In addition, it is being used more as an ingredient in shampoos, moisturizers and other personal-care products that companies market as naturally made [another increase in demand due to tastes]."

"Retail honey prices world-wide recently averaged $4.69 a pound, according to market research firm Euromonitor International. Prices have climbed about 25% since 2013, while the cost of sugar has fallen around 30% over the same time frame."

"U.S. retail prices averaged $7.66 a pound in May, up 9% from a year earlier"

"Those prices have risen by about two-thirds in the last decade"

"Americans consumed 596 million pounds of honey in 2017, or an average of nearly two pounds per person—up 65% since 2009 [if demand shifts right, we expect both price and quantity to increase]."

"It has been touted by celebrities—including tennis starNovak Djokovic—for its health benefits and numerous scientific studies have shown it can help heal wounds, ulcers and burns [maybe this is part of the reason tastes increased]."

"Global honey production has been relatively stable over the past five years [but if supply shifted left that could cancel out the demand increase and leave quantity the same]."

"In the U.S., honey production peaked in 2014 and has fallen 15% since then [if supply shifted more to the left than demand shifted to the right, total Q falls-maybe the increased American quantity means less for consumers elsewhere]."

Saturday, May 25, 2019

What happened in some earlier U.S. trade Wars?

Want to know how Trump's trade war ends? Look to the War of 1812 by Shawn Donnan of Bloomberg. 
"President Donald Trump’s escalating trade war against China has drawn plenty of historical parallels. The Chinese like to invoke the 19th-century Opium Wars and the national humiliation that followed. In the U.S. the comparison is increasingly to the Cold War against the Soviet Union, or the 1980s trade wars against Japan.

Ask Douglas Irwin, author of “Clashing Over Commerce: A History of U.S. Trade Policy,” however, and he argues the most accurate comparison from an American perspective is the War of 1812.
That conflict was born out of a trade war (a British embargo of France) and fought at least partly as a trade war (a British blockade of America). It also yielded another trade war.

Once the war was won, it prompted calls for a decoupling from a British economy with which America’s was deeply integrated, Irwin said. And like the current calls related to China, that was based on a bigger existential question for the U.S.

“We wanted to reduce our dependence on Britain, which was viewed as an enemy power,’’ said Irwin, a professor at Dartmouth.

In response, Washington began imposing higher tariffs on British goods to protect what it declared to be strategic U.S. industries. That action grew into manufacturers’ calls for protection from cheap British imports that would become a feature of political debate through the 19th century.

You can argue today’s economic stakes are undoubtedly much higher in value terms. But the War of 1812 and the dependence on British industry at the time presented a legitimate existential question. The British got all the way to Washington and set fire to the White House in 1814, after all.

Irwin is not hopeful about the future of Trump’s China trade war. He believes a resolution in the short term is unlikely. “If you are really asking for economic regime change that’s something no country, particularly one that is as nationalistic and proud as China, is going to deliver on,’’ he said.

Irwin fears it could all end in a new technology Cold War. His problem with the comparison with the conflict with the Soviet Union is that Moscow never posed a real economic challenge to the U.S. And with Japan the inverse was true.

“That is where China is really different,’’ he said.

The 1980s trade wars against Japan were also fought in a very different way, Irwin argues.

The Trump administration’s emphasis so far has been on tariffs and other defensive economic tools, he said. In the Reagan administration the focus was as much on offensive measures such as boosting research and development and American competitiveness. Reagan was also a vocal defender of free trade.

Complicated as it seemed at the time, the friction with Japan over everything from cars to televisions and semiconductors was simpler to deal with. Yet it still took time to sort out. That bodes badly for anyone hoping for a quick resolution with China.

“There were years of discussions and they were a much more market-oriented economy than China,’’ Irwin said. “And here the stakes are bigger.’’"

Wednesday, May 22, 2019

Mexicans buy fake cellphones to hand over in muggings

By Mark Stevenson of AP. This reminds me of "signaling" in economics. Here is Wikipedia says about it:
"In contract theory, signalling (or signaling; see spelling differences) is the idea that one party (termed the agent) credibly conveys some information about itself to another party (the principal). For example, in Michael Spence's job-market signalling model, (potential) employees send a signal about their ability level to the employer by acquiring education credentials. The informational value of the credential comes from the fact that the employer believes the credential is positively correlated with having greater ability and difficult for low ability employees to obtain. Thus the credential enables the employer to reliably distinguish low ability workers from high ability workers." 
 Here are excerpts from the AP article:
"Armed robberies have gotten so common aboard buses in Mexico City that commuters have come up with a clever if disheartening solution: Many are buying fake cellphones, to hand over to thieves instead of their real smartphones.

Costing 300 to 500 pesos apiece — the equivalent of $15 to $25 — the “dummies” are sophisticated fakes: They have a startup screen and bodies that are dead ringers for the originals, and inside there is a piece of metal to give the phone the heft of the real article.

That comes in handy when trying to fool trigger-happy bandits who regularly attack the buses, big and small, that ferry people from the poorer outlying suburbs to jobs in the city center."

"Now, many people carry a device worth hundreds of dollars in their pocket, and one that may also hold their bank or credit card information.

That’s where “dummy” vendors like Axel come in. Axel says he sells three or four dummy phones a week out of his stall in a downtown electronics marketplace"

"But Axel admits the victim would be in trouble if a thief caught them handing over a “dummy” phone.

“Obviously there are problems, because if the criminals search it or find out … there is going to be a problem.”

Because of that, some try a different strategy, spending a little more to buy a cheap but real second phone."

"the dummy trade started about 14 years ago, but for different reasons: Phone shops would buy dummies for their exhibition cases to protect against another type of crime, the so-called “sledgehammer crews” who can clear out a jewelry or electronics store in seconds by breaking windows."
Related posts:

A fake job reference can be just a few clicks away.

Fake Economist Fools Portugal.

Slave Redemption in Sudan. (Fake slaves are sold to those who buy slaves and then give them their freedom)

Can A Product Work Just Because It's Expensive?. (fake medicine)

If It Pays To Have Friends, Can You Pay To Have Friends?. (you can hire fake boyfriends)

Study: Half of American Doctors Give Patients Placebos Without Telling Them.

Saudis grapple with fake street sweepers .

Rent a White Guy: Confessions of a fake businessman from Beijing (by Mitch Moxley in The Atlantic Monthly)

Can adding a phantom third story to their homes help families find a wife for their son?

Why do employers pay extra money to people who study a bunch of subjects in college that they don’t actually need you to know? Signaling

Tuesday, May 21, 2019

The Phillips curve is alive and well (unless it's dead)

See Post from Harvard professor Greg Mankiw. He shows that over the last 30 years, when percentage of 25-54 year olds employed increased (similar to the unemployment rate going down), inflation was higher than when the percentage of 25-54 year olds employed decreased.

If the Phillips Curve is right (at least in the short-run), this is what we would expect: inflation to be higher when unemployment is lower.

According to today's WSJ, Fed. Vice Chair said the economy is not beyond full-employment even with unemployment at 3.6%, so high inflation in the near future is not a concern. Inflation does not seem to respond to low unemployment the way it used to.

See also The Economy Is Strong and Inflation Is Low. That’s What Worries the Fed. by Jeanna Smialek of The NY Times. Excerpts: 
"Inflation rose a scant 1.6 percent in the year ending in March, well short of the central bank’s 2 percent target. The Fed’s policymakers are worried about the continuing sluggishness, and President Trump has repeatedly cited low inflation as a reason for the central bank to start cutting interest rates.

“We are doing very well at 3.2% GDP, but with our wonderfully low inflation, we could be setting major records &, at the same time, make our National Debt start to look small!” Mr. Trump said in a recent tweet.

The Fed, for its part, is wrestling with how to respond to persistently low inflation amid what appears to be the weakening of a foundational economic relationship. Unemployment is at its lowest level since 1969, which should spur higher wages as companies compete for workers. Climbing labor costs should eventually get passed along to customers, driving inflation up. Instead, it is moderating."

"The breakdown leaves the Fed staring down an uncomfortable question. If officials can’t get that old chain reaction to work 10 years into an economic expansion, against a backdrop of tax cuts and high government spending, and with exceptionally low joblessness, will they ever?

The Fed’s chairman, Jerome H. Powell, has called weak inflation “one of the major challenges of our time.” In part to address it, he has led the Fed to embark on a yearlong review of its communications, tools and strategy. A major goal is determining what is reining in price gains and what can drive inflation back to the Fed’s target in a sustainable way.

Extra labor supply is one obvious culprit. Since 2016 at least some Fed officials have declared the labor market “at or near full employment.” But the job market keeps surprising them. Prime-age workers are hanging onto their positions for longer.

That’s provided an unexpected source of new employees, enabling brisk hiring to persist without a run-up in wages and prices. Average hourly earnings have shown progress without rocketing up.

Officials have repeatedly lowered their estimates of sustainable unemployment as a result, and Richard Clarida, the Fed’s vice chairman, has suggested that the jobless rate is “not far below many estimates” at that revised level.

Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, goes a step further. He thinks that the Fed, which has raised interest rates nine times since 2015, began doing so too early and that the economy remains below full employment. Premature tightening has convinced the public that inflation won’t rise to 2 percent this business cycle, he thinks, and now consumers and businesses are acting accordingly.

Beyond slack in the labor force and expectations, forces like technology and globalization may be restraining pricing power. Consumers with Amazon and Yelp in their pockets can easily avoid overpaying."
Related posts:

Fed officials disagree on how much inflation the current low unemployment rate might cause 

Fed Looks for Goldilocks Path as Jobless Rate Drops  

Monday, May 20, 2019

These Are the Highest Paying Jobs for the Class of 2019

By Shelly Hagan of Bloomberg.

Data Scientist
Software Engineer
Product Manager
Investment Banking Analyst
Product Designer
UX Designer
Implementation Consultant
Java Developer
Systems Engineer
Software Developer
See Highest Paying Jobs With a Bachelor’s Degree from to see alot more information.

Monday, May 06, 2019

Mark Twain, Free Trade and Tariffs

Twain supposedly said that "free traders win the arguments and the protectionists win the votes."

Tariffs are in the news again. See Stocks tumble as Trump threatens to hike tariffs on China by Emily McCormick of Yahoo Finance. Also, I covered tariffs in some of my classes recently (see link below).

Marc-William Palen, a lecturer in imperial history at the University of Exeter, wrote an article titled How Mark Twain Became a Free Trader. Click here to go to Palen's page.

Here is an excerpt, where Palen discusses a part of A Connecticut Yankee in King Arthur’s Court. After that, I have another quote from the book that also shows Twain's support for free trade.

"The culture of free trade also manifested itself in the writing of Mark Twain.

Famed satirist Twain had been a supporter of the Republican protectionist policy up until Cleveland’s 1887 tariff message. It was at this point that Twain became a convert to free trade and gave Cleveland his endorsement.

Twain’s newfound antipathy for protectionism found outlet in A Connecticut Yankee in King Arthur’s Court (1889).

In it, Twain’s protagonist, Hank Morgan of Hartford, Connecticut, awakens to find himself transported to sixth-century England.

As Hank traipses across the land, he comes across a smith by the name of Dowley. Hank and Dowley immediately begin discussing “matters of business and wages” over dinner.

The sixth-century tributary kingdom in which Dowley abides appears at first glance quite prosperous in comparison to Hank’s Hartford.

“They had the ‘protection’ system in full force here,” Hank explains, “whereas we were working along down toward free-trade, by easy stages,” a veiled reference to Cleveland’s speech and the Democrats’ proposed lower tariff bill of 1888.

The others at the Dark Age dinner table listened “hungrily” as Dowley began to question Hank on the rate of wages in Gilded Age America.

“In your country, brother,” asked Dowley, “what is the wage of a master bailiff, master hind, carter, shepherd, swineherd?”

Upon hearing Hank’s reply of a quarter cent, “the smith’s face beamed with joy…. ‘With us they are allowed the double of it!…. ‘Rah for protection—to Sheol with free-trade!’”

To which Hank, unmoved, “rigged up” his “pile-driver” to drive the smith “into the earth—drive him all in—drive him in till not even the curve of his skull should show above ground.”

Hank replies to Dowley that, while the wages in the smith’s land were indeed double those of Connecticut, late-19th-century Americans could buy goods at prices well less than half what Dowley and his countrymen paid, making the high wage argument superfluous.

Hank thought he had scored a point against the blacksmith and had “tied him hand and foot.”

But Dowley “didn’t grasp the situation at all, didn’t know he had walked into a trap… I could have shot him, from sheer vexation. With cloudy eye and a struggling intellect,” Dowley admitted he did not understand Hank’s argument. At which point their dinnertime discussion only deteriorated further.
Twain’s Hank was a literary representation of late-19th-century America’s free traders. These were men who prided themselves on their intellectual superiority and the economic soundness of their arguments.

They were, however, frustrated time and again by what they perceived as pernicious protectionist propaganda that nevertheless struck a chord in the heart of the ignorant American worker.
Twain’s extreme language hints as well at how fierce the tariff debate had become within the presidential election of 1888 – the “Great Debate” between Democratic free trade and Republican protectionism."

In a discussion of how the government raises revenue, Hank says:
"In my day, in my own country, this money was collected from imposts [a tariff or import duty], and the citizen imagined that the foreign importer paid it, and it made him comfortable to think so; whereas, in fact, it was paid by the American people, and was so equally and exactly distributed among them that the annual cost to the 100-millionaire and the annual cost to the sucking child of the day-laborer was precisely the same"
To see why it might work this way, click here.
Related posts:

Chapter 33 Of Mark Twain's A Connecticut Yankee in King Arthur’s Court Is Titled "SIXTH CENTURY POLITICAL ECONOMY" And Deals With "Money Illusion"

Mark Twain On Work And Pay

Mark Twain On Labor Markets And How Wages Should Be Decided-By Government Fiat Or By Markets?

Mark Twain Understood That It Is The Purchasing Power Of Wages That Matters