Here is a letter I recently sent to the Midland Daily News:

In his recent letter, William Smith expresses his concerns with the status quo in the political process: “If the president and his party don’t help the majority of the people during his term in office, vote them out! Until then, how will we know? I am sick and tired of status quo. Can’t we just once pass some bills and see if they will help the American people? Maybe, just maybe, that in turn will help the condition of our country” (Sick of the status quo, February 15).

Although I sympathize with Williams frustrations, it is wishful thinking to expect anything other than the status quo from the American political process. Politicians, regardless of their party, face gross incentives in favor of pursuing their own reelection and virtually no incentives to improve the conditions of the public. As Don Boudreaux said in September of 2009: “No delusions should remain that the most recent presidential election has “transformed” Washington into anything grander than what it has always been: a ’spoils exchange’ where A and B shamelessly conspire to rob C and then swap the plundered proceeds with D for D’s commitment to help A and B retain their seats on this exchange.”

Kurt Bouwhuis

Below is a superb interview with the founder of Wikipedia, Jimmy Wales.  In the interview Mr. Wales discusses Hayek, the use of information in society, incentives vs. rules, and entrepreneurship.  From my friends at the Universidad Francisco Marroquin in Guatemala.

Recently the United States government has been participating in a so-called "Trade War" with China that has affected everything from steel, to tires, among other things.  The most recent with that of ribbons imported to the U.S. from the China, as well as the retaliatory duties on chicken imported to China from the U.S.. The argument for this aggressive trade policy is two-fold:

1. China has been embarking in a particularly mercantilist economic policy.  They have allowed the dumping of their goods in U.S. markets, as well as the government subsidizing Chinese manufacturers.  China's monetary policy is, in essence, the de facto pegging of their currency to the Untied States dollar by an exchange rate of about 6:1.  This pegged exchange rate encourages exports to the U.S. and a balance of payments which leaves the United States in heaps of debt to the Chinese.
2. The second reason is a mixture of populous rhetoric and special interest indulgence.  In acting to restrict trade with China, politicians, and the president in particular get to look as if they are "doing something."  It allows them to tout how they are helping working men and women.  At the same time it enriches unions as production is shifted away from the Chinese producers and shifted back to the United States producers.

However, this is misguided for several reasons.

First of all, if we look back on history, protectionism's history has been particularly disastrous.  During Hoover's administration the Smoot-Hawley Tariff Act brought trade to a halt with a tax on several thousand items had been imported prior, as well as subsequent retaliations from the countries which were affected.  The act was responsible for reducing world trade by sixty-six percent, according to Treasury Department numbers.  This is no small feat, and ensured a deeper, longer depression.  So here we are now.  In a recession, or attempting to move forward out of one, and the government acts as if it's ignorant of history (most likely because it is).

Second, by enacting these tariffs it increases costs for consumers.  If the tariffs were not in place we would be importing more goods from abroad from countries with comparative advantages in those respective goods.  When those imported goods come from countries who are more cost efficient, it is cheaper for consumers to purchase those goods.

Third, there are no fixed amount of jobs.  If by allowing Chinese citizens to have some jobs over in their country, it does not necessarily mean they are "taking" any jobs from U.S. citizens.  I will concede that there will be some losses in certain industries in the short run.  But wealth is created by innovating, taking risks, investing in human capital, and improving the human condition.  If a few manufacturing jobs goes overseas, this frees up a great deal of human capital, allows individuals to take risk and innovate, which in the long run improve the human condition.

Finally, in addressing the concept of China subsidizing their industry and allowing their goods to be sold cheaper over here,  I say; "so what?"  In the words of Milton Friedman, "Why should we object to them giving us foreign aid?"  If they want to subsidize our consumption by allowing companies to sell their goods for cheaper than it may cost to produce, I'm not so sure this is such a terrible thing, especially for consumers.

From Mackinac.org by James Hohman:

"In her State of the State address last week, Michigan Gov. Jennifer Granholm listed the reasons why she believes the state's economy has fallen. "We all know the reasons — trade policies that dismantled factories here and built them in Mexico, the auto industry in meltdown, the banking crisis, the mortgage crisis, and on top of all that, a severe national recession." While the latter reasons may have played their part, company and job relocation to Mexico has been the least of Michigan's problems. Furthermore, trade with Mexico has actually been a bright spot for the state.

Company relocations are a very rare occurrence. In 2004, the Bureau of Labor Statistics kept track of U.S. companies that moved their production. The survey includes responses on employer and work relocations, and the answers are fairly surprising. In the first three quarters of 2004, 685,929 employees were separated from their work, but only 40,727 were separated because their companies relocated, and only a quarter of these jobs — 10,722 — moved outside of the United States.  

While 10,722 jobs may sound like a lot, it was only a fraction of the overall job turnover in the economy. During the same period, Michigan alone lost754,628 jobs and added 777,196. Even if we assumed that all of the nation's outsourced jobs left Michigan, which is very unlikely, relocations overseas would still account for just 1.4 percent of Michigan's job losses that year.

Considering that Michigan's exports to Mexico grew by 169 percent over the past 10 years, and that only Texas and California export more goods to Mexico than Michigan, it's very likely that the country's southern neighbor has actually been a source of state job growth."

Hopefully you hear about creative destruction a lot already. Just in case you need an example/real world application, here is the video for Google's new Twitter-esque product, Google Buzz.