“Trump revs up his Wayback Machine”

From Ben White in Politico today:

President Donald Trump is firing up his economic Wayback Machine in an effort to boost markets, the economy and his own political fortunes heading into his reelection campaign.

Economists warn that Trump’s approach, with its roots in 19th century mercantilism and 1980s Reaganism, risks back-firing on him in potentially significant ways.

In the span of just a few days, the president dusted off economic approaches largely discarded in recent decades, from promoting explicit currency wars to bullying the head of the Federal Reserve to promising to restore American manufacturing greatness by slapping ever-escalating tariffs on Chinese imports — and promising supporters everything will be fine if he doesn’t cut a deal.

Where does Trade-Trumponomics stand, “history of economic thought”-wise? Here’s an interesting graphic, annotated.


Addendum: to see the text and presentation more clearly, click on link to “prezi.com“.


Source: prezi.com.


Mercantilism predates all of the approaches (comparative advantage, absolute advantage) we teach in *introductory economics*, and the newer approaches (monopolistic competition and increasing returns a la New International Economics of Krugman Helpman) in international textbooks, and yet newer firm-based models (New Trade Theory of Melitz and Antras).


And that is where Trump is mired in. At least he’s beyond the Physiocrats…


39 thoughts on ““Trump revs up his Wayback Machine”

  1. Moses Herzog

    What about war time increase in demand, after starting a war over a drone shoot down?? That’s got to be a good thing, right?? Is that stimulative??— er something??

    1. Moses Herzog

      Maybe we can create a chart, “X units” increase in wartime demand over peacetime demand, per civilian Persian darkie killed. Run some regressions—er something?? That’s gonna make non-college grad white Americans feel like “a shining city upon a hill whose beacon light guides freedom-loving people everywhere.” and stuff, yeah??

      I have to pause and sit down now, I’m getting emotional and I feel tears coming on from my deep MAGA pride, I’m going to let the guy whose the “friend of a friend” of Maria Butina take it from here. Mike…….

    2. pgl

      No war from the drone shoot down. Trump is claiming to avoided that disaster but it seems he never had a clue what he was doing. So what’s new? Oh yea – the Iranians have figured this out and are already taking a victory lap.

  2. The Rage

    Really, it doesn’t matter. Pax Americana is the globalist system. This fact is ignored by this site, the mainstream media and economists. Ending pax americana is at least a 25% reduction in real GDP and maybe up to 40%, or when ‘Bubba’ was rocking through the white house. Nothing lasts forever, much like the industrial revolution had on growth, started its decay in the 1920’s.

  3. Moses Herzog

    I forgot to mention a certain economic number quoted today.

    And we have southern Evangelicals, Jesus, and TBN to thank for this. Now don’t get Jesus and donald trump mixed up because this is a mistake common to CoRev, Ed Hanson, and “Princeton”Kopits, that Jesus and donald trump get enmeshed in their heads as the same being. And who can blame them really, after Watching FOX news 16 hours a day?? [insert FOX dumb news anchor cackle here]

    Maybe IHS Markit is part of the Satanic Liberal Conspiracy?? And Marketwatch also!!!! Who owns Marketwatch?? Is that part of Dow Jones Inc.?? No, it must be part of NPR, right?? I bet IHS Markit is owned by George Soros because he’s. like, evil and stuff, and the Satanic peoples is always quoting bad numbers when a Republican is in the White House—it’s part of how the Satanists encode evil messages to each other—by quoting negative numbers during a Republican White House term.

  4. pgl

    The very next line:

    “On Wednesday, he also awarded the Presidential Medal of Freedom to Art Laffer, a conservative economist and godfather of the supply-side economics approach of the 1980s who recently argued that President Barack Obama caused the Great Recession and popularized the idea that sweeping tax cuts would pay for themselves, which they have mostly failed to do.”

    Wow – they could have given Menzie for noting this here. Oh wait – later down:

    “He’s engaging in a number of very strange economic throwbacks here, especially this version of mercantilism that is a throwback not just to the 1900s but to the 1700s,” said Menzie Chinn, a professor of public affairs and economics at the University of Wisconsin. “This is all just going to continue to heighten economic uncertainty, thereby dampening the global economy and pushing the U.S. into a slowdown. Even if he somehow succeeds in forcing new supply chains, that’s going to take a very long time to occur.”

    Nicely said!

  5. Barkley Rosser

    Yes, his trad ideas are even wayer back than his bashing the Fed ideas. Heck, there were not even any central banks at all back in the 1500s. of course, we did have people pusing mercantilism in the US more recently, e.g. that fabulously stimulative Smoot-Hawley tariff of 1930. That was a great success.

  6. pgl

    At least he’s beyond the Physiocrat. Maybe Trump is beyond the Physicrat but I suspect CoRev is not:


    Physiocracy was a theory of wealth. The physiocrats, led by Quesnay, believed that the wealth of nations was derived solely from the value of agriculture. Quesnay’s understanding of value-added was rather primitive—he could not see, for example, how manufacturing could create wealth. Farmers, on the other hand, could. As Karl Marx explains in “Das Kapital”, “the Physiocrats insist that only agricultural labour is productive, since that alone, they say, yields a surplus-value”.

    In CoRev’s mind, restoring the income of U.S. soybean farmers is the prime directive!

  7. pgl

    Way down in this discussion:

    ‘Economists also note that monetary policy remains fairly loose and that one or two cuts is not likely to address damage from Trump’s trade policies. “Realistically, a cut in rates is not going to counter the damage to farmers trying to sell their soybeans,” said Robert Eisenbeis, chief monetary economist at Cumberland Advisors and former research director at the Atlanta Fed. “A rate cut is pretty far removed from the damage the administration is doing with their tariff policy. If you are a farmer or a car maker trying to figure out what to do, it doesn’t help you.”’

    It does seem the FED is about to lower interest rates in July. One reason given – the fear of the damage to the economy done by Trump’s trade war.

    We thought the Reagan White House economic team in 1981 was one of utter chaos. Fiscal stimulus combined with tight money that led to a massive dollar appreciation and falling net exports. Which of course was its excuse for its own trade protection. Fortunately Reagan invited Martin Feldstein to head the CEA in 1982 who set forth to clean up the mess created by Reagan’s incoherent team. Alas – Trump is doubling down on his incoherence and stupidity even in the 3rd year of this chaotic White House.

    1. pgl

      Former CIA Director and Secretary of Defense Leon Panetta says the rising tensions with Iran require a ‘strong, steady hand and a clear strategy and frankly we don’t have that right now.’

      Amen to that!

      1. 2slugbaits

        True enough, but in this particular case I think Trump (eventually) did the right thing. Trump was wrong to abrogate the nuke deal with Iran and overall he’s made a hash of things. But he was right in pointing out that the planned US strike was not proportional and would have made a bad situation worse. Besides, there’s just way too much “fog of war” surrounding recent events in the Gulf region. We really don’t know for sure if it was Iran that planted the mines on those ships; there are plenty of bad actors in the region that are quite capable of false flag operations. Israel has a long and sordid history along those lines. Or the mines could have been planted by some rogue elements in Iran without the government’s knowledge. And there’s a lot of uncertainty surrounding the downing of the drone. It is possible that the drone temporarily drifted off course. Or the Iranian radar battery may not have been properly calibrated so they genuinely believed the drone was in their air space. Just too many unknowns. We should remember the last time the US overreacted in the region and ended up shooting down an Iranian civilian plane that killed hundreds.

        1. Moses Herzog

          @ 2slugbaits
          You can say the final decision was “correct”. But what was the framework or the reasoning behind the last seconddecision??

          He’s saying the ships and jets were already in place, NYT backs this portion of the story, but donald trump saying generals gave him a death count estimation only after he asked for it?? Not only would any president have this as one of the first questions they’d ask—but they wouldn’t even have to ask it, the military leaders would have presented that to him HOURS before the plan had its beginning stages (placement of military) implemented. So he’s at least lying TWICE there—he’s lying he didn’t already have an estimated body count, and he’s lying that the generals “had to get back to him”. Just from the words coming from the orange bastard’s own mouth, we know this version isn’t true. It doesn’t even pass the whiff test.

          Is that “the right thing” to do?? You’ve got military leaders making very complicated conceptual plans, and then hundreds (thousands??) of Airmen and Navy walking on pins and needles so donald trump can give himself an erection by making someone flinch on the recess playground. It’s not a Tom Cruise film. These are real U.S. military risking their lives so donald trump can pull make-believe fantasy out of his ass for Chuck Todd to nod his head up-and-down to.

          1. 2slugbaits

            Moses Herzog I’m not defending how Trump came to his decision to abort the mission. At this point I’m just happy that he eventually did the right thing no matter how ugly the sausage making.

          2. Moses Herzog

            I think we’re in 100% agreement, just wanted to accentuate the point we don’t give him a pass on the sloppiness and irresponsibility of it. I don’t know how the Generals can stand interacting with a slob and a coward.

        2. ilsm

          The “proportionality” statement implies “do not shoot US’ manned intel resources”. P-8, P-3, E-3 E-8 complement the drone and satellites.

          The planned “strike” appears to have been a step in degrading Iranian “defensives” capacity: radars, missile (SAM) batteries……

          This would have been an initial sortie set in overcoming anti access/area denial (AA/AD) if it were the South China Sea. In Hormuz/Oman there are more complex realities with other bad actors.

          Is it in anyone’s interests to alter a [delicate] balance of power among thugs on the Pac Rim’s oil life line?

        3. pgl

          Did you see where Liz Cheney and Lindsey Graham were harping “bomb, bomb, bomb – bomb Iran”? Thank God – no one listens to the pretend soldier Graham and the daughter of chicken hawk Dick Cheney!

          Speaker Pelosi praised the restraint even though I bet she abhors Trump’s lack of real attention to foreign policy issues.

  8. 2slugbaits

    Economists warn that Trump’s approach, with its roots in 19th century mercantilism and 1980s Reaganism, risks back-firing on him in potentially significant ways.

    I would say that Reaganomics was rooted in mid-19th century economics. Reagan didn’t know it, but deep down he believed in the labor theory of value…just like Marx. So how about that…Reagan and Marx were soul mates. Who knew?

    1. Menzie Chinn Post author

      2slugbaits: I think that Trump also believes in the labor theory of value combined with a Marxist view of materialism. Why else does he keep talking about trade in *things* and the trade balance *in things* (goods, no services)?

      1. 2slugbaits

        Menzie Both Reagan and Trump also believed government added no value. As you say, their economics is material or “thing” based, but they seem to have a theory of history that is not Marxist. Instead of historical materialism Reagan saw history moving in a linear way (shining city on a hill and all that). Trump sees history acting through culture wars and moving towards himself. Minerva’s owl perched atop Trump Tower.

  9. Bernard Leikind

    Prof. Chin,

    Would you be able to provide a version of the trade theory timeline that you amateur economist readers could examine.
    The print is too small for me.

    1. Menzie Chinn Post author

      Bernard Leikind: Apologies. I added a link below the graphic – if you click on it, you’ll be able to get the entire presentation, and to zoom in to read.

  10. Moses Herzog

    Wow, Republicans finally found a racist white male they don’t like!?!?!?!?!

    That’s actually REALLY strange because I remember back in December of 2017 when 91% of Alabama Republicans voted for a known pedophile.

    The GOP—- “Home of donald trump, family values, and Southern Evangelicals” [content sigh] Good times……..

  11. Moses Herzog

    Time for true confessions……..

    [Goes into my best melodramatic “feel sad for me” voice, Joan Crawford style] I was very socially awkward in high school. I always wondered what it was like for two young teens to share puppy love texts with each other. Now, after all these years, I can vicariously get the sensation of young teenage puppy love shared by phone texts. How glorious:

  12. Moses Herzog

    She was nominated by donald trump for the job:
    “During the remainder of my tenure, I will remain steadfast in executing the mission of the CPSC and continuing our critical safety work,” Buerkle wrote.

    Her brief time running the agency has been marked by two high-profile decisions.

    Late last year, she voted in favor of a settlement with Britax that allowed the company to avoid a safety recall after nearly 100 people were injured when the front wheels on their BOB jogging strollers came off. The settlement — which passed along party lines 3-2 — ended a CPSC lawsuit that sought to force Britax to recall the strollers. An investigation by The Post found that Buerkle kept Democratic commissioners in the dark about the stroller investigation and then helped end the case in court.

    She was leading the agency as it decided whether to recall Fisher-Price’s popular Rock ‘n Play inclined infant sleeper. Buerkle and the agency were criticized after Consumer Reports revealed that the Rock ‘n Play was tied to 32 infant deaths, three times more than the agency had previously publicly acknowledged.

    It goes on—-
    “The American Academy of Pediatrics and Consumer Reports announced it wanted a recall days before the agency took action on April 12, joining Fisher-Price in taking 4.7 million inclined sleepers off the market.

    In Buerkle’s first two years as chairwoman, the number of companies fined for misconduct declined to five in 2017-2018 from 12 in 2015-2016. Public voluntary recalls fell about 13 percent during the same period, resulting in approximately 80 fewer recalls, according to agency data. Last year, the number of public recalls fell to its lowest level in a decade, consumer advocates say.”


    It’s not a big deal for the woman nominated by donald trump and Republicans that 32 infants died. The GOP is “the party of family values” and the CEO of Fisher-Price had to pay his family’s light bill after all.

  13. joseph

    Speaking of the Wayback Machine, Trump’s appears to be broken.

    He awarded Art Laffer the Medal of Freedom saying “I’ve heard and studied the Laffer Curve for many years in the Wharton School of Finance.” Trump graduated from U Penn in 1968. Art Laffer drew his infamous napkin diagram in 1974.

    Incidentally, Trump never fails to find an occasion to mention the Wharton School of Business, implying that he has a prestigious Wharton MBA. The truth is that Trump spent two years of undergrad at Fordham University and then transferred to U Penn for his final two years of undergrad (greased by a generous donation from his father). Trump did not attend the Wharton MBA program. Nevertheless, he claims to be a Very Stable Genius.

    1. pgl

      That’s funny. Let’s see what Heritage has to say about the history of the Laffer curve:


      “The story of how the Laffer Curve got its name begins with a 1978 article by Jude Wanniski in The Public Interest entitled,
      “Taxes, Revenues, and the ‘Laffer Curve.'”1 As recounted by Wanniski (associate editor of The Wall Street Journal at the time), in December 1974, he had dinner with me (then professor at the University of Chicago), Donald Rumsfeld (Chief of Staff to President Gerald Ford), and Dick Cheney (Rumsfeld’s deputy and my former classmate at Yale) at the Two Continents Restaurant at the Washington Hotel in Washington, D.C. While discussing President Ford’s “WIN” (Whip Inflation Now) proposal for tax increases, I supposedly grabbed my napkin and a pen and sketched a curve on the napkin illustrating the trade-off between tax rates and tax revenues. Wanniski named the trade-off “The Laffer Curve”.
      But that is so modern era. Let’s go to the Way Back Machine!

      “Ibn Khaldun, a 14th century Muslim philosopher, wrote in his work The Muqaddimah: “It should be known that at the beginning of the dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments.”

      A 14th century Muslim philosopher. Was that what Wharton was teaching in 1968!

    2. pgl

      OK as I read this Heritage piece written by Laffer itself, first of all it sucks as economics. But Laffer is a weak historian as well. He jumps from the 14th century to Keynes leaving out Adam Smith. I earlier posted something written by the great Douglas Irwin under this Econospeak post:


      Here’s his NBER paper on the Tariff Laffer Curve:


      Go to page 8 for what Adam Smith wrote in the Wealth of Nations. I trust that even Art Laffer has heard of Adam Smith!

      1. Willie

        Nah, why would Laffer know about the Wealth of Nations? He wouldn’t. Adam Smith has no role in properly medieval economic thought or napkin doodles. Keynes is the devil, though. So, he would surely have heard of Keynes.

    3. pgl

      “Trump did not attend the Wharton MBA program.”

      He got an undergrad degree. A lot of his colleagues in the Dept. of Finance received Cum Laude awards or better. We’ve seen the graduation list and Trump was not one of them. Yes Trump lies about everything including resume padding!

    4. joseph

      Well, you could go even more Wayback and realize that the supposedly revelatory genius of the Laffer Curve is simply Rolle’s Theorem from 1691 which is familiar to any high school senior taking elementary calculus and states that between any two zero points on a continuous curve there must exist a maximum or minimum point.

      The Laffer Curve must be one of the most tested and thoroughly refuted religious beliefs of conservatives as the tax cuts of Reagan, Bush and now Trump have shown. Tax cuts don’t pay for themselves. Tax cuts increase deficits.

      1. Willie

        If tax cuts (effectively the same as tax dodging) paid for themselves, then Greece is the most solvent, prosperous country in the world.

      2. Moses Herzog

        Everyone intuitively knew this years ago. But Americans didn’t WANT to pay for all those services they were getting from the government. They wanted the magical solution (such as the Laffer curve) that they still require today. And God help any politician who tells the American MAGA voters and Teabagger voters they can’t have the rich eat their cake TWICE over. The ideas of a forthright populace and work for the salary you receive died somewhere after FDR:

        I have felt for decades (nearly from the moment it happened, but it became more pronounced in my mind over time) that Mondale’s nomination speech and entire ’84 campaign were a crux and turning point for America. When Americans laughed at Mondale’s electoral votes they had no idea who was the brunt of the joke. People like Paul Tsongas kept trying to tell them who was the brunt of the joke. And to this day we’re lucky if 5% of America is getting the actual joke. Maybe instead of the pie-to-the-face joke, Americans only learn when the limestone brick caves in their face. It appears that is how Americans prefer it, at least for whatever other generation than their own they can thrust it on.

      3. pgl

        Rolle’s Theorem:


        Note two things here:

        “Other than being useful in proving the mean-value theorem, Rolle’s theorem is seldom used, since it establishes only the existence of a solution and not its value.”

        The same can be said about Laffer’s cocktail napkin!

        “The theorem was proved in 1691 by the French mathematician Michel Rolle, though it was stated without a modern formal proof in the 12th century by the Indian mathematician Bhaskara II”.

        Talk about the Wayback Machine!

  14. pgl

    Stumbling and Mumbling nails it!


    ‘President Trump believes we live in a zero-sum world in which one country’s gain is another’s loss. This is evident in his reaction to Mario Draghi’s comment this week that additional monetary stimulus will be needed if euro zone inflation doesn’t rise. Trump tweeted:

    Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.

    Adding that this is “very unfair to the United States!” This, of course, is bollocks.’

    He explains with some excellent economics as he notes how Trump is a mercantilist.

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