Learning not to trust the All-In podcast

Leading off the article with Yglesias shows the guy has little idea what he’s proposing to discuss. Imports can reduce GDP because the import is imported and not domestically produced. The formula identifies specifically: that which is consumed domestically but not produced domestically is not part of domestic production. There is no inconsistency here at all with revised trade policy increasing GDP. It should be totally obvious and intuitive that if the same good is consumed domestically, producing it domestically rather than importing it will increase GDP, all other externalities and second-order impacts aside.

Yglesias has no business commenting on macro finance. He just as good at being confidently incorrect as Chamath. An entertaining example of this was his confidently incorrect tirade about basis points.

https://www.cnbc.com/2023/01/13/matt-yglesias-got-confused-a...

Imports don't /reduce/ GDP. They don't affect GDP because they are not produced domestically. What you're proposing is import substitution (tariffs), which is bad because

1. domestically imported goods can have imported inputs.

2. reduced competition from the external good means the internal ones will be worse.

> It should be totally obvious and intuitive that if the same good is consumed domestically, producing it domestically rather than importing it will increase GDP, all other externalities and second-order impacts aside.

There's no situation where those can be put aside, and since GDP is an artificial formula you shouldn't Goodhart it like that.

Yglesias is just repeating arguments that have been mode over and over by people who do in fact know what they are talking about (Noah Smith makes the argument well here https://www.noahpinion.blog/p/imports-do-not-subtract-from-g...)

The moon base example I think makes the argument very clearly. If you have an economy which produces nothing then it has a GDP of 0. If the increase imports for whatever reason, their GDP is still 0, which means that imports doesn't subtract from GDP, otherwise their GDP would be negative which is nonsensical.

But all this is sort of beside the point because arguments from accounting identities are almost always nonsense.

>The moon base example I think makes the argument very clearly. If you have an economy which produces nothing then it has a GDP of 0. If the increase imports for whatever reason, their GDP is still 0, which means that imports doesn't subtract from GDP, otherwise their GDP would be negative which is nonsensical.

It's technically true that imports don't decrease GDP, but that's only true if there's no substitution effects. But for most goods substitution effect does exist, and therefore we should expect a GDP drop from imports.