On Feb 18, 2008 6:20 PM, Gautam Mukunda <[EMAIL PROTECTED]> wrote:
But one issue where we do actually _know_ what the right thing to do is,
> is trade. Free trade is the right
> policy. And McCain is right on that (as, sadly, both Democrats,
> repudiating one of the greatest achievements of the Clinton Administration,
> are wrong). If I can't trust someone to get the right answer in an area
> _where we actually know what the right answer is_, I don't see how I can
> trust them to get it right on the issues where it's a lot harder.
>
Could you explain further?
Our views on Obama and McCain are fairly similar, but switched around. I
wouldn't be too unhappy to see either one as President, but I'd prefer
Obama.
Nick
Me:
There aren't many issues in the social sciences where there is virtually
complete professional consensus. I'm not sure if there are any except this
one, but there is one. That one is free trade. There is absolutely no doubt
that free trade is good for both countries. If two countries trade freely with
each other _they will both be better off_. No qualifications, no restrictions.
There are a tiny handful of complicating issues (strategic trade theory, for
example) but they are, to first approximation, irrelevant. Trade can certainly
have poor distributive effects. But making up for them will cost less - almost
always vastly less - than the benefits from the free trade. I can't imagine
any competent economist disagreeing with anything I've written there. There
are particular special circumstances in which the earlier statements might not
be true, but they are relatively rare and far less important than the general
principle.
Beyond that, free trade has positive distribution effects across all people -
that is, it may increase inequality within states, but it decreases inequality
between states, and inequality between states is vastly larger than that within
(most) states. That is not _certain_, but it is, I would say, highly probable.
Free trade has positive effects for the US's national standing. Hillary
Clinton, in declaring her opposition to the few free trade agreements President
Bush has negotiated, has hit on the one policy that might actually make our
international standing _worse_. That is, again, less certain than the previous
statement, but it's _still_ highly likely. Finally, I believe it is likely
(not highly likely, but likely) that free trade policies prevent war.
Why do some people oppose free trade? Many of the gains from trade are
distributed, while the losses are concentrated. So unions oppose trade
agreements (almost always incredibly foolishly - even if the agreements weren't
passed, the larger economic forces are much more important) because their
workers may suffer even though the nation as a whole will benefit. Note, btw,
that unions almost always _oppose_ retraining programs that might help those
same hurt workers, because such programs would move those people out of the
unionized industry and weaken the union even as it hurts its members. This is
a classic principal-agent problem, and if you think it's right-wing to say
that, tell it to Robert Reich, who first pointed it out to me. Others are,
quite simply, wrong. But unless you're a member of one of those wounded
industries, you should be in favor of free trade. And even if you are, you
should acknowledge that by doing so you're putting your
personal welfare over the general good.
Now, some people don't like this - they argue that the economists have it
wrong, for example. I guess that might be true, although there is no finding
in social science in which I have more confidence than the principle of
comparative advantage. But anyone who chooses to say that I never want to hear
ever criticize a Creationist or an Intelligent Designer ever, ever again.
Because both are doing exactly the same thing - rejecting evidence and science
in favor of faith. Do it if you must, but don't claim you're part of the
"reality-based community" or anything like it.
Gautam
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