I figured PEN-L would get a chuckle out of this... -b National Post (formerly The Financial Post) Monday, March 19, 2001 THE FABULOUS BAKER BOY Many observers of U.S. and international economic affairs learn a lot from Paul Krugman, even if they don't always agree with him. They may wonder if there's any other economist who offers a comparable flow of insights. In fact, there is one, and his name is Dean Baker. He's the economist who, one year ago when the Nasdaq index was more than double its current level, had the foresight to write: 'If the market falls 50% and loses US$10-trillion of wealth in a correction, it's going to be very hard to avoid a recession. A lot of these dot-coms are worth a corner lemonade stand and are putting real companies out of business.' Writing just a few days later on a trip to England, Paul Krugman offered what, from today's vantage point, seems a considerably less perceptive assessment: In their attitudes towards tech stocks, U.S. 'investors seem moderate, sensible and on the right track -- at least when you compare them with their counterparts elsewhere in the world.' Paul Krugman, in case you haven't heard, is the Princeton University economist who writes a twice-weekly column for the New York Times. If The Economist newsweekly is anything to go by, he may be the most influential economist writing today. As a columnist, Prof. Krugman's stock-in-trade is the exposure of economic myths and distortions. A Gore administration might have provided him a position, I would guess, but at least the Bush team has provided him with a rich vein of material. And who is this Dean Baker? He's a PhD economist who puts out the weekly Economic Reporting Review, a free e-mail analysis (archived at TomPaine.com) of economics coverage in the New York Times and the Washington Post. And the record shows Mr. Baker has a better grasp of current economic events than even Mr. Krugman. Though Mr. Baker is exceptionally bright, his advantage is not that he knows more economics. Indeed, the Economic Reporting Review frequently cites Mr. Krugman as an authority -- on the microeconomics behind California's energy deregulation fiasco, say, or on the macroeconomics behind Japan's decade of stagnation. One advantage is that Mr. Baker keeps his thumb on the pulse of the economy. At the standard intervals when the U.S. government releases macroeconomic data, he issues his own commentary on it (for free, under the auspices of the Center for Economic and Policy Research, of which he is co-director). If my own experience as an economics professor is any guide, while Mr. Baker is busy mastering the data, Mr. Krugman is probably off in some classroom scribbling on the blackboard and covering himself in chalk dust. This builds character but it doesn't help in predicting economic events. Another advantage is that, although Mr. Baker is well to the left of Mr. Krugman on the policy spectrum, he is less ideological. When Mr. Krugman goes astray in his analysis, it is often because he has failed to control his partisan feelings as a centrist Democrat. Al Gore's economic agenda makes more sense than George Bush's, but it's not something to which you can get closely attached and still be fully coherent. Mr. Baker's relative freedom from ideology can be illustrated by his analysis of the World Trade Organization, an organization typically criticized by the left for pushing a free trade agenda. Mr. Baker's take on the WTO is different, and very timely given the ongoing controversy over the pricing of AIDs drugs in Africa. Contrary to its free trade rhetoric, he observes, the WTO is extremely protectionist in its efforts to intensify the costly forms of protection known as patents and copyrights. While protection in the forms of tariffs or quotas will rarely raise the price of products by more than 20%, patents and copyrights routinely raise prices by a few hundred per cent or more. In the case of copyrighted information that can be digitized (songs, movies, computer software, books, etc.), the marginal costs of production and distribution can drop to zero. The potential payoffs to finding better ways to encourage research and development and to reward creative work are becoming enormous. The facts about prices are beyond dispute, and even cause mixed emotions on the part of pro-business writers, who find their love of property rights in conflict with their love of low prices. And the costs associated with high prices are not the only ones. With patents as the reward system for pharmaceutical innovation, Mr. Baker argues, 'much of the research conducted by the drug companies is directed not toward breakthroughs to better our lives but toward finding ways around the lucrative patents of competitors.' Back issues of Mr. Baker's weekly economic reports are archived on the Internet and, in keeping with his views on intellectual property, are freely available for all to browse. If there's any right-of-centre economist with a record of economic prognosis even half as impressive as Mr. Baker's, I would be interested in hearing who it is. Brian K. MacLean is an economics professor at Laurentian University. His weekly e-mail newsletter, Canada's Economy in the Newspapers, was inspired by Dean Baker's Economic Reporting Review. Copyright 2001 Financial Post DataGroup, a division of The National Post Company. All rights reserved
