Why don’t we treat free trade like global warming?
Belief in anthropogenic global warming is a sort of political signifier for American liberals – if you don’t think human activity is changing the Earth’s climate, they’re probably not going to take you very seriously. This is not because every leftist has independently verified the Intergovernmental Panel on Climate Change’s findings and concluded that people who disagree are blinkered or stupid. Instead, liberals quite sensibly think that when a critical mass of scientists arrive at a certain conclusion, we should take that conclusion as a given and proceed accordingly.
Despite being fairly conservative, I basically accept this logic. If most scientists believe in climate change, I’m inclined to nod my head and move on. As far as optimal mitigation strategies go, I waffle between a more hands-off, Manzian approach and a revenue-neutral carbon tax. I’m not sure how I feel about cap-and-trade. As I said, this is not exactly my area of expertise.
Barring real evidence of systematic bias or incompetence, I’m willing to accept the consensus view of specialists in most fields (to preempt the inevitable, I don’t think the infamous “Climate-gate” memos demonstrate systematic bias). So here’s my question, prompted by what sounded like a shot at free trade in E. D.’s latest post: Why don’t we accord the same level of deference to economists? Shouldn’t the pro-free trade consensus within the field of economics be as bullet-proof as belief in global warming?
It’s not a partisan issue – in my opinion, the best introduction to the benefits of international trade was written by Paul Krugman. And the strength of the pro-free trade consensus in economics is at least as robust as the consensus view among climatologists. There are a few high profile dissenters, but those exist in every field, including climatology.
If an overwhelming number of trained specialists in a particular field agree on one issue, shouldn’t we just take their word for it? And if not, why not? Why is economics any different from climatology?
Just to add a little capper to your post, I would remind everyone that Krugman was awarded his Nobel for his work on trade theory. This means that you should give his ideas on trade more weight than his ideas on anything else.
Trade economics was one of my specialities at university and I can state with as much confidence as you can ever have in the social sciences that there are no good policy reasons to impose tariffs, quotas or export subsidies. You will not help the poor, the best you can hope to do is help a few narrow groups at the expense of everyone else, and you can do that with transfer payments at a much lower social cost. In fact it doesn’t even matter what the trade policies of other countries are, unilateral abolition of all tariffs, quotas and subsidies is the optimal policy to undertake. Just because every other country decided to jump off a bridge that’s no reason to follow them.Report
Sounds good to me.Report
This seems counter-intuitive, in that in practically all cases the party whose goods are subject to tariffs is the one filing the complaint.
I would like to be able to understand this. So, if you wouldn’t mind explaining a bit, I would rather use a real-world example.
Recently, China began to impose tariffs on high-grade steel. The Steelworkers filed a grievance. China is still developing capacity to produce the really high-grade stuff, and one of the big sticking points there was a lack of access to the type of coal needed for smelting, and a bit contract for that just went through last month. From what I’ve read, China enacted the tariff to protect their small, upstart manufacturing capacity. So, if this plays out the worse for China, I’d like to see how.
I haven’t followed any one specific case from beginning to end to note various effects.Report
It is counter-intuitive, which is probably pretty much everyone who isn’t an economist gets it wrong (even the Chinese government).
When China imposes a steel tariff on imports from the US, the following things happen:
1) They capture some revenue from US steel exporters. Note that the revenue gain to the Chinese government is necessarily lower than the losses to the steel exporters due to deadweight loss of taxation.
2) Chinese steel makers raise their domestic prices now that their government has shielded them from foreign competition. This has the same effect as any tax that protects incumbent firms from competition. Chinese Steel makers get richer at the expense of Chinese consumers, but like any imperfectly competitive environment the gains to the producers are smaller than the losses to consumers.
3) A balance of sorts has to be maintained between the exchanges between any two currencies. This means that if fewer people are swapping Yuan for Dollars to buy US steel either A) more people will swap Yuan for Dollars to buy some other US export or B) fewer people will be able to swap Dollars for Yuan to sell exports to the US. So either way some other Chinese industry will lose (as will their counter-party in the US).
Overall the social losses exceed the gains, both worldwide and in China. Note that none of this refers to US trade policy at all, so even if the US is engaged in big tariffs on Chinese goods, China is still better off eliminating its tariffs.Report
China’s playing dirty all the way down: their manipulation of the RMB acts as a market distortion.Report
That CAN’T be sustainable, though. I shudder to think at the eventual correction…Report
It appears to be happening. China’s suffering a serious bout of domestic inflation. So in effect the real exchange value of the RMB is adjusting itself to the pegged exchange rate.Report
I shudder to think at the eventual correction *of China*. It seems to be pursuing several unsustainable courses at once. How the whole thing didn’t explode already is remarkable.Report
Overall the social losses exceed the gains, both worldwide and in China.
I don’t _see_ any ‘social losses’. I see small losses to manufacturers in the US.
This is where this entire discussion is stupid. Yes, free trade might result in higher world-wide productivity…AND?
Is that what we make economic policy on? The grand total of ‘stuff made’?
If so, wouldn’t a better policy be to nationalize (and, in fact, internationalize) all production and enslave everyone to work 18 hours a day in factories?Report
If so, wouldn’t a better policy be to nationalize (and, in fact, internationalize) all production and enslave everyone to work 18 hours a day in factories?
It’s been attempted.
It’s less sustainable than you’d think.Report
Yes, there’s been a “workers of the world unite” thing lurking in the background here.
It seems like a fine idea at first blush.Report
Well, yes, but surely we could come to some compromise. I mean, I see all these luxury goods around, like cars and houses and cars, when we could have been building more steel plants and giant warehouses where people live on bunk beds and wear jumpsuits.
Surely, we can come up with the scientific ‘optimal’ design for the world, and do that. What the purpose would be, I have no idea, but apparently, scientific consensus is behind it and we can’t disagree.
Also, economists agree: Children not working in steel mills produces ‘losses’.Report
The goal isn’t to maximise GDP, it’s to maximise allocative efficiency, which means that the good produced are optimal, given the preferences of consumers. This is pretty much a good thing by definition. And labour productivity tends to lead to higher wages.
So no, stuff made is not the be all and end all of trade theory. And its also true that allocative efficiency isn’t everything, but you deal with distributional issues using transfer payments, not messing about with the exchange of goods and services.Report
>”This is pretty much a good thing by definition. ”
Well, not to the Chinese government, who value things like maximizing national power, building a strong military, etc., in addition to sleazier goals like maximizing the welfare of specific party cronies at the expense of consumers overall.
Such views may not even be crazy, depending on the geopolitical situation. World War II rationing in the US probably made sense — perhaps better done through high taxes on needed war materiel rather than quotas, but a heck of a skew away from “allocative efficiency preferred by consumers” either way.
On the other hand, for the Brezhnev-era USSR, they’d have done a lot better to maximize the likelihood of national survival by creating markets for washing machines and shoes than by building another hundred T-72 tanks.Report
Right, in the face of existential threat it might make sense to move away from an allocative efficient market to favour the defence part of the economy. For the same reason, I can think of a couple of national security exceptions to free trade (they’re narrow though).
And of course CHina is favouring the welfare of narrow groups. So does the US, so do EU countries. Its a fundamental prediction of Public Choice Theory.Report
2A), China’s steel industry expands, leading to more good jobs in China and all of the accompanying positive downstream results. People learn to be steelworkers and engineers, which allows the industry to expand further, leading to a significant increase in social capital as they move into the middle class.
Admittedly, after this comes a disconnect. As the industry grows, it requires subsidies like the tariff less, yet it becomes more powerful and able to demand more goodies, not fewer.
At any rate, economics is at its least convincing when constructing simple “proofs” that ignore the complexity of the real world. Economies aren’t spheres of uniform density. (I will forgo the obvious pun.)Report
Why, look at Pittsburgh and Bush’s steel tariffs here in the US as living examples of 2A.Report
Fostering a new industry is, I think, more likely to work than protecting a failing one. Not that either is guaranteed.
Not paying taxes on stuff you buy over the internet is a subsidy to what was once a new industry, and it worked amazingly, though I’d argue that subsidy is no longer needed. I can afford to pay tax on books I buy from Amazon, and my state could certainly use the money.Report
Thank you for taking the time to run through that.
I’m not so sure that #2 is applicable in this case, as the Chinese government often exerts price controls, and I am uncertain of the status of steel.
#3A is something that I believe is a bit out-dated. I know that economic theory demands that greenbacks be repatriated, but its status as a reserve currency and (more importantly) its use in the oil trade renders nil that requirement.
I’m thinking that OPEC amounts to a ‘stateless state’ where greenbacks can be repatriated.Report
2. If the Chinese gov’t exerts price controls – they will either cause shortages (by controlling prices too low) or suppress demand (by forcing them too high). Either of these will act as a tax in the same way as the tariffs do.
3. Your interpretation here is not right. Eventually, all trade must balance and the dollars must flow back to the US. They may take long/circuitous routes – such as being traded through a bunch of hands or sat on for a long period before someone else spends them in the US – but they will come back.
My (admittedly crude) understanding of the dollar trade flows with China is basically when US firms buy Chinese trade goods, the actual dollar placements are seized by the government and exchanged for equivalent RMB. The Chinese government then maintains the overall exchange rate by using those dollars to buy US Treasury bonds. So, the dollars are already back, though they were used to finance the deficit spending of the U.S. government.Report
Basically what Plinko said. The only thing I’ll add is that if Dollars are going overseas and not coming back then the Fed has effectively become an importer. Mind you, that involves the US getting goods in exchange for pieces of paper, so in the final analysis is a pretty sweet deal.Report
Economics predicts the past.Report
“prompted by what sounded like a shot at free trade”
In other words, you read a post called “On the language of assumption,” then proceeded to assume Kain was taking a shot at free trade.
Brilliant!
Reading the post a little closer, I think it’s clear that Kain isn’t taking a shot at free trade, but at the folks who make their $$ via “artificial scarcities, subsidies, and rents they have captured with the help of the state.” Could be a critique of Russian oligarchs, Middle Eastern monarchies, tin-pot dictators from South America, or (gasp) American capitalists. But it’s not exactly a critique of free trade…..Report
Exactly.Report
I followed the link Will supplied, above, “E.D.’s latest post,” hoping it would take me to the specific remark. Alas, no such luck.Report
I believe most of the arguments against trade are not against free trade, but against free trade that is not fair trade.
Free trade means you make goods wherever it is most efficient and the costs (including shipping) are lowest. Fair trade means all producers play by the same rules. In the US we have relatively strict environmental rules which add to the cost of production. This is a good thing as keeping the environment relatively clean is a true cost of production and should be included – otherwise the cost is borne by those others than the producers.
However, many places such as China have no such regulations, allowing the price paid by producers to be artificially low, being subsidized by the lesser well-being of those who have to deal with the pollution/clean-up.
A similar argument can be made for labor laws. Countries that have few worker health and safety laws have an advantage over those that treat workers as human beings. The price of the good is depressed due to some of the costs being borne by the hurt workers or society having to take care of the injured workers.
Free trade is good. Fair and free trade is the ideal.Report
“A similar argument can be made for labor laws. Countries that have few worker health and safety laws have an advantage over those that treat workers as human beings. The price of the good is depressed due to some of the costs being borne by the hurt workers or society having to take care of the injured workers.”
This may be true. But labor laws are extremely expensive such that a nation’s economy oft-has to be advanced to the point where they can afford to implement them. That means, the choice for a developing nation may be between not a sweatshop job or American or European style “good” job, but rather 1) a job at a multinational sweatshop, 2) a job at a local sweatshop, or 3) no job at all. The workers in developing nations tend to prefer the first choice and for good reason. I have had them as my students.Report
What you are pointing out makes a lot of sense, and I can understand the desires of those in developing nations and the risks they are willing to take.
But that feeds right in to the anti-trade sentiment. Workers in the US and other developed countries see that as being unfair – when a manufacturer can discount their costs in a way we cannot it is viewed as unfair. Whether that discount is due to government subsidies, or the producers’ ability to shift expenses to either the local people via environmental damage or the workers by avoiding basic safety issues, it is looked at as unfair.
Some even consider lower wages as being unfair – but that is incorrect on a very basic level. That is one of the developing countries’ advantages over us that is not unfair. Frustrating? Yes. Unfair? Not necessarily.Report
The important thing to bear in mind is that the overall balance of trade won’t be affected because international cash flows have to balance out. So low pollution or labour standards will effect the kinds of goods China exports you, but the balance is fixed. Polluting industries or industries reliant on a lot of unskilled labour gain, other industries lose.
Now if Chinese production is imposing a negative externality on non-Chinese people (think: global warming), then you’re justified in taxing that production like any other polluting activity (it’s not a tariff per se, its a Pigouvian tax), so long as you’re not treating Chinese production more harshly than your own.Report
“So here’s my question, prompted by what sounded like a shot at free trade in E. D.’s latest post: Why don’t we accord the same level of deference to economists? Shouldn’t the pro-free trade consensus within the field of economics be as bullet-proof as belief in global warming?”
I don’t think E.D. was taking a shot at free trade. It seems like his real target was the heavily managed trade that actually exists and is called “free trade”.Report
Sure… is the general response to heavily managed trade that actually exists to say “we need to make it freer!” or to say “it’s heavily managed in the wrong way by the wrong people and we need the right people to manage it differently — the *RIGHT* way”?
If it’s the latter, I think this critique still stands.Report
I think we need to make it much freer and far less exploitative. I’m still working out my thoughts on this, however. I did say in my Labor 2.0 post that I didn’t think a protectionist policy was necessary to the goal of a more robust labor movement.Report
The problem with “exploitative” is that it strikes me as fundamentally subjective… to the point where I have been relieved (and sometimes pleased!) to have a particular job at a particular rate while someone else entirely tells me that, no, I’m being exploited and don’t even know it.
We then get into discussions of psychology (and, sometimes, false consciousness!) and how my experience of a thing is not an accurate experience and how I’m too close to the process to see how taken advantage of I actually am.
Are we using a definition of exploitation that is broad enough to cover me and my relationship to my job? If the answer is “no”, I’ll be relieved.
Understand that, in the past, the answer to that question has usually been either “yes” or some amount of name-calling.Report
exploitation seems like an easier thing to identify with hindsight or alternatively looking at egregious examples than closer to the margin.Report
In my experience, the most violent arguments of this sort aren’t over the egregious examples but over the experiences of one of the people in the conversation.
“You’ve been brainwashed!” and that sort of thing.
Always said in anger and befuddlement that the brainwashed person doesn’t appreciate the help from the liberator/psychologist.Report
A couple of quick points about the “managed trade” status quo, fellas:
1) The economic consensus supports the idea that lowering tariffs and other barriers to trade is good regardless of any intervening factors. The Mankiw post I linked to does not include qualifiers like “except in cases where Congress inserts special interests carve-outs” or “except in cases where subsidies still exist.”
2) Over the past few days, several folks – including Erik – have told us that libertarianism and decentralization sound great in theory, but political reality demands fealty to the progressive coalition. I remain skeptical, but this logic applies doubly to free trade agreements: You’re not going to get tariffs lowered through democratically-elected bodies like Congress without special interests carve-outs. That’s just the reality of politics.Report
Nearly every time you refer to the economic consensus you have in mind here, it seems, you use clearly value-non-neutral words like “benefit” or “good,” (in the post, and then in this comment respectively). Whereas the AGW consensus to which you want that economic consensus to be given equal public deference is merely, by your own account (“human activity is changing the Earth’s climate”), a descriptive account attached to a causal hypothesis. There is just no way for normative views to be given equal deference to descriptive-causal claims, however. There is always the question of what is desirable, and always an element of judgement that must at least nominally be reserved to the observer whose potential deference we are positing.
A descriptive claim about free trade might be that it increases world product. But Jason Kuznicki has recently suggested that perhaps consuming less could lead to a better life for some. He certainly doesn’t see that as an argument against free trade, but someone else could. The point is that “benefit” and “good,” even if there would be near consensus about whether those descriptors apply to a given set of facts, are ultimately in the eye of the beholder — or at least must be presumptively subjects of debate, not of deference– and so there is just no way to demand deference to such claims.
This is really a rather simple semantic issue that you are skipping over, however, and I think your point could still rather clearly hold broadly speaking if you constructed the parallel appropriately. What I think has been found about trade is that it leads potentially to more efficient production by allowing demand to be filled by the product of others rather than just one’s own product (whether “one” means an individual or a country). [Substitute whatever description of the actual findings there that you prefer; I am no expert.]. Just don’t claim that the findings mean that the results of trade are good, beneficial, preferable, etc., (no matter how obvious you think that is) if you want to say that the findings should be given deference as objective findings of experts in a credible field of inquiry. You always have to give the observer space to do the value assessment himself, or you will fail to achieve the consensus you demand, as people will feel that you are telling them how to assess value and outcomes (which, again, is something you can do, but only subject to debate, not as a matter of deference). This is not to say that you can’t go ahead and make a normative argument about how one should assess the objective findings that you’ve gotten people to defer to. But that has to be external to the request for deference to expert opinion on the factual questions. People can of course choose to defer to the judgement of others on normative questions, but I don’t think think we can ever demand that they do.
If the normative implications of a set of empirical conclusions that are consensus in an empirical field are in fact so clear that no person of even minimally good judgement could fail to reach the same ones as you, then there is no reason to demand people defer to what is likely the normative consensus that follows from that empirical consensus; those who we have nay hope of reasoning with will reach that normative conclusion on their own. But if the normative conclusions to be drawn from a factual consensus are not that clear, then what business is it of anyone to demand deference to some normative conclusion? That’s just the kind of situation in which people are supposed to retain and exercise their own independent judgement.Report
What exactly do we mean by exploitative here? If we mean that we don’t want to employ people in conditions we ourselves wouldn’t tolerate, how do we reconcile the fact that the realistic alternative for them is still worse?Report
That assumes that belief in global warming is bullet-proof.
Consider how accurate:
1) The weather report on your local tv news is when it comes to predicting the weather on Fridays (regardless of what day of the week it might be);
2) The number of hurricanes and tropical storms forecast being right on target.
I doesn’t happen.
It doesn’t mean that they don’t know what they’re doing.
Projections based on models with known variables will always be a bit off.
Projections based on models with unknown variables will always be a bit more off than that. (and some things remain unknown for good reason, like saturation levels of various levels of the atmosphere for various substances)
You have to be able to understand the tool that they’re working with in order to assess weighting the data properly. There’s not even one standardized model– all of them are out. But when you see over-reliance on a tool well-known to exhibit severe limitations (and I include many IR devices here), you would do well to scrutinize the matter with a cautious eye.Report
As a model builder and a designer of expert systems, I can categorically state you’re dead wrong. A predictive model produces probabilities, not absolute outcomes. Maybe the rubes might be swayed by this Friday Forecast business, I am not.
The smokestacks and tailpipes are puffing out carbon dioxide and the tundra is now emitting prodigious amounts of methane. The carbon dioxide fraction is rising and it is acidifying the oceans. As the oceans near their carrying capacity, and they are for an absolute fact, we will soon enter a death spiral from which we cannot recover via any known strategy.Report
In some nations, wood is still a primary fuel, and this is more devastating to the environment than either the carbon dioxide or the methane.
But still, a trend is a trend. And I’ve looked at enough of those kinds of charts to know that they never travel in a straight line. Usually, they curve back in on themselves at some point.
As a builder of models, you have some way of dealing with those unknown variables.
I don’t. I just reduce them to knowns or widen the tolerance, or sometimes just try to bring those two into balance.
But if predictive models were ever to really achieve accuracy, I believe we would see them in sports betting first.Report
False. The long term trend for ocean acidification has been established and it’s trending worse than we ever supposed.
Bulletproof facts: as the ocean pH is changing, the shellfish populations are collapsing. Present tense. Beyond dispute.Report
Blaise, here’s something for you to ponder–for whatever it’s worth. The intensity of this debate is interesting–must it be one over another, or could there be core evidence supporting both positions? It seems impossible to even fathom that as a possibility but who knows. Forgive the long copy/paste–didn’t want to misrepresent any of the info contained.
Acid in the Oceans Fraud
The pH of the oceans is 8.1, which is alkaline, and there has been no measured acidification.
Scientists have no method available to survey ocean acidity, as Argo does for temperature, yet they recently claimed oceans are becoming more acidic. They measured acidity in a few estuaries to come up with that fraud.
Two billion years ago, there was a huge amount of carbon dioxide in the air and carbonate in the oceans. Since then, most of it disappeared. It was converted to calcium carbonate in the oceans and ultimately limestone. Now there is a shortage. The human addition is slightly rescuing life and the planet by increasing the CO2. For propagandists to claim humans are destroying life and the planet through CO2 couldn’t be a bigger fraud.
——————————————————————————–
The oceans have had almost four billion years to absorb carbon dioxide. Why are the oceans not acidic? Hasn’t there been enough time yet? There was five times as much CO2 in the air during dinosaur years as now. The oceans rapidly stabilize; and they stabilized at pH 8.1 due to the alkalinity of calcium and its buffering capacity.
——————————————————————————–
Fraudulent scientists use hydrochloric acid in laboratory tanks to test the effects of carbon dioxide on ocean biology due to increased acidity. CO2 is in equilibrium with carbonate, which improves marine growth and shell production, while HCl destroys the ability to metabolize carbonate. Example of HCl used in Fraudulent StudyReport
Have it your way, every fact to the contrary.Report
The basis for these statements is model simulations that include only physical processes in the control of pH and that are calibrated from a single year of data (3) rather than those that use direct empirical measurements of ocean pH through time. Little published empirical information exists on the dynamics of directly measured ocean pH (1, 11), and none is available at temperate latitudes, which harbor the world’s most productive fisheries.
It doesn’t separate atmospheric acidification from agricultural runoff.
I don’t dispute the validity of the findings, but these are early findings that require more study.
Significant, yes; determinate, no.Report
If an overwhelming number of trained specialists in a particular field agree on one issue, shouldn’t we just take their word for it? And if not, why not?
As a general guideline, yes, but always with suspicion. It’s reasonable to uphold consensus in a particular field as accurate. Indeed, we’d get very little done in society if we refused to take the word of people who should know what they’re talking about. However, consensus among experts can be transformed into a grand unquestionable orthodoxy, and it’s at this level that I urge caution and suspicion. Consensus is something arrived at through a process of group thought and consideration of evidence. It implies the existence of other views and dissent. As consensus does not equal truth, truth demands that others get a hearing and that our ears remain open to the voice of dissent. Of course, keeping an open ear doesn’t mean we refuse to act when consensus urges a course of action. Knowledge is never absolute. Prudence dictates that we act without perfect knowledge.Report
I am 100% down with this take.
Part of the problem is that this is not how Global Warming Credulists treat the issue of Global Climate Change.Report
Exactly right. Conformist orthodoxy is something that one must avoid at every turn. Whilst on balance I agree with the climate scientists I must say that a lot of the agreement with them would appear to stem from a desire by many of those nominally on the left to find an excuse to denigrate the efficient workings of the market. As such, one must be alert to the possibilty that the “consensus” position here is trying – though not deliberately – to concur with a longstanding belief-set as such an alliance would gain more traction for those theories than would otherwise be the case.Report
So let it be written, so let it be done, Kyle.Report
The above thread starting with BlaiseP, Heidegger, KYle and JB etc is smart stuff. Thanks H-man for your input. I’m learning while reading but the political aspects of the GW issue need discussed here…but thanks to all for some fine input, much appreciated.Report
> However, consensus among experts can be transformed
> into a grand unquestionable orthodoxy, and it’s at this
> level that I urge caution and suspicion.
Can you perhaps point to a case of this occurring since 1960? The last horribly wrong grand unquestionable orthodoxy I can think of is “lobotomy is a valid medical intervention for certain types of mental illness”, and even that was pretty controversial among experts, it was just implemented by policymakers beyond the consensus. And that went out in, what, 1955?
I’ll grant you that this has happened many times prior. It certainly will happen again someday, at some point.
In the scientific fields, it now takes a pretty huge body of evidence to convince anybody to use declarative statements in their papers (science reporting aside). It’s been this way since about 1970. I don’t know that “suspicion” is the correct term.
As I point out farther downthread: at the very least, can we all agree that when a consensus exists among a body of experts, that the burden of proof now shifts to the counter-claimant?Report
In the early 70’s, the consensus was that CFCs could not be harming the ozone layer because they are too heavy to get up that high in the atmosphere.
Even after it was proven exactly how CFCs were destroying ozone, the mechanism which brings them to that level was not determined for several years afterward.
But that’s one.
Give me a minute.Report
And who can forget Meryl Streep going nuts and proclaiming anyone who eats apples sprayed with Alar would die in 24 hours!! Naturally, millions of perfectly good apples were destroyed because of this lunacy. A terrible, terrible shame.Report
Alar is a carcinogen and was banned for that reason (though the ban was moot, since the manufacturer has already stopped selling if for food uses.) Afterward, the manufacturer paid some “research” groups to promote the story that the banning was purely a result of hysteria. Many people were taken in by this.Report
I don’t think that Meryl qualifies as an expert of any sort beyond acting. She’s got some chops there, though.Report
Will H– Who can forget Meryl Streep going nuts and testifying in front of Congress that children will die in 24 hrs if they eat any apples sprayed with Alar. Total, total total, B.S. The only people who died were people who didn’t eat fruits and vegetables treated with Alar–were talking severely malnourished men, women, and children in Third World countries.Report
How is meryl streep the same as a scientific consensus, let alone ano orthodoxy?Report
For some reason she was sitting in front of Congress reading off of a paper.
At least it wasn’t Bono.Report
At least the paper she was reading from wasn’t written by L. Ron Hubbard.Report
“Congressman, the earth still trembles from the damage done from the hydrogen bombs dropped on volcanoes 75 million years ago. We need to address this critical issue for The Children.”Report
Dammit Will H, Jaybird, and Pat—I should have learned my lesson a long time ago (don’t read anything from the League until after work)–Now I’m going to be laughing all day because of your comments!! L. Ron Hubbard, Bono, Chops.
It turns out Ms. Streep has a Ph. D. from the prestigious Oregon Institute of Science and Medicine. Besides chemistry, she also has degrees in Astrology, Palm Reading, and Alchemy. She has also demonstrated the unique ability to levitate herself approximately 15 inches above ground. Indeed, the babe’s got chops. Thanks for the replies–back soon.
p.s. I’m, embarrassed to ask this, but how can I italicize words? Have tried everything with no success. Thanks for any help.Report
@ Will
Was that really the consensus?
“CFCs could not be harming the ozone layer because they are too heavy to get up that high in the atmosphere.”
Or was it:
“CFC’s likely could not harm the ozone layer because they are too heavy to get up that high in the atmosphere.”
This is a reasonable example, but think about the process here.
* Someone invents X for a purpose.
* Someone points out that there might be deleterious effects of using X for this purpose.
* Someone points out that this effect is unlikely.
* The original designer wants some profit, so onward and upward!
Nobody actually checks to see if the unlikely effect actually occurs for a while.
And then, of course, someone points out that the unlikely effect is actually happening, but those people (who are profiting off the use of the CFCs) fight it because of reasons that have nothing to do with evidence or consensus and everything to do with retooling manufacturing plants. And most of the merry public doesn’t know or care about this audit battle.
This isn’t really a problem with consensus and/or experts. It’s a problem with audit (back to audit again!)
One of the really bad disconnects between the science community and the general public is that scientists do science because they like science, but we as a society actually *use the artifacts of science* for making stuff that improves GDP.
So when it turns out that one of those artifacts does something that is bad, we have a case of scientists doing science telling us that we have to stop using their artifact and thus spend money. It’s a battle of consensus.
The government is supposed to perform as a corrective body to fix these mis-alignments, but the government is us, and back up four paragraphs to “most of the public don’t care”.Report
Pat,
It’s not merely the “horribly wrong” orthodoxies that give me pause, but any orthodoxy that rests on the fact of consensus, that says x is undoubtedly true because the consensus supports x. So, for example, while I share the view that human behavior has caused changes to the climate, I get annoyed at attempts to treat the matter as if no reasonable person could think otherwise. I’m not a skeptic, but I’m less than certain of my knowledge in this department, especially as it’s based largely on consensus. Frankly, I don’t think any kind of knowledge can ever be absolutely certain, so my epistemology is one of hope (tempered with suspicion) rather than certainty.Report
The overwhelming majority of apocalyptic evangelicals think that the end times will happen within my lifetime.
I don’t believe them because I don’t believe in their methodologies and their past predictions have been wildly inaccurate.
I feel the same way about many economists.
Had there been a groundswell of economists predicting the current financial crisis I might have a better opinion of them.Report
What do you think of geologists? Because they can’t predict earthquakes either.Report
“As far as optimal mitigation strategies go, I waffle between a more hands-off, Manzian approach and a revenue-neutral carbon tax. I’m not sure how I feel about cap-and-trade.”
To continue the analogy, that’s how liberals feels about free trade. What is “free trade”? What resemblance does that have to actually existing “free trade”? Who benefits, etc?
Just as libertarians could accept AGW but oppose carbon taxes, so many liberals can accept the notion that free trade increases long-term prosperity but still be concerned about many of the policies that pass for “free trade” these days.
In the end, there’s always a gap between “is” and “ought,” fact and normative judgment.Report
Good post, Will. But economists do not all agree on the mechanics of free trade or how to best implement it or manage it on the back-end. Also, climate scientists may agree on AGW, but policy makers do not agree on a fix.Report
Good point. Keynesian ideas are far more popular in government policy circles than they are in economics departments.Report
To echo some of the other comments above, at issue isn’t whether, under the assumptions that economists go by, “free trade” is a good thing, it’s what policy a country ought to pursue now that economists have attained their consensus. I’m willing to accept that Anthropogenic Global Warning is happening, but accepting that doesn’t make it obvious (to me) what, exactly, the U.S. ought to do about it.
Along a similar vein, I’m willing the apparent consensus among economists that free trade is a good thing. But what are the best ways of creating attaining free(r) trade? It seems to me that trade can never completely free in the sense of there being absolutely no policies that would tend to favor homemade products over foreign-made ones, or foreign-made products over homemade ones. I also wonder whether a certain industry or set of industries are somehow essential to a country’s national interests that it may need to be protected, at least for a short time as an “infant industry.” Economists may have good answers to the concerns I raise, but I suspect that the answers are not part of the consensus behind the beneficence of free trade. (I stand to be corrected, however. It’s probably obvious to anyone reading that I am not an economist.)Report
“Despite being fairly conservative, I basically accept this logic.”
I understand why you accept the logic in both cases. But I also think the logic is essentially conservative.Report
And the logic of free trade is essentially liberal. Ironic, isn’t it?Report
I can’t tell if you’re being coy here, but if you’d like, we can go over the history of social sciences and the physical sciences if you want. I know of no one– literally no one– who would argue that on the level of basic epistemology we have similar access to consistent truth claims when we deal with social science as when we deal with the physical scientists. That’s not a knock on social sciences. I’m in the process of becoming a social scientist. But in all of the basic elements of philosophy of science, in terms of observational and categorical falsifiability, generalizability, and verification, economics is nothing like climatology. And you can see this in large part through the intermittent pangs of conscience from economists, such as following the financial crisis, where they wonder whether macro can classify as a social science at all.
That economics as a discipline failed to predict the financial crisis, if we really want to take your equivalence seriously, is like if astronomy had failed to identify a planet in between Earth and Mars.
Economics is not like climatology in the existence of large scale and demonstrable exceptions to the rule that render any version of that rule so broad and vague as to be non-falsifiable. You’ll note that you haven’t actually given us a rule here that you think should be “bullet-proof.” I’m guessing your claim is “freer trade, in terms of reduced tariffs, import/export taxes, and other barriers to the flow of commodities between nations tends to result in higher growth for all involved.” That “tends,” or any other qualifiers and weasel words that you’ll stick into your definition of the problem statement that you are defending but refusing to define, is nonscientific. Yet you’ve got to have that in there, because it is demonstrably untrue that every example of restrictions on free trade result in less growth. Even rabid partisans don’t dispute that under the right conditions, protectionist policies and infant industry regimes can thrive. This country might be the very best example of that, but there are plenty of others– British textiles, Korean electronics, Japanese cars. There are plenty of countries where the whole-hearted embrace of neoliberal macroeconomic policies have not resulted in anything like the improvements people have claimed. (Much of sub-Saharan Africa has literally had its macroeconomic policy dictated to it by the World Bank and IMF for decades.)
Your post confuses observational claims, experimental claims, predictive claims, and prescriptive claims.
“Free trade” itself is a term so nebulous, ill-defined, and idiosyncratic that it is nearly meaningless even in this context and would get laughed out of a physical sciences conference. Those economists who you claim are demonstrating consensus of course have vast and irresolvable differences. Krugman believes that he can support free trade while endorsing the large, significantly redistributive social welfare state of his dreams. Many of the people you are saying are in consensus with him would find such an idea ludicrous. Meanwhile, the supposedly free trade regime you are endorsing contains vast amounts of corruptions and impediments to what you think of as free trade. You can’t have true free trade with fiat currency. You can’t have true free trade with organizations like the Fed. You can’t have true free trade with the nation-state!
Incidentally, that’s not even to get to your contention that the consensus that exists about free trade, whatever that means, is equal to that in climatology about AGW. I don’t think that’s close to true, but regardless, it would take more than the word of Greg Mankiw, who is about as far from a neutral observer as you can imagine.
You are not, I take it, here endorsing some sort of radical anarchist state of free exchange of actual commodities. So you are asking for a mixed economy, just like me, Erik, David Hirshey, the Koch brothers, Slavoj Zizek, Grover Norquist, David Broder, and everyone in between. The differences among the economists that you are saying support you are massive, contentious, and show no sign of stopping. You can’t get past these problems by waving towards a consensus about a vague term like free trade. There’s no easy way out. Sorry. You’ve got to deal with people who disagree with you and have every reason to disagree with you.Report
You say that economics are not the same as science due to a lack of falsifiability, but you must bear in mind that the key point about the economics of free trade is that it has enough support amongst professionals in the subject to be in the same ballpark as what you rather naively think of as scientific “truth”. And you denigrate Prof Mankiw, but he is no more wrong about this issue than you might be.Report
I don’t denigrate Greg Mankiw, I identify him as someone who, like me, has a particular viewpoint that makes him a poor reference for supposedly objective information. The idea that our pragmatic certainty on the economics of free trade is of similar strength to our pragmatic certainty on the consistent, observable, testable, and falsifiable nature of carbon released into the atmosphere to retain solar heat is, frankly, farcical.Report
But everyone has a subjective viewpoint! As I was trying to say – possibly inartfully – even the climate scientists have one, it’s just easier to dress up in epistemilogical bullshit than that of social science.Report
The difference is that one group hypothesizes and then predicts (accurately). The other merely describes.Report
See, on the big think level, I’m with you. (I am certainly not a positivist.) On the policy level, I break the other way. It would just get real navel-gazey real fast in here if I went into it in depth.Report
Incidentally, there is a famous joke about the tendency of economists to consider their chosen field akin to the natural sciences:
A physicist, a chemist, and an economist are stuck starving on a desert island. A can of beans washes up on the beach.
The physicist devises a mechanism using twigs and rocks to attempt to force open the can, but after several hours with no results, during which the economist sits and smugly smiles, the physicist gives up.
The chemist attempts to extract some sort of substance from plants on the island to melt the can. The economist continues sitting and smiling arrogantly as the chemist also fails in his efforts.
“What?” the physicist and chemist say, “do you have a better plan?”
The economist stands and walks proudly towards the can on the beach: “Let’s assume we have a can-opener.”Report
I think Will was asking for the kind of answer you just gave with the question, “Why don’t we accord the same level of deference to economists?”
Also, from my interpretation of the question “Shouldn’t the pro-free trade consensus within the field of economics be as bullet-proof as belief in global warming?” I don’t think Will was talking about anything more than the idea that voluntary exchange makes each participant better off. Without touching on the practical difficulties of implementing a regime based solely on voluntary exchange, would you say that you disagree with that central contention from which the idea of free trade is extrapolated?Report
I think the idea of what voluntary exchange means is so vague and subject to context that the statement is useless. Additionally, I don’t think that the prerequisites for truly voluntary exchange can exist on Planet Earth; the material realities of being a human being prevent true voluntary exchange, and perfect knowledge is both necessary for a true voluntary exchange and unachievable in real life.Report
I don’t think that’s close to true, but regardless, it would take more than the word of Greg Mankiw, who is about as far from a neutral observer as you can imagine.
The sentence prior to the sentence referencing Mankiw references Krugman. Whether Krugman is a neutral observer is probably a post in itself but I think it’s safe to say that the criticism that Will’s take is limited to the word of Greg Mankiw is one that overlooks that his take isn’t limited to the word of Greg Mankiw.Report
Fair point, and you’re right.Report
Well put, Freddie.Report
Freddie’s response is a good one, and I admit I’m eliding the differences between the social sciences and the ‘hard’, physical sciences.
But consider the comparison: Economics has failed at many things, but the consensus belief among economists about lowering barriers to international exchange (and yes, that’s what we’re referring to here when we use “free trade” as shorthand) has existed since David Ricardo. That strikes me as nearly as “bullet-proof” as climatological projections about a vast, complex ecosystem that extend decades or even centuries into the future. (Not to mention the fact that climatologists have had their own high-profile muck-ups)
A couple of other points:
1) The Mankiw link refers to a survey of economists’ views on free trade. Quibble with his politics if you must, but we’re talking about an entire discipline here, not Mankiw.
2) In this context, free trade narrowly refers to the idea that lowering tariffs and other barriers to international exchange is a good idea. I probably should have been clearer about this in my original post, but that’s what we’re talking about. I don’t think this concept is very nebulous, although plenty of intervening factors can mitigate or amplify the benefits of lowering trade barriers.Report
Also, it’s not entirely fair to say that economists didn’t foresee the latest financial crisis. I don’t think that economists have the same degree of consensus about many topics that other social sciences do, but I’m pretty sure there were plenty of economists who saw this sucker coming.
I mean, it’s not exactly rocket science to look at a market exceeding all bounds of historical behavior and predict that there’s a bubble there.Report
A consensus that a policy prescription is a good idea just can’t ever be given equal deference to a consensus about the brute fact of a process that is underway and its cause. People will always reserve judgement about the normative prescription more than the factual description, the expert consensi for each being approximately equal, and should, because much depends on where one sits for the former, whereas the latter is either true or not. So if we take the extent of the consensus among economists for a prescriptive free trade policy as being roughly equal to that of the consensus among climatologists that AGW is the most evidentially-supported descriptive and causal hypothesis for trends in our atmosphere that we have (and I take no position on whether that rough equivalence is in fact what exists), then, no, “we,” the lay public, should not give equal deference to each consensus. As a matter of course, we should reserve greater skepticism for prescriptive claims. Beccase we’re being told to actually do something.Report
Free trade is a fascist plot to impose fundamentalist Christian law on the country.
Closer enough?Report
Instead of “Christian”, you could have used the shorter term “WEC”.
It would have driven the point home a bit harder.Report
Wild-Eyed Christian?>Report
I think it means White Evangelical Christian.Report
I’d never heard that one. Thanks.Report
It’s not mine, it’s actually Matoko_Chan’s.
I thought it fit pretty well within the whole “fascist plot to impose fundamentalist Christian law” motif.Report
Matoko Chan…yes, I miss her, though I was a White Sepulcher I was her White Sepulcher. I want a worldwide Christian/Catholic parish.Report
I’m no expert on the economy, but I don’t think comparing a scientific understanding of what has, is, or will happen to an economic theory of what should be is apt. Either human activity did or did not, is or is not, will or will not impact the climate (obviously there are degrees of severity of an inability); acknowledging the truth (whatever it may be) is the right thing to do. To embrace lies, nontruth, or false information is just silly. For obvious reason.
Now, to the economy, some may argue that there is ample evidence to show that free trade is the ideal economic approach in terms of strengthening an economy. Okay. If the research shows that, I am willing to accept it as fact. BUT, that is not the only consideration here. There are ethical issues, moral issues, legal/constitutional issues (in the US, at least), that must also be of consideration. Does any of this mean that the economists are wrong? No. It just might be the approach advocated by their findings, which seems to go hand-in-hand with the findings themselves, is not ideal for other, non-economic reasons.
If the scientific opinion of global warming came inherently with a solution for it, there would be a lot more legitimate area for disagreement.Report
> It just might be the approach advocated by their findings,
> which seems to go hand-in-hand with the findings
> themselves, is not ideal for other, non-economic reasons.
But then shouldn’t the burden of actual proof shift to the new set of claimants? I mean, if we all agree that water is wet and will cool us down on a hot day, but someone says we shouldn’t jump in the pool because there might be sharks in there, shouldn’t they be the ones to now carry the duty of showing *why* what they believe is important?Report
Pat-
That is a fair argument to make. And I think many people have done just that in opposition to economists’ arguments in favor of free trade. This post seems to argue that we should dismiss such counter-arguments if they do not come from economists themselves.
Think of it this way:
I am 85-years-old and on my death bed. A doctor, who would rightfully be presumed to be the person most qualified to make determinations about health and medicine, says my life can be saved with treatment A. My family accepts this as medical fact. They do not doubt that treatment A will keep me alive. But treatment A costs $1,000,000 and will require regular care from family and friends. My family is not wealthy and all of my family and friends have jobs, family, and friends of their own. If my family (myself included) decided to forgo treatment because it would bankrupt the family and put undue burdens upon my friends and family, would we be “wrong” about this? Should we simply submit to the doctor’s prescribed course of action? Surely there are considerations of what ought to be done outside of the doctor’s perspective, right?Report
> Should we simply submit to the doctor’s prescribed
> course of action?
No.
The doctor’s prescribed course of action is: “If you want to live, do X.” The practical reality of X is that it comes with Y.
Your judgment is that Y is too expensive. The additional benefit you get off of living for some indeterminate amount of time isn’t worth the burden to the family. So you decide not to submit to the doctor’s prescribed action. Fair enough, on its face.
However, if we’re being hard-core pragmatists and realists here, you don’t get to say, “Well, I’ll just take crystal healing because this non-doctor is going to charge me Z and I can afford Z”. At least, not and claim that you’re doing anything based in rational empiricism 🙂
Of course, individual analogies always break down when you’re talking about groups, and this is why the doctor analogy is bad. A better one with AGW would be:
We all work and live in a factory. This factory produces all the things that we enjoy, we go nowhere else (in fact, we can’t, the doors are locked). And we actually like all the stuff we have.
And then one day someone says that the one piece of primal machinery upon which all of the other pieces depend is broken, and is filling the factory up with gases that might make it so that most of us can’t live inside the factory any more. So we either need to fix that piece of primal machinery, replace it, or turn it off, or accept the fact that most of us are going to die, because the doors are all locked and we’re not getting out.
And now we have three coalitions inside the factory. One coalition is of almost all the machine-designers, who are saying yes this is a really big problem. Most of them think they can build another machine that won’t have the same problem, but it’s going to require all the machines in the factory to work on that for a while, so very few things we like are going to get made while that project is going on. Some of the outliers in this group insist that it may be possible to re-engineer the primal machine, but they’re not really clear on where they’re going to put the gas that they collect yet.
The next coalition is of the group who decide who gets the first run off of each machine, and divvy it up among everyone else. They have insisted for quite some time that the primal machine isn’t broken, but now are starting to say that even if it is broken, it’s not broken as badly as the machine-designers insist, and well everyone likes the stuff they divvy up off the production line, right? So don’t change anything. They’ve found a couple machine-designers out of thousands who insist that the primal machine isn’t broken, even though they don’t work on the primal machine and many of them don’t seem to even know how it works.
Finally, you have a few normal folk who have always longed to take almost all the machines out of the factory to make more room for a dance floor, and they’re all shouting that the most important thing to do now is just turn all the machines off, even the ones that make all the food, because it’s better to just have a big party even if we all starve to death in six months.
Now, in the doctor analogy you get to decide what happens, because it’s your life and you get to decide what it’s worth to you and your family. I’m not so sure you get to decide what everyone’s life is worth, though.Report
You are aware that Freeman Dyson, while quite authoritative in the field of quantum field theory, is not a climatologist? Given this, I wouldn’t refer to him as a “dissenter” in the field of “climatology”.Report
Heh. Old Freeman Dyson once said it’s better to be wrong than to be vague.
Economists of trade ought to be whetted on the wheel of Ackshul Trade. You’d be surprised at the counter-intuitive monkeyshines going on in actual trade and even historical trade. The Louisiana plantation owners who shipped raw sugar to Boston for refining would re-import that sugar for their own tables: it was a status symbol. Why didn’t they refine all their sugar in Louisiana? I don’t know. They just didn’t.Report
What about the weather channel guy?Report
Yeah, I probably should have linked to Patrick Michaels or someone else within the discipline.Report
And thus we start again along the chain of No True Scot…Report
If their conclusions are so complex their conclusions can only be accepted on faith, economists and geophysicists ought to make their cases more clearly. Two important questions seem begged in the process of laying out this article: the first is Manzi’s article:
Climate models are, at a minimum, non-validated. Predicting the cost impact of various potential warming scenarios requires us to concatenate these climate predictions with economic models that predict the cost impact of these predicted temperature changes on the economy in the 21st, 22nd, and 23rd centuries. It is hubris to imagine that these can guarantee accuracy, and impossible to validate such a claim in any event..
The acidification of the oceans is now fully validated.
The second, and far more perverse begged question is this: Shouldn’t the pro-free trade consensus within the field of economics be as bullet-proof as belief in global warming? Free trade is a fluffy, feel-good phrase, a mendacious and unscientific term which implies some paradise awaits those who do away with every point of friction in the system. Trade cannot be free. Stop using the phrase, it’s absolute nonsense. By definition: every working market requires regulation and contract enforcement or it will shut down.Report
“Free trade is a fluffy, feel-good phrase, a mendacious and unscientific term which implies some paradise awaits those who do away with every point of friction in the system. Trade cannot be free. Stop using the phrase, it’s absolute nonsense.”
I disagree. Although imprecise, we have indices which can shed light on relative degrees of free trade. At the micro level, if you and I are to exchange any good or service in exchange for another good or service, we can subjectively gauge whether or not that exchange was free. For example, I freely type these words in response to words which I assume you freely typed. In the sense that I don’t really know whether or not someone held a gun to your head and made you type that comment or in the sense that I don’t really know whether or not my words are a direct, deterministic function of my social conditioning or other forms of propaganda, or in the sense that my words are only based on the experiences of my senses, we cannot really say that your comment and my response truly represent free exchange, but it seems there is some usefulness in gauging the relative freedom of means of exchange. I think you and I can both agree that our exchanging of this information is uncoerced, whereas Internet users in China are denied the gains in utility that we both hopefully get from this thread.
“By definition: every working market requires regulation and contract enforcement or it will shut down.”
That’s true, and normatively, don’t you think those contracts should be signed or assumed on a voluntary basis? Shouldn’t the role of the state be to set up a system that prevents involuntary obligation wherever possible?Report
Freedom in trade is absolute bunk: confine your argument to contracts and payments or I cannot take anything you say about this topic seriously. If I take the Wimpy Approach to Free Trade, making a promise to pay you tomorrow for a hamburger today, you might insist on me signing a promissory note for that hamburger and take me to court on Wednesday if I do not pay.
There is no sadder sight than the Outtrade Window, where the schmucks line up with a Sell ticket and no corresponding Buy. When a trader loses his shirt, he takes off his badge and leaves it at the front desk: we know he’s lost his shirt because his trading account has to clear through the Federal Reserve.
Here’s where all that Free Trade baloney collapses in a stinking heap: a contract is only as good as the ability of a third party to enforce it.Report
I don’t think anyone will disagree with you there, but the entire premise behind contracts assumes voluntary participation.Report
What does Voluntary Behaviour have to do with Free Trade? Those who trade on margin must pay up or they are forced to exit their positions. The entire philosophical position of the Free Traders is absolute baloney from stem to stern: Trade is nothing but enforceable contracts.Report
enforceable contracts that both parties enter into willinglyReport
Well sure. So stipulated. Forcing someone to “signs ze papers” (old Cheech and Chong routine: ‘vy can’t you signs ze papers? Because you have broken my hands!’)
Let’s back up a step here and find territory we share in common. What you’d call un-free trade I’d call Market Distortions, such as tariffs, subsidies, monopolies, white collar crime and bad governance.
I’d like to throw in wage slavery, evictions of native peoples for purposes of clear-cutting, mining and the like, and other human rights abuses. I won’t, because markets are amoral, not immoral. That falls under the Bad Governance provisions: a government ought to operate on behalf of its people. All these condescending ninnies who clasp their hands under their chins and moan about the plight of the Illegal Aliens are horribly misguided: I want our borders enforced because those illegal aliens are routinely abused and extorted and prostituted and made to carry drugs into this country, not by Americans, but by exploiters within their own cultures. I digress, but not far, for it goes to your point about freedom and will: the illegal alien can be exploited because he won’t call the cops.
The reason I get my back up over Free Trade is this: trade has to be regulated or markets can’t operate. As I’ve said before, the need for regulation varies with risk. These soi-disant Free Trade advocates wrongly define the problem: all they’ve sought, historically, has been less regulation for their own little sectors of the market.Report
Also, let’s not forget that “free trade” is defined dialectically in opposition to “protectionism”.Report
It was never intended as an absolute.Report
If it’s not to be taken as an Absolute, then let’s make this much clear: markets require regulation. The more risk is involved, the more regulation is required. Anyone who advocates for Free Trade, knowing these things are true, ought to prune away any references to Freedom, for contracts are binding and the best ones have no permissible degrees of freedom.Report
Free trade refers to the absence of policy instruments such as tariffs to discourage imports, subsidies to encourage exports and other instruments designed with similar intent. Basically, if a country treats foreign goods the same way it treats domestic ones it is practicing free trade.
This is a fairly narrow concept.Report
This criticism is usually given wholesale to Libertarianism as well.
If there is a continuum between points on the X and Y axis, saying that we need to move on this vector is often rejoined by arguments pointing out that getting to a particular asymptote is impossible to achieve.
This is usually a good way to change the subject to asymptotes rather than whether, on the continuum between these points (which is where we are, and where others are, and it’s possible to rank them for the most part) whether we ought to move in this or in that direction.
(And, of course, there are more dimensions than just the two but, generally, two dimensions can give a fairly good, if shallow, representation of reality)Report
A question for Will (because I, like Freddie, think you’re being coy here):
Is anything revealed by comparing
If an overwhelming number of trained specialists in a particular field agree on one issue, shouldn’t we just take their word for it?
to
If an overwhelming number of trained experts on Christian theology agree that accepting Jesus as your personal savior gets you into the kingdom of heaven, shouldn’t we just take their word for it?
?Report
Put three theologians in the same room and wait for them to agree on anything, you’ll be taking one of them out on a stretcher within the hour.Report
If an overwhelming number of trained experts on Christian theology agree that accepting Jesus as your personal savior gets you into the kingdom of heaven, shouldn’t we just take their word for it?
The people who didn’t get into the kingdom of heaven just didn’t apply the “accepting Jesus as personal savior” theories correctly. Some might say that it’s never been properly applied at all.Report
The Kingdom of heaven cannot fail, it can only be failed.Report
Awesome.Report
Wow…double awesome!Report
I’m perfectly happy to accept theologians conclusions as being correct with regard to theology. I just happen to think the object of study in that case is non-existent, but its perfectly possible to make correct statements about imaginary systems.
The things about which economists agree are actually rather similar. Economics is formalized and precise enough, and the empirical evidence is so ambiguous, that the statements economists make – eg. free trade benefits all affected parties – can’t really be contested. The question is whether the thing that economists study has any relevance to anything real. I think it does, but it is a legitimate question.Report
Economics is formalized and precise enough, and the empirical evidence is so ambiguous, that the statements economists make – eg. free trade benefits all affected parties – can’t really be contested.
I rather like this formulation. It falls under the ‘a little knowledge can be a dangerous thing’ category.
The question is whether the thing that economists study has any relevance to anything real. I think it does, but it is a legitimate question.
Well, IANAE, but the premises upon which serious economic theory is built would support the view that it doesn’t have much relevance in terms of predictive models (other than entirely obvious, purely descriptive ones based on induction). But I can also see the intellectual allure of trying to understand complex systems and determine enough constancy and recurrence in the empirical data to formulate interesting predictive theories. Chaos theory seems relevant here, and sensitive dependence.
I always wonder the extent to which academic economists believe that their work even ought to apply to the real world. I mean, the initial conditions for theorizing are so abstract, and ideal, that the lack of relevance to anything real must be completely understood and accepted.Report
I don’t think anyone seriously claims that economics is much use as a predictive science. By and large the inputs to the equations of economic models are unknowable, or if they are knowable the real-world measurements have huge margins for error that makes feeding them into the equations basically useless. But this is true for several hard sciences too – climatology, population biology, geology, and so on.
Nonetheless – as with those hard sciences – economists would argue that economics is useful anyway, in two respects. Firstly, again, as with those hard sciences, it tells us which kinds of phenomena we should expect to be correlated. For example we would expect countries where trade is free-er to be richer than similar countries were it is less free. We do in fact find this, but of course there are very many additional confounding variables. The best we can do to confirm a theory is to accumulate this kind of evidence and account for the cases where the theory doesn’t work out with some kind of ad-hoc hypothesis about the confounding variables. This isn’t so different from some physical sciences, as I said.
Its the second respect where economics is different, as are most social sciences. The physical sciences are based on theories about how physical systems act, and we then use them to draw conclusions about how to manipulate those systems. The social sciences are based on theories about how people behave, which we then use to draw conclusions about how to manipulate people’s behaviour. There’s obviously scope for economic theories to be self-inconsistent by telling people to behave in way’s we’ve been assuming they wouldn’t. Which is problematic, obviously. Economists are aware of this problem and the recent fashion is to assume that people are basically always right on average. All recent economic theories assume that everyone in the economy being modeled by the theory understands the implications of the theory. This is obviously rather limiting since most people don’t have PhDs in economics and we can’t model systems made up of people like that … I don’t think this point is terribly relevant to trade theory but I think its pretty interesting, myself.Report
I believe that technical analysis is indeed a study of economics, and that its value is mainly in its predictive function.Report
Technical analysis?Report
Oh, you mean charting? It makes trying to predict recessions look like newtonian mechanics, and astrology look like a respectable scientific discipline.Report
Still, it’s really all about entrance/exit strategies.
More than any other single thing, those charts are what determine allocation of capital throughout industries, throughout the economy.
I would say that is a significant function.Report
Yeah, pretty much. You’re better off using haruspicy than technical analysis. At least you’ll get dinner afterward.Report
Well, I just read a very interesting article regarding the global climate change hysteria– these atmospheric scientists actually say there is a shortage of CO2 in our atmosphere. That’s correct. The current concentration level of CO2 in our atmosphere is approximately 390 ppm (parts per million) which by any standard measurement is quite low. In the past 500,000,000 years or so, the earth’s average concentration of CO2 in the atmosphere was in 1500 ppm range which was a much healthier level for plants and wildlife. (Greenland?) There exists not one peer reviewed study that can link a causal relationship between the levels of CO2 in the atmosphere and global warming. It’s just not there. Hey, even the UN agrees with this!
UN IPCC AR4 WG1 report states: “Water vapour is the most abundant and important greenhouse gas in the atmosphere. However, human activities have only a small direct influence on the amount of atmospheric water vapour.”
And this:
“Human-caused CO2 from all sources contributes on average only 0.117 % of the total greenhouse warming effect. Natural water vapor and clouds are responsible for about 94% of the greenhouse warming effect. (The amount of CO2 in air and the amount of water vapour /clouds in air varies with temperature, altitude and other factors.) Water vapour and CO2 absorb infrared radiation (heat) from the sun and emit infrared radiation in the atmosphere and into space. But CO2 is a trace gas in the atmosphere; the concentration of CO2 in air is far too low to cause significant global warming.”
So why do so many lie? Simple. $$$$$$$$$$$$$$$$$$$$
Given these startling new statistics, the Obama Administration is currently considering making it mandatory regardless of where you live, to run air conditioners 24 hours a day and 365 days a year. (Naturally, big government will be providing air conditioners for every household.) Also under consideration, making it illegal to operate any vehicle (even ambulances and police cars) that gets more than 5 miles to a gallon. I don’t know about you, but I’m off to Home Depot to buy 6 air conditioners–and I live in Michigan!Report
human activities have only a small direct influence on the amount of atmospheric water vapour.
Do you have any studies available that would indicate the climate change potential for all the pissing in the wind done by the UN?Report
Ha ha. Oh God, Will H, that is funny. That’s pretty desparate on my part to EVER use the UN as a source of anything. I think the UN has caused , many, many more deaths that it has saved.Report
This is just unscientific hand waving. You might strengthen your argument with a few linkie-winkies, you know, to facts. I put them up all the time.
Look, CO2 -> Global Warming isn’t the problem right now. Why? Because the ocean is soaking up most of that CO2. The earth’s oceans have a remarkable ability to handle CO2: they handle volcanic eruptions with huge phytoplankton blooms. The shellfish make shells, they sink to the floor of the ocean and become limestone.
While the oceans are socking it away, we can look at the land and say, with considerable validity, AGW hasn’t produced the predicted dystopia. Now there are problems we can see, acifidication in freshwater lakes and streams, but the guys up in tourist country dump limestone in their lakes to buffer the water so the tourists can catch a few walleyes.
But once the ocean has reached its carrying capacity, there won’t be anywhere for the CO2 to go. That’s when the doo-doo will hit the whirling blades of fate.Report
Wow, that’s a rather ginormous begging the question there, dude.Report
What question was being begged?Report
> If an overwhelming number of trained experts on
> Christian theology agree that accepting Jesus as
> your personal savior gets you into the kingdom
> of heaven, shouldn’t we just take their word for it?
Yes, we should take their word for it. According to Christian theology, accepting Jesus as your personal savior gets you into the kingdom of heaven.
This tells us nothing about whether or not “Christian” is the correct theology (or even if there is a “correct” theology), or anything about the existence of Jesus or heaven.Report
This tells us nothing about whether or not “Christian” is the correct theology (or even if there is a “correct” theology), or anything about the existence of Jesus or heaven.
I agree. That was the point of the analogy.Report
This is silly. Climate change is an actual measurable thing, and the causes can be determined. Climate scientists are not, strictly speaking, telling us what to do, they’re telling us what is happening, and what will continue to happen if we do certain things.
Now, ‘not attempting to walk off the top of a ten story building’ is an obvious plan of action when confronted with the theory of gravity, and likewise ‘reducing CO2’ is an obvious plan of action when confronted with the theory of climate change, but neither of those actions _are_ part of the theory….the theory just says what will happen if you do them, it’s silent on if you _should_ or not.
Free trade, OTOH, is a _policy_. It is a plan of action.
But let’s treat it like a science. In fact, let’s treat it like climatology, which economics actually shares many resemblances with.They’re both the result of a bunch of tiny interactions, so they’re a statistical science, there are no control groups possible because experiments can’t be ‘made’, they just happen, the entire world is involved to some extent…they’re actually pretty close.
Do, does ‘free trade’ make any predictions? Where are you even measuring for the results?
Wait, back up. First, what is ‘free trade’, anyway? How d you measure how much ‘freetradey’ something is? As others have pointed out, there appear to be dozens of classes restriction on the market already.
_Economics_ may be a science. Free trade is a specific policy, it cannot have ‘consensus’, as policies are not part of science. What _could_ have consensus is that ‘free trade policies result in more X’, where X is some obviously good thing…but I’ve yet to hear even what that would be, and I would probably disagree that more X is always automatically good.Report
Here’s Krugman.
http://www.amazon.com/Pop-Internationalism-Paul-Krugman/dp/0262611333
If you want to call him a hack whose words you wouldn’t believe if he said that the sun would rise tomorrow, that’s an option explored by many as well.Report
Hey, I’m actually mostly with Paul Krugman. Krugman at least realizes that importing is only a good idea when we’re also _exporting_. I.e., ‘free trade’ has to be _trade_, an actual exchange of goods.
However, he doesn’t seem to have any logical way for us to actually start producing more things to trade, nor does he admit that moving production _there_ that we used to do _here_ is not, in any way, better for us.
I.e., he seems to grasp the actual logic of the situation, but then doesn’t seem to come to any actual conclusion. He just seems to shrug and say ‘And that’s how it is’. Um, how about some policy ideas so that we _don’t_ have a trade imbalance?
If the stuff coming needs to equal the stuff going out, and _right now_ more stuff is coming in than going out, should we not then make policies to have _less_ stuff coming in and _more_ stuff going out? Which would be the _opposite_ of ‘free trade’ that he seems to think is so awesome?
OTOH, I could probably respond better to an actual article by him as opposed to links to a book I don’t have, thus forcing me to remember what he generally talks about when I do read him.Report
If only the US were the largest manufacturing economy in the world! then maybe we’d know what to do!
http://mjperry.blogspot.com/2011/02/made-in-usa.html
Actually, what I read from Krugman (not as much as I used to), is that he believes the free-trade mantra on it’s own full-stop. He also believes it’s benefits accrue unevenly and unfairly, so he supports broad social services and progressive taxation to ameliorate the unfair negative effects. That’s a pretty different view than what you’re saying.Report
Did you actually _look_ at that chart? It’s not per-capita. It’s totally worthless.
Please notice where Japan and Germany and the UK are, and then remember that they have just a fraction of US population.
And then remember that China is something like 90% vast stretches of small villages interspersing rice fields, and the actual manufacturing base is maybe 25% of the population.
| Actually, what I read from Krugman (not as much as I used to), is that he believes the free-trade mantra on it’s own full-stop. He also believes it’s benefits accrue unevenly and unfairly, so he supports broad social services and progressive taxation to ameliorate the unfair negative effects. That’s a pretty different view than what you’re saying.
Uh, the second part of that doesn’t really have anything to do with the first. I’m glad he wants to _fix_ the problems that he, himself, wants to cause, but that doesn’t really change anything I said about him.
And that’s utterly unrelated to the actual issue in what he proposes, in that he seems to understand that trade is a two way street, and that we are currently going on only one way…and…um…something something something, free market with a safety net, blah blah.Report
Germany, Japan and the UK are all roughly the same fraction of US manufacturing output as their populations are fractions of US population. If anything the UK and Japan are a little on the low side.Report
I was just pointing to that as to the ‘we make more than anyone else in the world’ claim, which was utter nonsense. (Especially as Europe turns into the EU, which actually _does_ make more than the US in total.)
And all those countries, and the US, while still barely managing to go up per-capita, have managed to go up by less than they used to. Growth is tapering off. We slowed and stopped growing, and in the modern world where we’re constantly reducing the number of workers, slowed production growth means negative employment growth.
And I’m not counting the recession there, I mean before that.
Meanwhile, China growth is skyrocketing. It’s still _nowhere_ close per-capita, but, as I pointed out, a huge section of China is utterly unrelated to any sort of industrial concern at all, and doesn’t really participate in a ‘market’ in any sense, they’re farmers who work in the shared-rice paddy and are maybe lucky to actually have electricity, which they do not pay for, because they literally do not have money. China’s like what happens if you take modern Michigan and attach it to Medieval Europe….yeah, the per capita production sucks, but only a fraction of the population are even trying to ‘produce’ anything at all. And ‘Michigan’ keeps expanding into Europe.
China is growing by converting _to_ a first word country, and it has a _hell_ of a lot of extra population to convert. (Which is why the recession hasn’t much hurt it.) And because it has such top-down control, it’s managing to actually do it in a slow and sane manner, instead of total chaos. (Like India’s doing, rather poorly.)
Great for them. Rather sucky for the rest of the world.Report
There’s a theory afoot I rather like. It’s not mine, but I’m not sure who to cite.
There are three sorts of economies: Sellers, Makers and Thinkers. Sellers are at the bottom of the totem pole, they sell raw goods: timber, ore and the like.
The Seller wants to become a Maker. The maker can do some value-add, turning that timber into chairs and bauxite into aluminum sheet. This he does by purchasing technology from the Thinker.
The Thinker stands in a precarious position atop the economic hill. He survives by technology transfer. The Maker wants to be a Thinker. He does so by making the technology the Thinker thought up. Unless the Thinker invents more things the Sellers and Makers will buy, he’s in serious trouble. The Thinker can’t just go back to Maker status, he already farmed out his Making and will not get it back.Report
The graph two posts up indicates that this little story is completely irrelevant to the world we actually live in, however.Report
Says you. China is in Maker mode just now. Not Thinker Mode. If their “Made in China” label is to mean anything, it means they’re making stuff. Not inventing stuff, which is where you get the big markup.Report
Let’s put it this way, you don’t see big Chinese software shops churning out SAP modules. That would be India, which chose the Thinker route, and that’s why India is going to win out in the long haul. Poor ol’ China is going to turn into one gigantic low-margin sweatshop and as inflation hits, and it will, what with the undervalued renminbi, their much-vaunted economic engine is going to burst into flames, because there’s no oil in the crankcase. Whole towns, dedicated to one mundane task, will erupt and China will collapse in the greatest economic implosion in the history of the world. Before all is said and done, there will be corpses hanging from lamp posts.
My predictions have an unnatural tendency to come true. As early as 1983 I predicted the collapse of the Soviet Union based solely on the tales I was told by the defectors I processed through Coburg. China, like the Ottoman Empire of old, is trying to reform from the top down and it will never work. Their economy is white hot, they’ve got millions of undocumented workers flooding in from the countryside, the Hungry Ghosts, filling the slums of the cities. Their kids don’t go to school, they’re exploited by sinister ministers who won’t pay their wages and there’s no recourse, China is stamping out hundreds of such fires every year and it’s getting worse every month.
Don’t kid yourself, Simon. I live in the real world, on top of the Thinker stack. I see who’s entering the upper echelons of society and who’s not. I manage a software team in Pune, India. I’ve been managing such teams since 1999, both here and in India. When I manage a software team in China, I might take your argument a little more seriously.Report
That wasn’t my point. My point was that the US quite clearly still makes stuff. More stuff than ever, in fact. So your assertion that the Thinker already farmed out his Making is not true.Report
C’mon, get real.Report
“The US makes lots of stuff” and “The US uses less people to make stuff” are not mutually incompatible statements.Report
Erm, does that mean my story isn’t Completely Irrelevant to the World We Actually Live in? We are not going back to the days of some semi-educated jamoke putting a nut on a bolt in Henry Ford’s factory. That bolt is put on with a robotic torque wrench, usually all six bolts per wheel, all at once.Report
And fwiw, the USA is all three areas. We’re a Seller, insofar as we grow wheat and corn and the like, and that’s a large sector of our economy. We’re a Maker, as you point out, though most of the low-margin manual labor intensive jobs have gone overseas. And to a large extent, we’re losing our Thinker supremacy as other countries come on line with their own technology.Report
My most important disagreement with all of that is the very last sentence. You’re looking at a rapidly developing country that’s pulling millions, and in the future billions, of people out of the grinding poverty of subsistence farming by making stuff the rest of the world wants to buy, and you think that’s a bad thing. I think its awesome. In both senses of the word.
Obviously you think its a good thing for the Chinese, but why do you think its a bad thing for us?Report
Seconded. How can this possibly be Sucky for Us? Enormous new markets are being created as China emerges from a cripplingly stupid and cruel period of misgovernance and massacre.
This is great for us. By my estimation, the rapprochement between China and the USA has forestalled another world war. We are so closely bound together, economically, we wouldn’t dare step on each others’ toes. This doesn’t mean China isn’t in big trouble, it is, and I’ve explained why upstream.
And look at how well America’s doing in China. GM is selling more cars in China than the USA. American products have the cachet of quality. Thank God the Chinese are doing as well as they are, and I hope they do even better. It can be nothing but good for everyone to see the world’s most populous country finally come into its own. Hell, if it wasn’t for China buying our debt, we’d be like Italy by now.Report
The answer is simple. The expert consensus regarding ‘Free Trade’ is given different weight from that regarding ‘Anthropogenic Global Warming’ because of how those consensuses support government involvement.
In the Free Trade case, the experts say that the government shouldn’t get involved. Therefore the experts are clearly idiots and shouldn’t be listened to about any damn thing, and here are some cherry-picked examples to prove my point.
In the AGW case, the experts say that massive government interference in the market is vital. Therefore the experts all agree and so should we, and there’s no need to investigate further or do our own research because they’re the EXPERTS, dammit!Report
> The expert consensus regarding ‘Free Trade’ is given
> different weight from that regarding ‘Anthropogenic
> Global Warming’ because of how those consensuses
> support government involvement.
Yes, this is probably true. What does this tell us about the voting public? They sure like arguments from the consequences of a belief, no?
Note: you can be against AGW and still not support massive government involvement. I’ll grant you there’s a large alignment between “people who support government solutions to problems” and “people who support AGW”, but this is where political dialogue has gone off the rails.
Because, quite frankly, the GOP has pretty much absolved itself of participating. Which is a damn shame.Report
Economics is not a science. The rest of this post and possibly thread is just thumb-sucking.Report
Economics is not a science?
Then what is it?
Come to think of it, what *are* “sciences”, According to Pooh?Report
This is in reply to both Pat and Will:
Q: “Why don’t we accord the same level of deference to economists? Shouldn’t the pro-free trade consensus within the field of economics be as bullet-proof as belief in global warming?”
A: Great Financial Crash of 2008 – ??
(and just to help out those who have a problem with facts and such, the world has indeed been warming, fulfilling the predictions of climatologists, and falsifying the predictions of denialists).Report
It seems folly to say economists didn’t have a consensus agreement on the financial crisis, ergo they are not a real-or-as-good-science as the physical sciences. Just as it would be folly to assume that an incorrect weather forecast means that climatologists don’t know what they’re saying. Neither of these means that their sciences aren’t technical and there’s a lot of economic modelling and forecasting that is spot on – the same with climatology and meteorology. Additionally, criticism of a flawed political application of scientific principles or reaction to scientific consensus ought to reflects negatively on application not the underlying scientific discipline.
That said, I think there’s a lot of truth to Freddie’s broader point about distinction between the physical and social sciences, though Hume’s treatment of the problem of induction leads me to be generally less certain of the sciences than most people.Report
Weather is not climate; failure to understand that is rather telling. The whole point of the failure of the economics profession is that they pushed for a set of systemic changes which should have yielded certain systemic outcomes; instead they gave us the opposite.Report
> The whole point of the failure of the economics
> profession is that they pushed for a set of
> systemic changes which should have yielded
> certain systemic outcomes; instead they gave
> us the opposite.
Wait… the economics *profession*? Or the economics experts?
Financial advisers != macroeconomists.Report
Also, specific markets are not economies. Economics does not claim to predict either financial crises or recessions. I mean, we’d love to be able to, but we can’t and don’t generally claim that we can.Report
If you looked at a growth chart and saw a 33% real annual return rate in the S&P over a four year stretch what would your prediction be that the S&P was about to totally crater from a balloon?
How confident would you be in that prediction?Report
I’d not be confident in any specific prediction about timescales. What I would say is that any big price movement without an underlying change in value *eventually* corrects itself. Assuming the increase in valuation didn’t coincide with unusually rapid growth, or constitute a rebound from a period of unusually low valuations, it will either eventually be followed by a crash, or by a period of unusually low returns until the underlying value of the shares catches up with their price.
The key word is eventually – people like Robert Schiller and Bill Gross are constantly calling bubbles, and in a sense they’re right in that the assets they’re talking about are over-valued, but they’re usually wrong when they predict that the crash is actually imminent. Bob Schiller called the housing bubble every year from 2003-7. He was right eventually, but it doesn’t exactly show prescience, especially given that prices have not yet declined to 2003 levels.Report
You can define it as anything you like, and there are certainly science-like aspects to it, but economics simply does not have the same empirical rigor as do the physical sciences. That’s not to say it’s useless, but only to recognize that basic economic truths don’t have quite the explanatory power in the real world as something like F = M*A.
Further, the question posed in the original post is comparing apples to rose clippings. As others have pointed out, the normative leap from “this is what happens if” to “this is a good thing” is where the problems lie. The distaste for “free trade” is more analogous to saying “yes, humans are contributing to global warming, but I don’t think that’s a bad thing” than to AGW denialism.
Economists tend to be somewhat slippery in moving between what they are pretty sure will happen to what they would like to happen or hope would happen – everyone more or less knows that reduced barriers to trade will lead to more exchange and create surpluses (in economic terms) by catering to comparative advantage. Proponents “THINK” this will result in good outcomes for everyone, but that’s more of an estimate than an experiment.Report
> You can define it as anything you like, and there
> are certainly science-like aspects to it, but
> economics simply does not have the same
> empirical rigor as do the physical sciences.
I would argue that good economists have exactly the same empirical rigor as any other science (tangent: I would also argue that there are lots of really bad economists, but that’s an aside) – within the bounds of their powers of observation, their theories can be validated.
That’s true of any science, social or otherwise.
Whether or not their instruments are calibrated or their measurements are accurate *is* certainly in question, but that’s something that should be properly explained in the limitations section of the publication 🙂
Now, *bad* economists are the ones who say things like “Free Trade is Good” and then wave their hands around saying it’s hard to produce any sort of evidence supporting their claim.Report
Because economics is not a science. Economics is much close to astrology than astronomy. Overwhelming evidence showing the markets are not efficient or the risk does not follow a Gaussian distribution is ignored time and time again. Beliefs drive economics, not facts. It is a religion, not a science.Report
For anyone who cares, IMO, these books are the best at making the case againist what currently passes for critical thought in economics
Steve Keen’s (an economist) Debunking Economics: The Naked Emperor of the Social Sciences
http://www.amazon.com/Debunking-Economics-Emperor-Social-Sciences/dp/1856499928/
and Mandelbrot’s (yes, THAT Mandelbrot) The Misbehavior of Markets: A Fractal View of Financial Turbulence
http://www.amazon.com/Misbehavior-Markets-Fractal-Financial-Turbulence/dp/0465043577/
Mandelbrot did his initial research in fractal geometry by studying over 100 years of price information from cotton markets. He published his results over 60 years ago where it was promptly ignored by economist’s. My guess is they could not handle the math.Report
Steve Keen does not understand quite basic aspects of modern economics. He’s therefore in no position to criticize them. Sorry, but while I’m sort of sympathetic to some of his ideas, he’s ignored by other economists for good reasons.
Mandelbrot on the other hand hasn’t been ignored. The substantial part of what he said – that price variations don’t follow a normal distribution – is quite widely acknowledged. The problem is that if we abandon out current theories of finance on this basis, we don’t have anything to replace them with. Mandelbrot’s suggested replacement theory isn’t very useful for reasons he even documented himself. So we have a choice between no theory and a theory that works reasonably well in normal times but can’t accurately predict the probabilities of certain very rare events. This is very similar to the situation other sciences dealing with huge, chaotic data sets face.Report
> So we have a choice between no theory and a theory
> that works reasonably well in normal times but can’t
> accurately predict the probabilities of certain very
> rare events.
This was my point about nonlinear manifolds.
A theory can be descriptive and even predictive from a probabilistic standpoint without being predictive from a deterministic standpoint.
Case in point: earthquake prediction. Nobody can tell you when an earthquake is going to happen. However, people who study seismology study the historical record of geologic areas, and they can make probabilistic estimations regarding the likelihood of a major earthquake within the near future to varying degrees of confidence, depending upon the region in question. When they’re wrong, it’s usually because there is a major fault that is unknown (which happens)… which usually means the earthquake happens *earlier*, instead of later.
Another case: GDP. From 1947 until 2010 The United States’ average quarterly GDP Growth was 3.30 percent reaching an historical high of 17.20 percent in March of 1950 and a record low of -10.40 percent in March of 1958. (http://www.tradingeconomics.com/economics/gdp-growth.aspx?Symbol=USD)
Predicting near-term GDP growth is probably rather futile. However, I’d take bets that if you look at GDP from 1947 to 2025, in 2025, you’d probably see very little variance from that 3.3 percent. If I’m wrong, it will probably be because of a major assumption change (like, we get off of fossil fuels).Report
I wonder seriously whether the author is a socialist who is pissed off that the science of economics proves you need markets. That’s what it smells like to me.Report
I believe he’s referring to the psychology of markets. There’s a particular term for that, but it escapes me.
But markets really are driven by fear and expectation. There’s nothing rational about it.Report
What I notice (observe) is, in short, markets can be extremely irrational, upsettingly so like when speculators bid oil up to 144 a barrel only to have it bubble or the recent housing crash. The Austrians say it’s a monetary problem and going back onto the gold standard would solve this. I’m skeptical.
However, in long, the bubble bursts and rationality prevails. And there is, as far as I know, no better system that replaces it. Top down, centrally planned, command and control economies led to waiting in line for HOURS to get something as simple as pasta that we buy for a buck or two a box at our local supermarket. I have a former student from Belarus who testified to this. If a price is irrationally exuberant in short, then, given what economics teaches — sellers want to produce more at higher prices — there will eventually be a glut of the supply that will burst the bubble. This is exactly what happened with oil (remember the full oil tankers sailing around the continents with no place to go because markets were saturated with oil) and housing.Report
It is not a question of replacing markets, it is a question of understanding how they truly work. What Mandelbrot showed was that markets are a discontinuous system and as such have completely different characteristics than are normally ascribed to them by traditional economics. First and foremost, the risk in markets follows a power law distribution and as such is much higher that most economist will acknowledge. And that markets are subject to long periods of disequilibriums and in fact can persist in a state of disequilibrium.
The market as discontinuous system is a fundamentally different creature than the one most economist believe in but the record shows that discontinuous systems are a much better model for economies than existing neoclassical models. However, discontinuous models suffer from one major drawback, they are not predictive. By definition, the future state of a discontinuous system can not be determined from its current state. Now this means that things like CDS or that you can mitigate risk through something like a MBS complete nonsense, which the last crisis has proven to be true. But when you are making lots of money selling snake oil, it does not do anyone any good to call attention to the fact that it is snake oil. So the economist that promise that the snake oil will in fact cure what ails you get the jobs and the soap box and the prizes and thus does nonsense become the consensusReport
However, discontinuous models suffer from one major drawback, they are not predictive. By definition, the future state of a discontinuous system can not be determined from its current state. Now this means that things like CDS or that you can mitigate risk through something like a MBS complete nonsense, which the last crisis has proven to be true.
Hold on a second there. The mainstream view within economics is that you can’t predict the future states of markets from their current states. What we mean when we say that markets are efficient is that when you look at price histories they appear to follow a normally distributed random walk, so you can’t ever predict the price at one point in time from the price at another point in time. Anyone who thinks you can predict the actual future states of markets is way outside the mainstream of financial economics.
The mainstream theory does say you can predict the direction in which risk moves when you do certain things. For example, the probability of one mortgage defaulting may be utterly unpredictable, but the probability of every mortgage in a pool of 100 defaulting will be smaller. No-one claims to have known authoritatively what that risk was, they just knew it would be smaller and let the market determine the appropriate price for it. People have models of the risk, based on standard Gaussian distributions. but its not necessary to believe the models were exactly right to believe they were useful. This is perfectly respectable statistics – normal distributions are easy to deal with, and when you compose random variables you almost always end up with normal distributions. Or at least things that can be reasonably approximated with normal distributions. And the normal distributions have smaller variances. So a bunch of basically unpredictable events, like mortgage defaults, become predictable when you pool enough of them together. This matches our everyday intution about how large numbers of unrelated events interact with one another – we don’t expect everyone in the same city to randomly default on their mortgage the same year without their being some underlying cause.
There are two possible ways in which this can go wrong. The mainstream account of the crisis is that the underlying variables were not actually uncorrelated. Which is to say that there was an underlying cause for everyone defaulting on their mortgage in the same year. That reason was probably the underlying structure of sub-prime mortgages which exposed lenders to house prices in a way that normal mortgages do not, but which was hidden in the MBS and CDO pools into which they were sold. Look up Gary Gorton’s papers on the financial crisis if you want the details on this – they’re fascinating.
The other possibility is the one you raise – that the underlying variables have a probability distribution that’s doesn’t give you a normal distribution when you add lots of them together. The most likely candidate would be power law distributions which give you Cauchy distributions when added together. Cauchy distributions are sneaky because they look like Gaussian distributions – they have the same bell-curve shape – but they behave very differently. In particular, with a Gaussian as you compound different variables the probability of an unlikely event actually happening even approaches zero as the variance shrinks. With a Cauchy distribution that doesn’t happen – the probability of an unlikely even happening eventually actually approaches one.
Its plausible that we might mistake Cauchy distributions for Gaussian distributions in the kind of price data that Mandelbrot looked at. After all, they look very similar so if you treat one as the other you get sensible results, except for improbably events that by definition don’t happen often and which you might be tempted to just treat as outliers. The trouble, however, comes when we try to work out what this means in practical terms. Our intuition rebels against the implications.
For example, think about mortgage defaults. What you essentially said above is that mortgage defaults must follow a non-gaussian distribution because the basis for CDS and MBS is “complete nonsense”. Now think about the probability of missing a mortgage payment. Obviously the most probably outcome is you miss none. After that the most likely outcome is you miss one, but this is much less likely. After that the probabilities drop off less quickly. The key question is how much less quickly. If its a power law distribution, if you held your mortgage for an infinite duration, you would eventually definitely default given enough time and rise over time. If its a better behaved distribution, there’s a finite probability of default which would be approached asymptotically over time. Everyone – not just economists, everyone – behaves as if the latter were true. Otherwise the interest rates lenders change would rise exponentially with the duration of the loan. As it is they rise only modestly, and most of that rise is nearer the start of the term.Report
I have to say Jon Rowe, your attitude is why I get so damn frustrated trying to talk economics. Some how we are entered into this strange world where we see over and over again that our models for how markets work are terribly flawed. Events that could never happen or should only happen 1 in 100 years occur with alarming frequency but somehow we ignore all that. Because to question how we think markets works somehow means we want a command and control economy.
Damn it no! How about markets are absolutely critical to economics and there for we need to REALLY understand how they work and given how often we keep getting bit in the ass by things that should never happen, perhaps our simplistic little supply and demand curves are missing something.
I am just saying……Report
My own portfolio gained 56.45% over its value over the past year; so I’m thinking the part about economics that really counts is something that I’ve got down pretty good.
I can see his point. And just today, I heard some talking head whimpering about ‘speculation,’ as it that were a bad thing.
Now, you see the bubble going on with gold right now. The value of gold hasn’t gone up, but the price has. It’s really not gold they’re buying in the first place. It’s all about risk & return.
If you want to explain gold by discontinuous systems, feel free. Maybe we could all learn something from it.
But I think you’re reading something into Jon’s comment that wasn’t there.Report
Not that investing has that much to do with economics but if you think making money in one single year means you understand economics then no, you really dont. One year is nothing, and especially making money this year, it was an easy year to make good money (not that I am complaining, I will take it, I do love the good years). Investing is like poker, it is not how well you do in the winning streaks that make you a pro, it is how you do in the losing streaks, how long they last, how deep they go, and how fast you recover.
For the gold market as a discontinuous system I cant do it any better than Mandelbrot did (see link above)Report
Not that investing has that much to do with economics
Pardon me if I don’t believe that, but I happen to be sitting here right now wondering how, after seeing the headline: “China lowers its economic growth target a tad– China lowers its growth target a tad, to 7 percent, to signal a shift in economic strategy,” such a thing might affect the two Chinese companies I’m holding, as well as the ETF with holdings in China.
No, last year was a difficult year. About the first week of May, everything dropped, and it stayed there a long time, until about the middle of October. Nov & Dec were fantastic, but I’ve still got shares I purchased in April that I’m waiting to cover the fees (they voted to issue more shares, and now I regret not voting).
Crisis in Spain and Greece didn’t really affect things so much, but Ireland was devastating. Unrest in Egypt did very little, but the market reacted sharply to Libya.
I am at a loss to think of what trade might be other than economics.Report
I looked at the link there, and there’s only so much I can tell from a link to Amazon.
I know that beta is a measurement of volatility, and so are Bollinger bands. Come to think of it, so is MACD, and probably every other technical indicator, to some extent.
Last I heard, Bollinger was still going around refining his bands. I would hope that someone would continue to refine Mandlebrot’s work.
But I really don’t see any huge upheavals.
Even the view that options are a better deal than stocks is fairly mainstream these days. He’s only validating that by different means.
I don’t see anything to get all worked up over.Report
I was wondering if this would be brought up in the discussion of discontinuous systems, but the figure shown for 01Jan10 – 31Dec10 is completely arbitrary.
It tells very little about what occurred from 01Feb10 – 31Jan11.
Non-identical distribution.
Discontinuous system.
Completely arbitrary, without reason.Report
Well if you can make the next breakthrough that really means and shows something — something that moves us to the next paradigm like Einstein replaced Newton — then YOU will win the Noble Prize.
I’ll defer to the experts in the meantime.Report
“The Austrians say it’s a monetary problem and going back onto the gold standard would solve this. I’m skeptical.”
IIRC, booms and busts (including speculative bubbles) were at least as common during the gold-based periods.Report
Yes. In order to really correct the problem using the tools the Mises/Rothbard Austrian schoold recommends you’d have to not only go back to commodity money, but switch to 100% reserve banking and prevent any new money-like assets from appearing. Quite why anyone would think this consistent with Libertarianism is beyond me. To be fair to Austrian economics in general there are other less prominent, less politicized lines of Austrian thought that acknowledge that gold influxes under the gold standard and free banking produced exactly the same kind of effect, and that money-like credit-based assets are pretty much inevitable. See, eg, George Selgin.Report
I think libertarians believe in the whole “competing currencies” thing. Allow currencies to compete, allow banks to compete, allow the Austrians to run alongside the Keynesians.
(Of course, we remember the *LAST* time we let the Austrians try running things…)Report
Yeah, most libertarians if asked would endorse some kind of completely free banking as the ideal, and probably conjecture that it would end up with underlying commodity money rather that fiat currency. Banning fractional reserve banking and credit money is Murray Rothbard’s little eccentricity (although how you ban things in anarchy is not clear to me), but there is a vocal bank of crackpots that wanders around the internet adovocating half-understood Rothbard-style Austrian economics.Report
I don’t personally see how free banking system could prohibit fractional reserve currency either, provided that consent was the standard by which we decided what was legal and what wasn’t.
If the bank is doing it, and if I know about it, and if I still want to deal with them… well, where’s the violation of consent? We’re all adults here; we know the risks. And if I don’t want the risks, I’m in no sense coerced. I could always opt for commodity money instead. I’m sure the Rothbard National Bank on the corner would be offering it.Report
I think it’s called Behavioral Economics. Why do people actually buy and sell things? And yes, almost none of it driven by rational decision making.
Case in point, all these eTrade gambler rubes: they see a little peak on their charts and don’t understand why it appeared. If they had any sense, they’d look at the corporation’s Form 4 filings, to see if it’s an insider selling or buying. Now that information is significant and other traders are already operating on that information: another sovereign rule, you’re never the first person to know anything. Any little transient from a trend shouldn’t push you from a disciplined trading strategy but it happens all the time.
My old man was an investment vulture. One day, when an airliner went down, he rushed to the phone and bought that airline stock at market, knowing it would pop right back up. Of course, those were the days when the airlines were regulated, and the rebound was reasonably predictable, but the most profitable trades take advantage of panic and stupidity of all sorts.Report
Behavioural economics says that individuals don’t act rationally, therefore markets as whole don’t act rationally. The former part is definitely true – for example people appear to discount the future geometrically rather than linearly. The “therefore” is the problem – its quite possible to add together lots of irrational behavior and get apparently rational behavior in the system. Take ants – ants are really stupid. An individual ant will happily starve to death following a pheremone trail round in circles. Colonies of ants, however, behave quite rationally. Stock market traders are very like ants – I’ve never spoke to one who seemed to have any insight on anything at all. Nonetheless, the market as a whole is fairly rational.Report
The “fairly” in “fairly rational” is doing a whole lot of work here.Report
True. Partly, that’s because I’m using “rational” in a rather restricted, technical sense that I don’t want to explain unless actually raises a relevant objection. But also because I don’t (and most economists don’t) subscribe to the strong version market rationality that says you can never make more than the market rate of return except by luck. Quite obviously some individuals do, although most people who *really* do stay quiet about how they do it.Report
Heh. Men in Black comes to mind:
Jay: Why the big secret? People are smart. They can handle it.
Kay: A person is smart. People are dumb, panicky dangerous animals and you know it. Fifteen hundred years ago everybody knew the Earth was the center of the universe. Five hundred years ago, everybody knew the Earth was flat, and fifteen minutes ago, you knew that humans were alone on this planet. Imagine what you’ll know tomorrow.
I trade in the futures market. Got into after I came back from Oxford, after the Army. There was this little electrician who had a theory, didn’t have much money but I wrote him a system for five bucks a day and room and board. Made about a half million dollars on that system, set me up as a consultant and I’ve never looked back. And here’s how this little system worked.
Seen at short range, markets are stochastic. Seen at longer ranges ,they seem to exhibit trends but we both know that trending is just as stochastic as the short range market, exactly like your ant, well, actually even stupider, but you might be tempted to infer some purpose to what had none. Unlike a stock price, a commodity price will never go to zero, even if wheat went to a penny a ton, it’s a non-zero price.
So how do you clear the clutter out of it and take advantage of the speculators? You write a moving average of, say 30 days, sized up to the trends. You take the highest high and the lowest low of, say, the last 10 days, then look at the last close. If the last close is closer to the highest high and over the 30 day moving average, that commodity’s likely overbought. Conversely, if it’s closer to the lowest low, it’s likely oversold. You set profit and loss stop trades accordingly and enter at market.
This only works if you have lots of volume in that market. It’s also helpful to understand the market itself: the corn market trends differently than precious metals, for example. That affects risk and profit stops.
Is it gambling if you are trying to take advantage of someone else’s stupidity? I don’t have any insight other than to spot panics and irrational exuberance. I’ve seen ’em come and I’ve seen ’em go in the futures market, the high-flyin’ yuppies with their econ degrees, a wad of Daddy’s cash and his hubris, too. Me, I last because I don’t seek any market indicators other than the smells of fear and desire.
But if you really want to leverage stupidity and panic, my forte, there’s nothing like a gasoline market, which is where I hang out these days.Report
I believe the term is animal spirits.Report
Wasn’t E.D. simply trying to point out that what we often refer to “free trade” is no such thing? He seems to agree with Kevin Carson in that he believes “free trade” agreements are often chock full of protectionist measures in the form of stronger I.P. laws. I am also under the impression that free trade requires the free movement of labor, but labor’s movement is clearly restricted by immigration laws.Report
“I am also under the impression that free trade requires the free movement of labor, but labor’s movement is clearly restricted by immigration laws.”
Who told you that free trade “requires” the free movement of labor? It would also require “free” investment. I’m for both freer investment and freer labor. That means that corporations can buy up whatever and where ever they choose with no restrictions by state governments. Free movement of labor works under laissez faire, where there is no welfare state. We can’t have free movement of labor where immigrants can do a race to the top to get on welfare and that includes socialized medicine and emergency room healthcare.Report
But part of the problem with current “free trade” agreements like NAFTA is that poor Mexican farmers are being driven out of the market by subsidized American crops, which allows agricultural businesses to sell them at artificially low prices. I don’t suppose you support these subsidies, but where are these farmers supposed to go? From what I’ve read industry has not been able to provide the necessary amount of jobs. Also, I believe NAFTA is composed of thousands of pages of regulations, so in combination with everything else it seems that it is inappropriate to call such trade agreements “free”.Report
So you are saying there is a giant sucking sound of jobs from Mexico to America with NAFTA.
No I don’t support subsidies to farmers and yes I hate the current system of heavily bureaucratized law writing where every single bill, statute, treaty or whatever is over a thousand pages long. I support what NAFTA stands for in principle which is free trade among Mexico, Canada, and US. And any altering of the current regime as I see it, HAS to be in THAT direction, not in the direction of protectionism.
By the time you get to free movement of labor and capital you are a Common Market, not a Free Trade Area.
http://en.wikipedia.org/wiki/Economic_integrationReport
I agree that we should strive to make such trade agreements as free as possible.Report
For the sake of clarity, can someone define precisely what “free trade” is?Report
In the ideal it’s the absence of tariffs and non-tariff barriers between and among nations. In practice, the lower the tariffs, the freer the trade. So a tariff of 3% on oranges is not technically “free trade,” but it’s freer than a tariff of 30% on oranges.Report
Thanks, Jon. Would “non-tariff barriers” include copyright and trademark protections? Anti-monopoly policies? Minimum wages? Workers’ rights legislation?Report
Only if they apply differently to imported and domestic products.Report
I think he may be getting at is do countries need to “harmonize” such things as “copyright and trademark protections? Anti-monopoly policies? Minimum wages? Workers’ rights legislation?” as part of free trade and generally the answer is no. However, 1) the WTO HAS harmonized some of these areas. Like the TRIPS agreement on IP. And, though we don’t have this with NAFTA, other regional trading blocs HAVE harmonized their economies. What begins with a trade agreement transforms to a point where the line between many “sovereign nation states” and one “Super-state” blurs, or could blur or has blurred with one very big prominent example. This freaks out the anti-globalization right wing Christians because they see trade agreements pushing us towards one world government which sets the stage for the Anti-Christ.Report
On AGW: what’s interesting is that most models show that the real impacts (assuming we continue on the same path of mining and burning coal and oil) start to hit hard at about 2050. But by then, unfortunately, the amount of extra heat stored in the ocean will make a reversal of policy useless; an ever-worsening situation will be baked in, so to speak. So the relevant question, for us right now, is just how much harm we’re willing to impose on our children so that we can continue our current lifestyle. Unfortunately, humans are ill-suited to making that calculation.
On free trade: As many above have pointed out, the benefits of international free trade also come from models, but these have far less verifiability than the AGW models. As Americans, we have decided that there are other values besides the production of the most goods at the lowest cost which are important — like child education, worker dignity and environmental protection. Our legal system forces the sellers of domestic goods and services to include these costs in the price of their goods. Why then should we allow certain sellers to obtain certain goods (which happen to be manufactured overseas) at a price which does not include these costs? We’re just undermining our own value system.Report
We forget, at our peril, that countries that have the least productivity, the most dysfunctional markets and the least production of goods are also the world’s leaders in child ignorance/abuse, worker misery and indignity as well as environmental destruction.Report
Don’t pretend that the source of most of those problems isn’t the glib and amoral consumerism of the developed world.Report
I can’t tell if you’re making a pretty funny joke or not so I’ll treat your statement as if it were earnest:
I thought it was Hobbes who made life so difficult for the third-worlders on down.Report
I’m not sure if you’re being glib yourself so I’ll admit it’s far from perfect but it’s the best we’ve been able to come up with so far. When considering the real world examples I feel neo-liberalisms asian examples stand up pretty well when compared to the pure liberal direct intervention models in Africa.Report
It’s an entirely earnest statement.
In Collapse, which was not nearly as good as Guns, Germs, and Steel, Jared Diamond visits Japan and proclaims it a densely forested wonderland. What he declines to mention is that Japan remains a densely forested wonderland first because the country is covered with cedar plantation forests to replace deciduous ones which, after causing massive soil erosion and loss of biodiversity, which in turn has resulted in the covering in concrete of a significant portion of the country, have settled into a bland and lifeless equilibrium.
The second reason is that the Japanese are wealthy enough to pay Malaysians and Indonesian government/corporate cartels for “their” lumber. Consumers don’t know anything, so they look the other way at the 100-yen shop.
Look at oil companies in Papua: these companies will “negotiate” with local tribes for the rights to extract oil from their lands by dropping their chiefs from helicopters.
Look at Africa and the Middle East: retreating European colonial powers threw those regions into total disarray by expediting the “natural” course towards nation-statism by effectively creating power vacuums based more on their own colonial territories than any logical understanding of tribal or geographic borders. This is why we have fundamentally unstable-in-all-systems-of-government nations like “Iraq” and “Afghanistan” which shouldn’t even exist. The idea of “cities” in Africa flies against the very nature of tropical disease epidemiology.
When these nations don’t stabilize and don’t experience economic growth, we do things like give them t-shirts, which only result in economic incentives which in turn result in the members of the next generation becoming tradesmen in the American charity t-shirt black market instead of serving as depositories for the intellectual capital of traditional agricultural methods uniquely adapted to those locales.
The reason the Asian examples stand up so well is because those countries were countries before they were technological countries. “Uganda”, on the other hand, was never a country. It has nothing to do with perceived “neo-liberal” or “liberal” development models. Japan, for instance, developed its modern, technological economy under a bi-lateral, protectionist regime directed by America.Report
Yes, I’d willingly exclude Japan from the list. But South Korea and Singapore are still good examples of countries where millions have been lifted consistantly out of bone grinding poverty by lowered tarrifs and more liberal trade policy.
As you very aptly noted the more pure left wing form of aid where we just dump goods onto the recipients just turns into a cycle of dependency but I would object vigerously to the notion that one can lay colonialism or imperialism at the feet of neoliberalism. Nor do I think that the idea of using thug violence on tribal cheifs to get oil is any part of neoliberal thought.Report
I am definitely in support of a freer trade regime. I wrote extensively about this topic recently for my own site (http://www.theinductive.com/blog/on-talking-past-each-other-and-world-trade.html) if you’d like to read it.
It seems like we can’t just give charity, since this creates dependents. But it also seems that the realities of free trade as practiced by institutions contrast sharply with the ideal of individual voluntary exchange. Adam Smith’s The Wealth of Nations is often cited as the foremost authority on the efficacy of free markets, but people forget that Smith also wrote the Theory of Moral Sentiments. The two works taken together postulate that free markets only work if people are sympathetic and unselfish. This isn’t an appeal to authority, although I find Smith compelling.
Given realities, the problem then becomes one of whether coercion and exploitation can be minimized by allowing the system itself to retain the same fundamental structure with a few minimally-invasive yet effective changes or whether the atrocities emerging from the system compel the construction of a new economic order. I tend to think that the former is the more desirable prescription, but I think that because our economy is global and our political jurisdiction is not, reform must occur on the consumer end of things; specifically, policy and culture must converge to a more ethical consumerism.Report
“Why then should we allow certain sellers to obtain certain goods (which happen to be manufactured overseas) at a price which does not include these costs? We’re just undermining our own value system.”
Also keep in mind that someone has to produce the garments that we consume and arguably it’s a GOOD THING that it’s not us. At any given moment, the amount of land, labor and capital that exists is finite (even if it constantly changes). That means if we had to produce our shirts, we’d have less resources to produce, say, microchips or Iphones.Report
Haven’t you heard, by 2050 we are going to be immortal and able to control matter at the molecular level, perhaps even atomic level. That will cure global warming.
http://www.time.com/time/health/article/0,8599,2048138,00.htmlReport
Well when it comes down to it the difference is Climate science is based on observations of the Natural world 100 degrees Celsius is Rome as the same as it is in Washington. Free trade and economics are sciences relating to essentially the study of individual decisions and their collective habits and the results of those habits.
Free trade works very well on paper. But if you were to take Free trade to the maximum level you would see a large transfer of Wealth from rich Western States to the developing world. Now for the most part people in the West are content being wealthy compared to the rest of the world. So they make policies to reflect that. And while free trade might raise the fortunes of the entire world collectively it’s not so good for people who already have it pretty well off at the moment.
For free trade to work you need a global consensus of leaders all around the world. Otherwise you’re not getting free trade you’re leaving yourself open to being exploited. It’s not free trade when you’re dealing with China if they continue to use slave labor, price restrictions, and quotas on foreign imports. If one side practices free trade and the other Mercantilism they will win every time. Because Free trade requires everyone acting as partners to increase everyone’s slice of the pie collectively.Report
Economics, for all its intense study and math is still a behavioral science–which is to say, not much of a science at all. That many students of this soft science have reached similar conclusions is as persuasive as a consensus of 15th century geographers concluding that the earth is flat. This field is still in its infancy and no, the two situations are not comparable.Report
Economics is not a science. It is far closer to Sociology than Physics and thus Economics deserves significantly less deference.Report
Who opposes free trade?Report
Another equally compelling question one might ask: Why don’t apples taste like oranges?
Humbuggery et al has it about right: Economics involves some trappings of science–statistical analysis for example–but science it ain’t.Report
I think there’s a category error here. The division isn’t absolute, but I think that in general, anthropogenic-climate-change skeptics are highly vested in the proposition that the methods of climate scientists are fraudulent and that their conclusions are wholly invalid. They seldom argue that global warming is man-made, on-going, but a good thing; usually, arguments of value are a secondary, fall-back line of argument and the strongest position is along the lines of “there will be winners and losers so who can say it’s necessarily going to be bad?”
Opponents of free trade, on the other hand, don’t necessarily disagree with the methods of economists, their description of how free trade should and/or does work, and the consequences thereof. They mostly argue on the terrain of value: that the macro-economic benefits of free trade don’t outweigh the negative effects on individuals and communities.Report
This is the first comment in a long while that hasn’t reproduced someone else’s objections. Congratulations!
That said, I’m not sure if this is correct. A cursory survey of the responses I’ve received, for example, suggests plenty of people take issue with the supposed macroeconomic benefits of free trade.Report
Reproduction isn’t necessary when certain valid and fundamental objections are blatantly obvious. It’s just a matter of who gets to the keyboard first. The relevant complaint would be piling on.Report
Fair point, and I don’t mean to suggest I’m ungrateful or churlish at all the commenters who drop by. I’ve actually enjoyed this thread immensely, though it is a little exhausting to read the same few objections over and over again, however well-written or relevant they may be.Report
Cheers.Report
Exactly, that’s what I was getting at, except I wanted the pro-free-trade people to _state_ what they thought the benefit of, but apparently that’s so ‘consensus-y’ that no one needs to.
Climate change is not a policy. It is a scientific theory that explains observations and makes predictions. Now, these predictions are so bad that there is an _obvious_ policy that suggests itself if you believe the theory, but the policy is not, strictly speaking, part of the science, just like a ‘I’m not going to attempt to exit this car while it’s moving at 65 MPH policy’ is not part of physics, it’s just a policy you’ll adopt if you understand physics at all.
Science doesn’t tell you what to do, it tell you what will happen if you do, or why what already happened did happened.
I suspect the author this has decided that economics have decided that ‘free trade always results in higher world-wide productivity’, but even if that is scientific consensus…so? I bet lack of child labor laws also result in higher productivity (and I bet that would be easier to prove), but we don’t do that. I bet not letting people watch TV would result in higher productivity. I bet having them sleep in barracks at work would result in higher productivity.
The only people who care about the ‘higher productivity of the world as a whole’ are the fat cat assholes who have managed to convince the world they own 50% _of_ everyone in the world’s productivity because they have pieces of paper saying they do.
The rest of us care about our _standard of living_. And then everyone else’s standard of living. Only our _owners_ care about our productivity. Of course, our owners also appear to own our government and political discussion, so apparently, our productivity is more important than actually having a job to pay for a house to live in.Report
Economics is not a science. It’s really that simple.
http://www.edge.org/3rd_culture/rushkoff09/rushkoff09_index.html
There is no comparison in the veracity of the two fields. Faith plays no part in climate science. Faith is the foundation of economics.Report
Here’s how to think about economics, just so we can dispense with the cheap shots. It’s best to think of economics like chess theory. We can study games only as far back as we have records, which also applies to economics. Neither economics nor chess could advance much until they evolved standard vocabularies, but we do know the games we understand today were played before Ramirez de Lucena and Damiano described them.
Don’t take Doug Rushkoff too seriously, dude. He’s kinda like Andy Warhol, back in the day. He doesn’t actually know anything or produce anything original, but he’s thrilled, thrilled to be wherever he is at present. Actually, Andy Warhol was a competent fashion illustrator back in the day and what Doug Rushkoff has accomplished is quite beyond me. It’s a miracle Doug hasn’t twisted his shoulder out of joint from patting himself on the back so much.
Nowadays, every serious chess player studies Modern Chess Openings and Capablanca’s Chess Fundamentals and woe betide the chump who doesn’t know how to play the first eight moves of chess: they are completely defined, though there are some interesting variations emerging. The same is true of economics: everyone’s got to master the fundamentals, and at its heart, economics is game theory.Report
So glad to see you’re not making cheap shots. Ahem….
So…You’re saying I’d agree with you if only I studied precisely the same books you did? Who says I didn’t? In any case, let’s dispense with the hominem.Report
Look, economics is the study of winners and losers. It doesn’t matter if it’s a science or not, any more than the “science” of chess. Doug Rushkoff’s sophomoric rants don’t make economics any less a serious subject.
As for studying the same books, you don’t have to study any books to win at chess. But you do need to know the rules and be able to notate your game and it really would help if you knew how a chess clock worked.
If economics fails, it’s at the vocabulary level. I’ve previously ranted on this diary about “Free” Trade: trade exists only because it is not free. We can apply unfair advantages but you can still win if you’re a pawn down: not every disadvantage in chess means I’m going to lose the game.
Calling someone else’s discipline the province of 13th century kings means you’re a gibbering idiot. And if I ever see the word Digital applied to Culture, I know I am talking to someone who can’t read a Truth Table or write a line of code.Report
You’re missing the crux of the issue. It’s not that many people deny the monetary benefits of free trade, it’s that free trade poses numerous non-monetary issues. Regarding global warming, excessive international shipping combined with lax environmental regulations in many countries (which allows them to produce goods at low costs) are some of the biggest contributers to global warming. Speaking of lax regulations, we all know that poor labor conditions also help countries cut costs. In theory free trade is great, but in practice it has a devistating effect on the planet and the poor.Report
Shouldn’t the pro-free trade consensus within the field of economics be as bullet-proof as belief in global warming?
The pro-free-trade consensus is strong enough that it dictates our foreign and domestic policy to a huge degree.
Since when does anti-global-warming policy have anywhere near the same impact?
This is one of the stupidest articles I’ve ever seen on this site.Report
In addition to strong consensus among economists, there is a similar strong epistemic consensus among political scientists who study international relations.
In a survey of all IR scholar at U.S. colleges and universities conducted in 2006 the question asks: “In general, do you think free trade agreements like NAFTA and the WTO have been a good or bad thing for the United States?”
81 percent said a “good thing” or a “very good thing.”
13 percent said “neither good nor bad.”
7 percent said “a bad thing” or a “very bad thing.”
For whole survey and related question see Q77 and 78 at this link…
http://web.wm.edu/irtheoryandpractice/trip/surveyreport06-07.pdf?svr=wwwReport
Is free trade desirable? Well, sure if we are in a politics-free world. But in the real world, it creates winners and losers and figuring out how best to deal with the losers (which we must do if we are going to sustain a political coalition in favor of free trade) is complicated. See Dani Rodrik and the paper he references in this blog post: http://rodrik.typepad.com/dani_rodriks_weblog/2007/09/deconstructing-.htmlReport
Big problem with with the premise of this blog post. Economists, unlike those that research climate, are not real scientists. They practice a sort of voodoo masquerading as science. Before you label me naive, how is it that practically no economists saw the coming of the GFC or the consequences of the unsustainable trends building up to the GFC? Greenspan, bernanke, all the top banking officers and their “economists, no one of importance saw the obvious problems. In fact, they actively pushed the unsustainable. There are a handful like roubini to dissented, but as a rule, economists are a waste of human flesh.Report
Plenty of economists “saw the coming of the GFC”, etcetera. They were ignored.Report