Monday Smackdown/Hoisted from the Archives: Scott Sumner Knew Better than to Do This!

Let Me Smackdown Jared Bernstein on International Trade Here...

Smackdown

I really, really wish Jared Bernstein would not do this. It is simply not the case—as he knows well—that policymakers "quickly forgot about the need to compensate for the losses" from expanded international trade. Democratic policymakers—of whom Jared is one—well-remembered this, but after November 1994 did not have the power. Republican policymakers did not see the need as a need at all: they did not forget it: they ignored it.

Do you want to know what I think? I think a lot of not completely consistent things. Here are three things to read:

2017: Gains from Trade: Is Comparative Advantage the Ideology of the Comparatively Advantaged?: The true arguments for free trade have always been a level or two deeper than 'comparative advantage': that optimal tariff equilibrium is unstable; that other policy tools than trade restrictions resolve unemployment in ways that are not beggar-thy-neighbor; that countries lack the administrative competence to successfully execute manufacturing export-based industrial policies; that trade restrictions are uniquely vulnerable to rent seeking by the rich; and so forth. The... internal misdistribution hole...[patched by] the late 19th C. 'social Darwinist' redefinition of the social welfare function as not the greatest good of the greatest number but as the evolutionary advance of the 'fittest'—that is, richest—humans.... 'Comparative advantage'... an exoteric teaching: an ironclad mathematical demonstration that provides a reason for believing political-economic doctrines that are in fact truly justified by more complex and sophisticated arguments... more debatable and dubious than a mathematical demonstration that via free trade Portugal sells the labor of 80 men for the products of the labor of 90 while England sells the labor of 100 men for the products of the labor of 110...

2016: The Benefits of Free Trade: Time to Fly My Neoliberal Freak Flag High!: I figure that, all in all, not 5% but more like 30% of net global prosperity—and considerable reduction in cross-national inequality—is due to globalization. That is a very big number indeed. But, remember, even the 5% number cited by Krugman is a big deal: 4 trillion a year, and perhaps 130 trillion in present value...

2008: Brad DeLong: Trade and Distribution: A Multisector Stolper-Samuelson Finger Exercise: We have a world with multiple sectors and with substantial differences in factor endowment intensities... a fair degree of formal and informal cross-ownership—formal cross-ownership via property rights... the financing of the government... labor rent sharing, efficiency wages, monopoly power based on location, monopolistic competition, and all the other deviations from perfect competition that can give... stakeholders... effective claim on the cash flows.... Thus it seems a slam-dunk to presume that in the real world free trade is very likely to benefit the overwhelming majority of people in nearly every country, in spite of the intuitions generated by the two-good two-factor two-country version of Stolper-Samuelson...

And here is Jared:

Jared Bernstein: What Economists Have Gotten Wrong For Decades: "theory never said expanded trade would be win-win for all. Instead, it (and its more contemporary extensions) explicitly said that expanded trade generates winners and losers, and that the latter would be our blue-collar production workers exposed to international competition. True, the theory maintained (correctly in my view) that the benefits to the winners were large enough to offset the costs to the losers and still come out ahead. But as trade between nations expanded, policymakers quickly forgot about the need to compensate for the losses...


#mondaysmackdown #freetrade #globaliztion #highlighted

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