The Corner

The Politics of Economics

Ramesh: Thanks for responding to that. (Sorry, readers: this is a bit

like eavesdropping on a conversation with astronauts on Mars, with long

delays between statement & response. Been on the road.)

I’ve followed a great deal of arguments about trade over the past few days:

Yours, Steve Sailer’s, Arnold Kling’s, and a dozen others going on off-line

and with readers. I doubt I shall ever get the Nobel Prize for economics,

but the following POLITICAL (as opposed to economic) facts are at least

clear to me.

—People schooled in economics, and who in some cases make a good living as

economists, have a surprisingly small zone of mutual agreement about

anything at all. Certainly they do not all agree with the free trade ueber

alles position.

—There are incontrovertible instances (Bismarck, post-Lincoln USA,

post-WW2 Japan) of countries prospering mightily while violating

international-free-trade principles.

—It is no good (politically, I mean–it is no good by way of convincing

masses of people you are right) to respond to those instances by saying:

“Ah, yes, in special circumstances.” That just leaves the door open for an

opponent to say: “So international free trade is not ALWAYS the optimal

strategy. There are circumstances when it isn’t. So… how do I know that

my country, today, is not in those circumstances?”

—Nor is it any good to say: “Ah, but those countries would have done EVEN

BETTER if they had adhered to strict free-trade principles.” That invites

the response: “How can you know that?” And also the response: “Well, why

shouldn’t I say the same of instances YOU cite, of countries (Hong Kong,

late-imperial Britain) prospering through free trade? Perhaps they would

have done EVEN BETTER under protectionism.”

—Nor is it any good to say: “Ah, but they were defying the law of gravity.

You can get away with that for a while, but reality will catch up with you.”

This is just saying: “IN THE LONG RUN, international free trade’s the way to

go.” Apart from bringing to mind J.M. Keynes’s well-known remark about what

happens to us all in the long run, this has the serious disadvantage, in our

own time, of being exactly what the rulers of the old USSR used to tell

their people about “scientific socialism”! “You may be suffering right now,

but it is all in aid of building a radiant future for our children.” (That

radiant future was such a staple of Soviet internal propaganda that one

Brezhnev-era dissident, Alexander Zinoviev, used it as the title for a

book.)

My abiding impression, after doing as much of the math as I can bear to (I

confess to having close to zero natural interest in theoretical economics)

is that Ricardian theory is fine in a frictionless world, just as Newtonian

particle mechanics is (I am ignoring 20th-century corrections to Newton).

They may even be universally applicable, as Newtonian mechanics is.

It is a truth well known to mathematicians, though, that there are some

circumstances so far from friction-free that while Newtonian mechanics does

not exactly break down, & is still controlling things at the deepest level,

poor Sir Isaac cannot be seen through the mass of necessary qualifications,

and the motions observed — in, for example, fluid mechanics — don’t look

the least bit Newtonian. Possibly the same is true of Ricardian trade

theory.

(Mathematically, in fact, fluid dynamics is notorious — not altogether

fairly — for all being based on one single equation. To judge from the stuff I

have been sent this past few days, the same might be true of economics –

though here it is not an equation but a principle, the principle of

comparative advantage. Neat principle; I like it; pleasantly

counterintuitive; I can follow the math; but….)

I don’t know whether international free trade is a sound principle in all

circumstances, and a proper guide to all economic decision-making. I do,

though, have a strong impression that if I were a conscientious politician

in a modern democracy, with the welfare of my people at heart (and my own

electability at the back of my mind), I would NOT be a dogmatic free-trader.

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