Sunday, January 11

Michael Kinsley on free trade explains comparative advantage, then goes on to say:
the most troublesome thing about free trade--apart from the difficulty of persuading people that it works--is the unequal distribution of its benefits. The whole country is better off, but there are winners and losers. Generally, the losers are lower-income workers, whose jobs are the easiest to duplicate in less-developed countries. It seems misguided to me to avoid a policy that makes the whole nation richer because it makes some individuals poorer. With more to play with, it ought to be easy to ease the burden on free trade's losers. Of course, under a Republican administration, we don't do nearly enough of that.
Fair enough. But then again, easing that burden is easier said than done. Then he goes on to explain why free trade is finding more enemies:
the losers in new-style trade are more likely to be people that U.S. senators and fancy economic consultants actually know. These are people with advanced degrees and high incomes. Their incomes will likely be above average for our economy even if they are driven down by competition from poorer economies. Under these circumstances, denying the benefits of free trade to the whole nation--and denying opportunity to the rising middle class in developing countries--in order to protect the incomes of a relative few seems harder to justify, not easier, than it was back in the days when our biggest fear was Japanese cars.
But then he says,
The reasonable free-trade position (i.e., mine) is that buying a product does implicate you to some extent in the process by which it was made. And there are working conditions so wretched and wages so low and practices, like child labor, so heartless that you do want your own government to ban imports of the product at issue, to avoid the taint of association and, with luck, to pressure the exporting nation to change.
So if we don't buy the products of child labor, their governments won't let them work?

Elsewhere, Alex Tabarrok links to Krugman on trying to get people to understand comparative advantage. One of his points that may have encouraged him in his political writing:
Adopt the stance of rebel: There is nothing that plays worse in our culture than seeming to be the stodgy defender of old ideas, no matter how true those ideas may be. Luckily, at this point the orthodoxy of the academic economists is very much a minority position among intellectuals in general; one can seem to be a courageous maverick, boldly challenging the powers that be, by reciting the contents of a standard textbook. It has worked for me!
Anyway, I wonder who Krugman will support for president. I suppose his hatred of Bush will trump his support for free trade.

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