Make (Trade) War, Not Love (of Economic Theory): Part I

MM: I have figured out why people hate economists.

BB: ?

MM: We are like a narcissist romantic partner who likes to play with his toys and never listens, or really cares.

BB: ??

MM: We look all cool and stuff, getting people all excited taking economics courses, making them going through all these technical models, and ending with the conclusion: trade is good. When they ask about labor exploitation, income equality and outsourcing, we tell them “Well we don’t live in a perfect world, LOL.”

BB: That truly sounds horrible, but is it a bit of a caricature or is it really how economists behave? We do know that trade is good, but we also know that trade is good only for most people, or good in aggregate. Is the message too subtle that it usually gets boiled down to things like “trade is good”?

MM: It is both a philosophical and a practical question. If you poll, most economists would prefer free trade and lower trade barrier. But most economists don’t bother to look into the nuances. If we convert everything into a dollar sign, or some theoretical utility measures, sure we can “prove” the existence of a net welfare gain. Philosophically, however, can we really compare the gain of a cheaper pair of shoes for everyone to the loss of job of a single person in manufacturing? Policy makers want to put everything on the same scale. Worse, we have not really offered any meaningful solution to the losers in the game. We end up ceding our turf to sociologists and anthropologists! It is not a mystery that trade war is getting momentum with support from certain fractions of both the left and the right.

BB: I guess that’s a central characteristic of economics that we want to quantify things, but as you said it can also be a weakness when communicating to the public. Yes, more trade is good and more barriers are bad, but I do think that (some, if not most) economists also know that there are distributional implications on trade, but probably we are not very good at conveying such messages.

BB (after sipping his Darjeeling tea): Also, politics play a role here. Even when consumers benefit from more trade with cheaper and more goods, the gain is distributed over a large number of people.

BB (sipping more tea): On the other hand, the pain of more trade is felt by a concentrated, organized few. They are much more determined than the rest of us who benefit, and it is understandable that they use political channels to fight for themeselves.

MM: Maybe it is not possible. It’s one thing to sit on an armchair to talk about distributional issues, it’s another to solve it. If there is no clear solution, can we morally say a world with free trade is always desirable? In other words, it may just be better to be honest without any forced moral coding into the messages.

MM (after sipping his single-sourced, fair-trade coffee): Also, other than some mathematical models, I am not sure how many economists know how trade takes place. I mean… the supply chain, the bureaucracy and all the tricks that make trade happen. Sometimes, what seals the deal is how one fills in 100 pages of custom forms.

BB: I guess your general message is that economists should be more humble, which I agree. But without the moral coding, who would still listen to economists?

MM: The key is to not forcing an idea to one’s throat. There are many moral nuances. We have trained ourselves to convince the elites in governments and central banks. Our rhetoric sucks when it comes to a regular person on the street.

BB: We don’t actually have that sort of training! Most of us only need to convince our students.

MM: And 85% of them ends up hating economics after the exams… my estimate based on my experience with people in parties, and only those parties that I was invited to…

TO BE CONTINUED…

“All is fair in love and war.”