Thursday, November 10, 2005


Well, I may have spoke too soon. Over on Maxspeak, L. Josh Bivens points out that a lot of economists understand exactly what trade can do to wages:

At the risk of sounding unbearably obnoxious, I'm going to help Gene figure out the net impact of trade of the majority of American workers, because, it turns out that trade textbooks tell us precisely how to assess this. The most straightforward explanation is called the
Stolper-Samuelson Theorem, and it says, in a nutshell, that expanded trade harms, in absolute (not just relative) terms, and permanently (not just through tough "transitions"), the incomes of a nation's "scarce" factor of production." The scarce factor" in the US is generally considered to be workers without a college degree.* This is a little non-intuitive, but these workers are scarce in the US because the ratio of them to degreed workers is lower than the equivalent ratio in our trading partners.

There was a big debate about this in the economics profession in the early 1990s. Not one single economist argued about the direction of trade's effect -- it was universally agreed that it was negative for these workers. Some said that trade's effect was small, even very small. Some said it was large. But again, there was absolute unanimity that the net effect of trade on these workers was negative, and that trade had exacerbated inequality.
(He goes on to say that "This is actually the best-case scenario for maximizing the 'winners' from trade. Original versions of Stolper-Samuelson predicted that all workers would lose out to capital-owners from expanded trade."

The problem isn't that the theory isn't there, then. The problem is that too many economists (if, I guess, not all) seem to shrug their shoulders and go back to chasing efficiency. They aren't affected by this, the people who pay attention to what they're saying aren't affected by this, and, to be blunt, the people that they are even aware exist aren't affected by this, just the invisible unwashed hordes.

Which is fine, if they admit that they do have a bias in that direction, but instead we tend to hear that anybody who doesn't share this focus is a "dirty, unwashed hippy communist" or, more damning, "just doesn't understand economics".

Which just goes to show you that, the evolution "debate" aside, science (especially social science) is rarely as cut-and-dried as one would believe.

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