The collapsing economic consensus on free trade

[RI]

It's been oft repeated in the past couple of years that there exists an economic "consensus" that free trade is a win-win proposition that creates the opportunity for Pareto improvement through decreased prices, higher product differentiation, and optimized capital utilization. Articles like Mankiw's 2015 NY Times piece "Economists Actually Agree on This: The Wisdom of Free Trade" or numerous pieces on less reputable but widely-spread sites like Vox proclaim that economists have a climate change-esque unanimity in favor of free trade. There's a lot of truth in this assertion; as someone inside the profession, there's been plenty of pushback against revising this conclusion as plenty of traditional trade models bare it out. For the laity, it's much easier to portray free trade-skeptics as flat Earth-style deniers in the face of expert "consensus," regardless of how much it rests on imparted wisdom, convention, and tradition for economists who don't work heavily with trade models.

However, in recent years, a number of top economists have started to come out of the woodwork with a message that things aren't as simple as free trade advocates would like us to believe. Perhaps chief among them is MIT's David Autor, who's written several recent papers on the negative impact of US-Chinese export competition. The Autor-Dorn-Hanson series of papers express some serious issues, but it's hardly just them:

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To summarize: Within just the past year, studies in the best economic journals around (AER, Econometrica, etc.) and from  economists as prestigous as Daron Acemoglu have linked free trade to: lower wages, higher unemployment, lower labor force participation, income losses for the poor, income losses for those with less education, declining worker health, increased mental illnesses, higher mortality, higher suicide risks, lower tax revenue, increased property crime, cuts to public services, and that migratory patterns simply can not cope with the rapid hollowing out of the U.S. manufacturing sector.

[○∙◄☻¥tπ[╪AV┼cVê└]

Climate change and the shape of the earth are science. Economics is not.

[Saint Milei]

Climate change and the shape of the earth are science. Economics is not.

Economics is not science? Lol in what world is this true?

[Seneca]

Climate change and the shape of the earth are science. Economics is not.

Economics is not science? Lol in what world is this true?

There is a clear distinction between the hard sciences (physics, chemistry, etc.) and social sciences (economics, political "science"). Those in the latter camp seem to be more anxious about their status as a "science" then those in the former. I wonder why.

[Beet]

The crazy thing is, Autor still says we benefit from trade with China. Here's him in an interview in April:

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http://www.npr.org/2016/04/18/474393701/china-killed-1-million-u-s-jobs-but-don-t-blame-trade-deals

This is the same economics 101 that neoclassicists have been pushing all along -- they always said that the net gains from trade should be redistributed to the losers. Our society just does a very bad job at it.

[RI]

The crazy thing is, Autor still says we benefit from trade with China. Here's him in an interview in April:

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http://www.npr.org/2016/04/18/474393701/china-killed-1-million-u-s-jobs-but-don-t-blame-trade-deals

This is the same economics 101 that neoclassicists have been pushing all along -- they always said that the net gains from trade should be redistributed to the losers. Our society just does a very bad job at it.

You must have taken different courses than me, because my introductory econ courses always pitched trade as an opportunity for Pareto improvement, when it's at best an opportunity, not a guarantee, for Kaldor-Hicks improvement. There's a big practical difference there.

Further, the costs are much larger and more widespread than previously acknowledged. This alone makes the "benefits outweigh the costs" argue more murky, and it's always been dependent on assuming a particular social welfare function in the first place. Trade was never "good" under a Rawlsian framework, but now it's very unclear if it's "good" under various utilitarian frameworks either. It's at least debatable; how can someone say with any certainty if lots of small pluses add up to more than several huge minuses? A priori, you can't, and don't even get started down weighted frameworks.

Autor's work doesn't really look at this question from a social welfare perspective, and, as such, his conclusion that the "benefits outweigh the costs" is ad hoc as any sort of conclusion on the matter would be, simply because utility is fundamentally unmeasurable.

[Saint Milei]

Climate change and the shape of the earth are science. Economics is not.

Economics is not science? Lol in what world is this true?

There is a clear distinction between the hard sciences (physics, chemistry, etc.) and social sciences (economics, political "science"). Those in the latter camp seem to be more anxious about their status as a "science" then those in the former. I wonder why.

You will need to back this up. I don't think economists care about their status as a "science". Economists know their worth and can be just as influential as Chemists, or physicists. In fact, economists are far more memorable than the former.

[Gustaf]

It's funny how every thread on here attracts uninformed commentary about whether economics is a science or not.

Anyway, trade isn't a field I've looked at in quite a while, tbh. Glancing at the many articles posted here by realisticidealist this all seems to pertain to a) short-term and b) local negative effects. None of that is new and I don't think any of it changes the broad consensus that free trade is good. Especially, of course, if one takes a global perspective.

It's unclear why competition right now would be different than that of the past which did not create permanent disasters in society.

[Tintrlvr]

These are basically just responses to changes in political discussion rather than actual changes in the beliefs of economists. No economists would have asserted that free trade benefited *everyone*, just that it was a net positive and Pareto optimal. None of the papers you cite suggest otherwise, it just has those economists who are inherently political in their outlook talking about the negative side effects that were always acknowledged but viewed (rightly) as externalities to the greater benefits of free trade and maybe talked about less because the political environment wasn't right for it. Of course, anti-trade political movements will seize on the papers to claim a lack of consensus that is not even asserted by the papers they cite.

[Foucaulf]

The way the OP is phrased seems deceptive. It is intuitive, and likely documented in several different fields, that persistent unemployment causes "income losses for the poor and with less education, declining worker health, increased mental illnesses, higher mortality, higher suicide risks, lower tax revenue, increased property crime, cuts to public services" and net emigration from the affected areas.

What the Autor, Dorn and Hanson papers have convincingly argued is the link between import competition and persistent unemployment in areas producing goods substituted by imports. (Gustaf is wrong here: Both the ADH 2013 and 2016 papers show decline in manufacturing employment over 2 decades in affected areas.) The other papers linked just seems like economists reinventing the wheel to get publications.

It is a little rich, though, for someone living in Washington State - with one of the largest export ports in North America, and a tech industry that has boomed due to cheap hardware imports from places like East Asia - to talk about trade being "never good" in some sense. And saying "trade [is] an opportunity for Pareto improvement" is obtuse. What you want to say is "comparative advantage, marked by specialization of production between nations, makes people better off."

It would be hasty to suggest still that China has some irreversible comparative advantage in labor, due to their low wages - their wages are not that low, as can be seen by textiles being made more in Bangladesh or Haiti or whatever. If anything, China's comparative advantage is in capital, and specifically producing goods at low cost without worrying about initial R&D expenses.

[RI]

No economists would have asserted that free trade benefited *everyone*, just that it was a net positive and Pareto optimal.

Free trade, as enacted in the United States, has clearly not been Pareto optimal as a great many individuals have been made substantially worse off. Our current position could very well be a weak Pareto optimum, but that does not imply that move to reach it was a Pareto improvement. And, as I said before, there is no objective basis on which to claim that trade has, in fact, been a net positive.

It is a little rich, though, for someone living in Washington State - with one of the largest export ports in North America, and a tech industry that has boomed due to cheap hardware imports from places like East Asia - to talk about trade being "never good" in some sense.

I don't recall saying trade is "never good" in any sense. Such absolutes are pointless. The point is that free trade as executed in the United States can not be said with any degree of certainty to be an objective net positive, and to continue to portray that the notion that it is a net positive is a "consensus" among economists for political purposes is deceitful.

[Meclazine for Israel]

Climate change and the shape of the earth are science. Economics is not.

Economics is not science? Lol in what world is this true?

There is a clear distinction between the hard sciences (physics, chemistry, etc.) and social sciences (economics, political "science"). Those in the latter camp seem to be more anxious about their status as a "science" then those in the former. I wonder why.

You will need to back this up. I don't think economists care about their status as a "science". Economists know their worth and can be just as influential as Chemists, or physicists. In fact, economists are far more memorable than the former.

Now you are talking about some type of psychological self-awareness session which is unrelated to the discussion

Economics is not a science in the true sense of the word.

Science is the “study of the natural world based on facts learned through experiments and observation.”

Basically, science progresses by being able to run an experiment to produce the same result. The same result in Brazil. The same result in Norway. The same result in Australia.

With economics, there are perhaps areas of microeconomics that may fall into this category, but with macroeconomics, government policy changes and you approach political science.

I dont doubt that a highly educated scientific mind could produce valuable theories in economics.

But economics is not a hard science. It's results are not repeatable or predictable as is the case with science and engineering.

[Foucaulf]

I don't recall saying trade is "never good" in any sense. Such absolutes are pointless. The point is that free trade as executed in the United States can not be said with any degree of certainty to be an objective net positive, and to continue to portray that the notion that it is a net positive is a "consensus" among economists for political purposes is deceitful.

The first part was with reference to your sentence:

Trade was never "good" under a Rawlsian framework, but now it's very unclear if it's "good" under various utilitarian frameworks either.

Okay, look, let's talk from a practical perspective. With the people heading into the next administration (Navarro, Kudlow, Mulvaney), the effects of free trade on the U.S. will be framed as a "50-50" issue; half thinks it's a net benefit, the other half thinks every major multilateral trade deal should be put on death watch.

Among economists, however, I don't see the benefits of trade as a 50-50 issue. To use the IGM economic experts panel, I have not seen the panel ever break 20% for protectionism on a trade question: see here, here, here, here. On a "fair trade" question there is just no consensus for support or disapproval (maybe this is what you're getting at?)

The weakest version of my argument is that if you want to phrase a "collapsing consensus on free trade," expect some economists to administer a "97%" poll like climate scientists did on the issue of free trade.

[Saint Milei]

Climate change and the shape of the earth are science. Economics is not.

Economics is not science? Lol in what world is this true?

There is a clear distinction between the hard sciences (physics, chemistry, etc.) and social sciences (economics, political "science"). Those in the latter camp seem to be more anxious about their status as a "science" then those in the former. I wonder why.

You will need to back this up. I don't think economists care about their status as a "science". Economists know their worth and can be just as influential as Chemists, or physicists. In fact, economists are far more memorable than the former.

Now you are talking about some type of psychological self-awareness session which is unrelated to the discussion

Economics is not a science in the true sense of the word.

Science is the “study of the natural world based on facts learned through experiments and observation[/i].”

Basically, science progresses by being able to run an experiment to produce the same result. The same result in Brazil. The same result in Norway. The same result in Australia.

With economics, there are perhaps areas of microeconomics that may fall into this category, but with macroeconomics, government policy changes and you approach political science.

I dont doubt that a highly educated scientific mind could produce valuable theories in economics.

But economics is not a hard science. It's results are not repeatable or predictable as is the case with science and engineering.

Only read till the bolded. Under that definition, econ is a science lmao

[Devout Centrist]

The "Economics isn't a science" crowd is out in force to support their neo-mercantilism.

Next thing you know, half the world has a gold standard and the other half is completely under the control of central planning!