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Mankiw on Free Trade in the NYT

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Don't miss the noble Mankiw's latest New York Times op-ed, which would be great even if it wasn't great publicity for me...




COMMENTS (24 to date)
Alex Stewart writes:

The comments on that article are... disappointing.

Eli writes:

I was just waiting for him to give the special interest story. But he didn't. This is one more step toward the Myth of the Rational Voter becoming the primary explanation for silly anti-econ policies.

Ben writes:

The editorial seems to rather miss the point. Some people are doubtless opposed to the TTP and TTIP because they are protectionists who don't believe in free trade, and those people are wrong as Mankiw says. But most of the opposition I have seen to these agreements centers around other, and much more defensible, arguments: that the negotiations are being done in secret and that "fast-track" authority is basically intended to allow the agreements to be put in place without public review, that far from embodying "free trade" they actually embody favoritism toward particular companies and represent a triumph of rent-seeking over free trade, and that they will remove the ability of individual countries to enforce environmental laws, child labor laws, etc. that (whether defensible or not) the citizens of those individual countries would like to see enforced. It's hard to judge the veracity of those arguments, since I'm not an expert in trade agreements, a lawyer, or an economist; but they seem like they deserve to be answered, at least, whereas Mankiw utterly ignores them. Perhaps voters are irrational, in part, because they are deliberately kept in the dark?

Daniel Klein writes:

Mankiw's piece is great. (Liberal economists think alike!)

Pajser writes:

The claim "we should import from abroad those goods that can be produced more cheaply there" ignores the externalities. The claim "history has taught repeatedly that the alternative - a planned economy - works poorly" ignores the performance of Soviet economy.

Don Boudreaux writes:

Pajser: Just to be certain that I understand your point: Are you saying that the economic record of the Soviet Union is evidence that central planning works well - that is, works to provide plenty of desirable goods and services for the masses?

Don Boudreaux writes:

Pajser: Your claim about the case for free trade ignoring externalities is simply wrong. Externalities - both negative and positive - have long been part of the economists' analysis of international trade. Adam Smith himself even dealt with at least one of these. To assert that pro-free-trade economists "ignore the externalities" is to reveal an unfamiliarity with the literature.

MichaelT writes:

I agree with Ben on this one. The troubling part about these trade agreements is the secretive way in which they have been negotiated. If it were simply a reduction or removal of tariffs and trade barriers, why would they be so against any public review of the agreement?

w40 writes:

95% of the comments in the New York Times on Mankiw's op-ed piece are thoughtful, knowledgeable and totally wrong, providing more grist for Bryan's mill.

ThomasH writes:

Too bad Mankiw was not defending something more useful, like carbon taxes.

Given all the conditions (probably) attached to the TTP (especially the reach of US copyright laws) who knows it is really a movement toward "free trade" at all. If it were, would Republicans be supporting it?

Ricardo Cruz writes:

Pajser, what externalities do you have in mind?

Pajser writes:

Don Boudreaux:

Soviet economy worked well in period 1917-90 in terms of GDP/capita growth. Discussion about desirable goods is more complicated. I know very little data. If USSR is compared, for instance, with Latin America that started on the same level of development, in 1990 Soviets had twice lower child mortality and twice more telephone lines per capita. It is from Google public data. On the first sight, it seems that Soviet citizens were better off.

Are you saying that Soviet economy didn't worked well in period 1917-90 taken as whole? What is the most convincing data that can support that thesis?

Pajser writes:

Ricardo Cruz: nothing specific. It seems to me that country is better off if between two nearly equally profitable activities it chooses one with higher externalities.

TMC writes:

Pajser : The performance was horrible. Also, read the next comment from Methinks.

ECharles writes:

I wish Mankiw would have explained why free-trade is beneficial even when another country imposes anti-free trade policies like dumping, subsidies, etc. Seems like a wasted opportunity since the mantra is always "free-trade is good only as long as both sides are trading freely", which is rarely the case.

Kevin McGartland writes:

I'm sure I won't be the only one to mention this, but the idea that the USSR was successful is absolute nonsense. Even the most liberal economists/historians would disagree.

Famine statistics are enough-- The lowest of estimates indicate that something like 5-6 million people died in the short period of 1932–33. Who cares about GDP/capita when 5 million people die from famine in a 3 year period? This is, of course, not counting the quotas, lines, rations etc. that plagued the USSR.

Jay writes:

As Kevin said, if you expand your search to the top 10 famines of the 20th century 9 of the 10 are in communist countries (including multiple from USSR) with the 10th being pre-reform India. To say the USSR "performed well" by any objective measure using data FROM THEM is absolutely ludicrous and should be laughed at on its face.

Pajser writes:

Kevin McGartland - it appears that majority of the scholars and even some UN bodies believe that Holodomor is result of genocide, crime against humanity, "cruel political action" and not of poor performance of economy. Which is, surely, awful - but it is independent issue. Quotas, waiting lines - sure. But that is less important indicator of performance of the economy than GDP/capita or child mortality.

Jay - data I use is from Maddisson Project. It seems to be reputable source. If you claim that they use some false statistics, you should support that claim on some way.

Jay writes:

@ Pajser

I was referring to child mortality claims which often come from internal sources and are hard to measure accurately for closed societies (and large ones such as the USSR). As Kevin said, if your country even appears once on a famine list let alone multiple times as the USSR does, it makes little sense to claim the economy is anything but a disaster no matter what GDP numbers you can attach to it.

Jay writes:
Quotas, waiting lines - sure. But that is less important indicator of performance of the economy than GDP/capita or child mortality

...because you say so? I would say those are the best indicators. Is the average person in an economy more affected by the availability of bread and blue jeans than a GDP per capita statistic? Please.

AS writes:

GDP is not a very useful statistic in a planned economy because prices and the allocation have no implication of Pareto optimality. Only in free economies do they have meaning, because they are the direct result of the voluntary choices of individuals seeking to maximize their own utility.

A central planner could hire 90% of the population dig ditches and refill them, at $100/hr, creating enormous GDP. It would have absolutely no economic meaning, however.

That's why I prefer real metrics like literacy rates, health, expected lifespan, and accessibly to real goods and services.

Mark V Anderson writes:

I agree with the general consensus that the USSR was a terrible place. I think maybe even Pasjer would agree with that. But I sure would like to hear an honest rebuttal to his argument that economically the USSR was above average. Is this true? Perhaps the constant refrain we've heard about central planning being a total failure economically isn't completely true?

Certainly the statistics that came out of the country are suspect. Perhaps the terrible crash of the '90's was partly a falsity; simply the real statistics coming into the light. But Russia is certainly not a basket case equivalent to say many African countries. It is simply behind the developed European countries, which is approximately where it was in 1917? It doesn't appear to lost ground, as one would expect after 73 years of a disastrous economic policy. Perhaps central planning can work economically after a fashion, although at a severe cost to the well being of its citizens.

I would think Russia has been open enough for the last 25 years that someone should have worked on a revision of the USSR statistics, to find out the true economics of the regime. I see more books on Russia than anywhere else in the world. Hasn't anyone done an economic study like this?

Pajser writes:

Jay, child mortality should be easy to check because it should be nearly the same after 1990 if data was not faked. If it is faked, it should be visible.

Famine - I wouldn't say that single occurrence of famine means that economic performance is poor. If famine is intentionally created, or if country progresses well - but it started so poor that it cannot counteract the effects of drought - famine doesn't mean that economic performance was poor.

I might agree that GDP/capita is not very important if basic needs of citizens are not satisfied. But I don't know that basic needs of Soviet citizens were not satisfied. I need some data for such claim. For instance, Soviets maybe didn't had blue jeans - but I'm sure that they had something that can satisfy same need.

AS, I wouldn't believe to market either. Because of externalities. Some product can be valuable on market, but it can be actually harmful, i.e. worse than useless. It all depends on how GDP/capita is calculated. As long as we use GDP/capita as measure, I see no reason for criticism of data about USSR GDP/capita particularly. Of course, other data would be interesting too.

Jay writes:

@ Pajser
Well operating economies do not crumble. The USSR didn't just appear once on the list: 1921-22 9 million dead, 1932-34 8 million, 1946-47 2 million. Any per capita statistic is easy to make look good when your poorest 20% are let starved.

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