Scott Sumner  

Playing the Trump card: Why do economists enjoy trashing their profession?

RIP Sergio Ricossa, lonely voi... The year of thinking dangerous...

During the 1980s and 1990s, there was a growing consensus that:

1. The minimum wage was not a particularly effective anti-poverty program, as it raised unemployment. Even the New York Times editorialized in favor of abolition of the minimum wage, in 1987.

2. Monetary policy drives inflation and NGDP, and fiscal stabilization policy is almost useless. The liquidity trap is not a problem in a fiat money regime.

3. Free trade with China will benefit the US economy, albeit at some cost to workers and companies in import competing industries.

Now all three of these views are under assault. And what I find interesting is the willingness, indeed almost eagerness, of many economists to accept the new heterodoxy. In my view, if the new heterodox view is correct it really calls into question the entire field of economics. Points one and three are some of the most basic ideas in all of economics. We've been lecturing the public for years that they are wrong about free trade. We say, "See, economists know something the public does not".

We've also been telling the public there are no free lunches, and that price floors create surpluses. And with the exception of a few extreme supply-siders, we've been saying that tax cuts and spending increases will raise the budget deficit.

Let's say this is all wrong. Why should the public take seriously anything we say now? We'd have become the laughing stock of the social sciences (no mean feat) and deservedly so. In that case, why not listen to Trump?

I'm especially surprised by how many economists are willing to accept contrarian views when questions are still very much open. Here are some examples:

1. The Card and Krueger study did cast doubt on the view that modest increases in the minimum wage cause more unemployment. But other studies have reached the opposite conclusion. (My own work on the Depression suggests that minimum wages do reduce output.) Even worse, the only plausible theoretical mechanism that I am aware of is the monopsony model of labor markets. That model suggests that if a minimum wage fails to boost unemployment, it will also fail to raise produce prices. But studies show that minimum wage increases clearly do raise product prices. And we still don't know much about the long run effect of higher minimum wages. The entire question is fraught with uncertainly, so why believe the worst about economics?

2. As far as fiscal stimulus, the studies I've seen tend to ignore the problem of monetary offset, either by looking at state and local effects, or by including the eurozone in international cross-sectional studies. Those studies that did properly focus on countries with independent monetary policies (by people like Mark Sadowski, Benn Steil and Dinah Walker, and Kevin Erdmann) did not find any significant impact from fiscal policy. And of course the big difference between the Eurozone and the US after 2011 was due to monetary policy, as the US did as much or more austerity than the eurozone.

3. I recently discussed a paper by Autor, Dorn and Hanson, which suggested the US may have been hurt by the rise of Chinese exports, during the period from 1990 to 2007. Noah Smith seemed convinced by the findings, indeed so much so that he was willing to trash the economics profession:

In his recent book "Economics Rules," Harvard economist Dani Rodrik laments how economists often portray a public consensus while disagreeing strongly in private. In effect, economists behave like scientists behind closed doors, but as preachers when dealing with the public. . . .

Popular opinion seems to be exactly right about the effect of trade with China -- it has killed jobs and damaged the lives of many, many Americans. Economists may blithely declare that free trade is wonderful, but our best researchers have now shown that public misgivings about these smooth assurances have been completely justified.

And yet as I pointed out, all they really showed was that Chinese exports had negative effects in certain local areas, something we already knew. There was no plausible evidence presented that China trade reduced overall employment. Yet many others, including The Economist, The Atlantic and Tyler Cowen treated this as a very important paper. Maybe it is, but I don't see it.

Marcus Nunes sent me a recent paper by João Paulo Pessoa, from the LSE. Here is the abstract:

How does welfare change in the short- and long-run in high wage countries when integrating with low wage economies like China? Even if consumers benefit from lower prices, there can be significant welfare losses from increases in unemployment and lower wages. I construct a dynamic multi-sector country Ricardian trade model that incorporates both search frictions and labor mobility frictions. I then structurally estimate this model using cross-country sector-level data and quantify both the potential losses to workers and benefits to consumers arising from China's integration into the global economy. I find that overall welfare increases in northern economies, both in the transition period and in the new steady state equilibrium. In import competing sectors, however, workers bear a costly transition, experiencing lower wages and a rise in unemployment. I validate the micro implications of the model using employer-employee panel data.

So why do so many economists like to trash their own profession?

1. It's fun being a contrarian. I've done a good bit of contrarianism myself, so I should not be the one to cast the first stone. Oddly, much of my "contrarianism" has been in defense of the old conventional 1990s neoliberal model. Paul Krugman put it best (describing his own contrarianism):

(ii) 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!
Me too!!

2. Another possibility is that the standard model falls into disrepute whenever there is a major macroeconomic crisis, like the Great Depression or the Great Recession. Both were caused by excessively tight money, but since central banks tend to follow the consensus of the profession, it's almost a tautology that economists will misdiagnose depressions. If they understood what was going on, then the depressions never would have happened. Instead they shift their blame to imagined failings of "laissez-faire economics", or those reckless "speculators" in the asset markets. (So lots of investments look bad, ex post, during a major depression? Wow, I never would have imagined that!)

Any other ideas? It seems weird that economists would want to bring their profession into even lower public esteem, but that seems to be what we observe. Maybe it's just an externality problem, like relieving oneself in the public swimming pool.

Comments and Sharing

COMMENTS (41 to date)
Effem writes:

Another theory behind the phenomenon: when a massive portion of the population is deeply unhappy economically to the point of being willing to elect extreme candidates on both sides, something is very wrong.

I find the "trashing" to be partly driven by a search for where we got off track. We don't have the answers and we will surely go down some dead ends... but there is a recognition that there needs to be a search for answers and that may involve questioning all sorts of assumptions.

Ultimately economics is about creating "utility." The population is clearly voicing that their economic utility has fallen. (And since price indices are meaningless, we really don't have an alternative yardstick by which to measure economic utility).

Thomas Strenge writes:

What are the incentives in the system? An economist who praises the socialist agenda of high minimum wages, trade protectionism which benefits trade unions and government stimulus gets invited to fancy cocktail parties, becomes a columnist at the NY Times, gets regular TV interviews as Obama's economics adviser, probably gets a chair at an Ivy League college. People have sold their mothers for less.

Cmot writes:

Imagine economists not as scientists but as members of high school girl cligues, in a constant zero sum positional battle with other girl cliques for prestige and social standing.

Successful cliques are successful because their interests trump their principles, so they adopt changes in style or thought not based on any intrinsic characteristic of the style or thought, but in it's ability to change their status relative to the other cliques.

Scott Sumner writes:

Effem, It's not at all clear what the electorate is signaling. Trump did better in booming Massachusetts than in any other state.

And it's not clear that the standard economic model is failing us. Compared to what? North Korea? Venezuela? Brazil? Greece? Where are the heterodox success stories? I'll stick to capitalism until I see something better. Instead I'd like to improve capitalism by reducing taxes on capital, deregulating, privatizing, opening up the economy to competition, and other similar changes. I would add that Europe has exactly the same rise of populism as the US, so it's also not clear that Bernie Sanders has any answers.

Jeff writes:

I also think there is something like a belief in the wisdom of crowds for public policy within the profession. If public consensus believes X, which leads to certain "common sense" policies then there must be something very credible about this action, despite basic economic theory.

Kevin Erdmann writes:

Scott, I'm not sure if Massachusetts is such a counterexample. The housing supply problem turns economic growth into a zero sum game. So economic growth in Boston actually creates financial stress for people that might be drawn to trump, as in migration of high income workers who can leverage Boston ' s potential forces out low income workers by bidding rents up. The Boston Fed has a paper on this. Economic growth in New England used to correlate with population growth. Now it correlates with rent.

Effem writes:

I agree we can't know exactly what is being signaled. But we know it's not a favorable view of the status quo.

There is no relevant comparison. Ultimately the purpose of any system is to create "utility" as the people define it. There is no exact measure of utility. Economists would like to think it's as easy as "wealth" but it clearly isn't. Even as it pertains to "wealth," is the proper yardstick average or median wealth (massive gap in the US)?

Economists can choose to either double-down and explain to the population why they are wrong. Or they can try to find some messages in the discontent and study the issues that have created a situation where 50%+ of the population doesn't support the current system.

Charlie writes:


I think you are reading Autor, et al. With too much focus on sign changes and not enough on magnitudes. I think people are interested in the paper, because adjustment seems to take much longer than we thought and longer than previously estimated. From the abstract, "Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences."

Maybe it's structural changes in the economy (skills are more specialized), maybe it's policy choices we made creating more labor fractions, less on the job training, more licensing. Whatever the cause, the finding is interesting and worth considering, even though the sign is in the expected direction.

Scott Sumner writes:

Kevin, Maybe, but there certainly aren't enough people in Massachusetts hurting to explain Trump' overwhelming win. If people aren't happy with the economy here right now, then there is no feasible policy that would ever make them happy.

There's lots of downside if we screw up, not just to Greece, but all the way down to North Korea or Somalia. In contrast, what's the upside for Massachusetts from abandoning EC101. Which parts of the world have higher living standards than Massachusetts? Maybe New Hampshire, Utah, Switzerland, and one or two other places. So what's to be gained by protectionism?

effem, You said:

"Economists can choose to either double-down and explain to the population why they are wrong. Or they can try to find some messages in the discontent and study the issues that have created a situation where 50%+ of the population doesn't support the current system."

Why not a third option? Try reforming the economy according to the principles of EC101. Don't economies that more closely approximate EC101 principles tend to do better than those that do not? Why question the basic principles?

Charlie, Fair point, but would you agree that it is no reason for economists to abandon their belief in free trade (contra Noah Smith)? You could probably do the same for technological change impacting local economies, and yet I don't see economists abandoning their support for technological change (although perhaps that's coming next.)

Effem writes:


I quite like your third option. But to be entrusted with making major changes you first need to demonstrate competence and win the trust of the majority (not simply the "winners"). A situation where 50%+ feel as though they have been left behind by the current system does not afford the champions of our system the right to remain in charge. This was easy to see coming but no one cared...

Effem writes:


Here is another thing I think economists should consider. Economist-approved policies are often implemented in such a way such as to massively distort the intended effects.

Let's take free trade. Economists overwhelmingly approve (as they should). Yet in practice it became "free trade for labor" and "protection for services."

Economists should be more realistic about the self-serving nature of those in power. Policy recommendations that are helpful in theory can become predatory in practice.

Swami writes:

The Krugman article has long been one of my favorite editorials of all time. The reason is because of what happened after it was written. Krugman here criticizes the pandering within the profession ("be a rebel") while acknowledging it is the path to popularity.

When you read this it appears as if he is drawing a line in the sand which he will never cross. Instead, he becomes the major offender. Krugman is the example of what happens when economists sell out. They become more famous and wealthy. Combine this with the overwhelming transition in all social sciences to the extreme left (per Haidt), and we are beginning to see a complete melt down in the profession as the prominent economists who get through the system become spokespeople for "progressivism" rather than objective analysis.

Suddenly minimum wage and planned economies are good ideas and free trade and inequality are bad.

Ryan writes:

I think both of the reasons you suggest are accurate, but they have some interaction with each other as well. When major macroeconomic crises occur more non-economists become actively upset with the standard views of academic economists, increasing the popularity of contrarian views. This raises the value of playing the contrarian.

Kevin Erdmann writes:

Scott, it is hard to overstate the effect of rent inflation on incomes, especially since the crisis.

I have used a couple of graphs, so I post my comment as a link.

Effem writes:


This may be contributing to the polarized political climate as well. Those who own a home (particularly in a "closed access" city) support the current system. Those who don't feel as though they are falling behind.

Property appreciation seems an inefficient way to distribute wealth in a society.

I agree with Scott completely on the three examples he gives. What could be a more ridiculous belief among economists than that monopsony (one buyer) could explain the labor market for low skill workers?

Fast food outlets not only compete among themselves for such workers, they also compete with car washes, construction clean-up, nursing homes and who knows what else. Yet I've had debates with supposedly competent economists (some of them famous) who take the monopsony theory seriously.

Not to mention that studies that fail to find disemployment effects from minimum wage increases, DO NOT disprove that such effects exist. Only that those particular studies didn't find them. I.e., the absence of evidence is not evidenece of absence.

Anonymous writes:

I'm still not sure I grasp the significance of the Card and Krueger study. What was it about this one study that made it so influential? There have been lots and lots of other studies on the minimum wage, both before and after this one, haven't there? Why haven't any of those become household names and singlehandedly changed the professional consensus the way C&K did?

Tyler Wells writes:

Because they want to be both loved and lovely. Economic orthodoxy isn't very popular and especially on college campuses. Of course, while going against the grain on campus might not make you loved you would think that it would make you more lovely.

Don Boudreaux writes:

Patrick Sullivan: You are indisputably correct when you rhetorically ask "What could be a more ridiculous belief among economists than that monopsony (one buyer) could explain the labor market for low skill workers?"

And yet there are indeed a number of serious economists today who do assert the prevalence of monopsony power in the modern U.S. labor market for low-skilled workers. The poor judgment that such an assertion implies is mind-boggling.

Mark writes:

Effem: "Ultimately economics is about creating "utility." The population is clearly voicing that their economic utility has fallen. (And since price indices are meaningless, we really don't have an alternative yardstick by which to measure economic utility)"

This is precisely why utilitarianism is flawed and utility is the first priority is morally and logically absurd.

Look up Robert Nozick's idea of a 'utility monster.' E.g., if the utility curve for Germans shifts such that most Germans get more utility from marginalizing Jews that Jews lose from being marginalized (and, who can say it's not true, since utility is subjective?), then does this vindicate anti-Semitic Nazi policies? (yes, I know, Godwin's law, I don't care).

We are all well aware that often times the mobs seem to get a great deal of utility from tearing up cities and burning everything to the ground in times of distress; few would contend that this somehow means such activities are economically productive.

Destructive policies confer utility in a perceived collective sense, not an individual sense. People will pursue policies that are in net bad for individuals, but which most individuals perceive to be good for 'the whole.' However, to refer to some things Don Boudreaux (I think) has said, someone is generally at his best when it comes to assessing value when he is assessing the value of a good or service to himself... and at his worst when he is trying to assess the value of something to other people (like, to the whole country).

And of course, unfortunately, many people do derive utility from the suffering of others. Plenty of people would probably be poor among equals than less poor but poorer than everyone else. Again, these people are Nozick's utility monsters.

Mark writes:

@Patrick Sullivan and Don Boudreaux.

Playing devil's advocate, one way I can see economists justifying the claim of monopsony in low-skilled labor markets is by deferring to limitations on movement. If you live in a really small town with a Walmart and not much else Walmart may be the only major employer of unskilled labor, and therefore have a 'monopsony' in that town. Of course, it's not really a monopsony if one can just move to the next town. However, if one accepts the premise that moving and commuting are virtually impossible, and one is restricted to employers within walking distance, then the monopsony model may begin to make sense.

However, I think it's a hard case to argue that the average unskilled worker is so attached to his neighborhood and so wary of the slightest commute that he really only has one or two possible employers. I imagine that within the borders of a typical American city, this 'location stickiness' effect on pursuit of employment is fairly small.

jorgeborges writes:

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Don Boudreaux writes:


Thanks for your comment. What follows below is not aimed at you but at those economists who insist that monopsony power is so real and relevant that it justifies minimum-wage legislation.

Economists with poor judgment are often unable to map onto the real world what theory tells us. In the case of monopsony power, of course it's true that no worker instantaneously switches jobs when some feature of his or her employment contract, such as hourly pay, moves in an unfavorable direction. What is required is sound judgment about the amount of time that must be allowed to pass before any accusation of monopsony power makes sense.

More importantly, inability or reluctance of workers to move to different locations in search of new employment is not a sufficient condition for the existence of monopsony power. In addition to such worker immobility there must also be employer immobility. Even if workers in Smalltown, USA, cannot move to Bigcity, USA, in search of new jobs, employers in Smalltown will nevertheless be obliged to pay competitive wages if other employers are free to move into Smalltown to take advantage of the excessively low-priced labor in Smalltown.

Of course it's possible that, even when judged over an appropriate expanse of time, there is some town in the U.S. populated by workers who are unusually reluctant or unable to move to other towns to search for better employment and that is somehow and for some reason off-limits to other employers. The question is: how likely is such a combination of both employee and employer immobility?

Because - as, for example, some work by Price Fishback makes clear, even company towns decades ago were infected with surprisingly little monopsony power - reality seems at odds with any such unhappy combination of immobility, it's implausible to suppose that monopsony power is a real presence in modern American markets for low-skilled workers.

And note: even if monopsony power were real, its existence itself is only a necessary condition for minimum wages not to reduce the employment options of low-skilled workers. It is not a sufficient condition, for it must also be true that (1) the excess profits implied by monopsony power have not been competed away in the form of lower output prices, and (2) employers' profit-maximizing response to a higher minimum wage is indeed to pay the higher wage rather than to substitute into capital or, more generally, into some alternative processes of production that use fewer hours of low-skilled workers.

Mark writes:

Good point, and I imagine the biggest inhibitors of employer mobility (and employee mobility as well) is things like zoning restrictions and lot size requirements and limitations on housing supply due to rent controls and whatnot. If someone showed me a place that constituted a local unskilled labor monopsony, I would be willing to bet a lot of money that that city or neighborhood had tremendous property use and building restrictions. Over-regulation creates a problem it thinks it may be able to fix.

Effem wrote: "There is no relevant comparison. Ultimately the purpose of any system is to create "utility" as the people define it. There is no exact measure of utility. Economists would like to think it's as easy as "wealth" but it clearly isn't. Even as it pertains to "wealth," is the proper yardstick average or median wealth (massive gap in the US)?"
I am rather wary of ascribing 'utility' to political sentiments. If people demand self-destructive policies, (or engage in them, such as in rioting), we would probably wouldn't infer that such self-destruction creates utility, or rethink our belief that not destroying things creates more utility than destroying them.

A poor person who would derive utility from making himself poorer but everyone else poorer still, so he would be poor among equals, is what Robert Nozick called a utility monster, a flaw in the over-application of utility theory.

In politics, I suspect a great many voters are 'utility monsters' who derive utility from inflicting dis-utility on others who are, through the political process, subject to their edicts. This is especially problematic when much of the population presumes to know the utility function for the whole country, and pursue policies that are 'best for America', in their mind, even as the net effect on all individuals' utility functions is negative.

Charlie writes:

"Fair point, but would you agree that it is no reason for economists to abandon their belief in free trade (contra Noah Smith)?"

Yes, I would agree. I wouldn't take Noah Smith to be a very good proxy for economists more generally, but even then, were the three of us to sit down over beers, I kind of think we'd all end up in the same place.

As far as Noah's quote, I won't speak for you, but the transitional costs were higher than I thought. I was one who thought displaced low skill workers, whether from tech or trade disruption should find jobs relatively quickly. So, I qualify someone sort of blithely dismissing transition costs.

It could be lots of different reasons. I remember in my undergrad international class, "haircuts" was always the example of the local good that couldn't be exported. Ironic that it's now one of Cochrane's go to's for the absurdity of occupational licensing. But even without licensing, "barbers" or hair care professionals have gotten really, really highly skilled in a lot ways.

Lastly, I think you are overreacting to the reaction. I agree with Tyler, this is interesting on going work. I didn't think the economist's take was all that shocking. The summation was pretty reasonable:

"Trade generates enormous global gains in welfare. Generous trade-adjustment assistance, job retraining and other public spending that helps to build political support for trade are therefore sound investments. To make any of these policies work, however, economists and politicians must stop thinking of them as political goodies designed to buy off interest groups opposed to trade. They are essential to fulfilling trade’s promise to make everyone better off."

Benjamin Cole writes:

Scott Sumner: a lot of influences get mixed up. For example, the arrival of 20 million illegal but work-seeking immigrants coincides with an explosion of free trade---at the same time that most major cities artificially constrain the supply of housing.

Economists are also their own worst enemies in that they constantly bash the minimum wage, or protectionism, or even reasonable limits on immigration, but never seem to mention property zoning or the criminalization of push-cart vending.

As a group, economists appear to be waterboys for economic elites,, and, of course, many are hired mouthpieces whose solution to every economic problem is lower taxes on the wealthiest.

It did not help that during the Great Recession our own central bankers constantly jibber-jabbered about inflation, and not job creation.


Mark writes:

"Generous trade-adjustment assistance, job retraining and other public spending that helps to build political support for trade are therefore sound investments. To make any of these policies work, however, economists and politicians must stop thinking of them as political goodies designed to buy off interest groups opposed to trade. They are essential to fulfilling trade’s promise to make everyone better off."
I wouldn't say it's an overreaction to see this statement as being interpreted as potentially anti-free trade. Many people would (not unreasonably, as the authors aren't entirely clear) interpret this as meaning "free trade is bad absent redistributionary policies", when in truth, at least in my opinion, free trade without redistribution is still better than no free trade without redistribution. Some might see such a paper as justification for anti-trade policies as a means of holding free trade hostage until the welfare state is sufficiently expanded (and of course, it is never sufficiently expanded).

Secondly, another perfectly valid interpretation of the authors' conclusion is that it is not greater public spending that is needed to remedy the situation, but rather less regulation that is needed; less licensing, fewer wage floors, less restrictive labor markets. I'm inclined to say that they misinterpret their own results. The fact that labor markets aren't adjusting accordingly is the problem, not trade, or lack of public spending, and perhaps that's what we should be looking at?

Zeke writes:

I don't think voting is an effective tool at analyzing the public's viewpoint on economics. It is not a narrowly tailored action that reveals the voter's preference about subject X but instead is a vote for a person, based on, inter alia, the personality of the candidate and numerous policy positions espoused by the candidate (of which the voter might not like all policies).

Further, voters are rationally ignorant about voting in part due to tribal alliegence and in part because any voter's vote doesn't count. Because it doesn't count, voters can vote emotionally instead of rationally.

The above suggests there is little we can learn from voting patterns.

mbka writes:


some time in the 90s I had a discussion with a fellow classical-liberal minded friend. At that time, the old left in Europe had just dropped dead and left the intellectual field to "neoliberalism" w/o much of a fight, save for some grumbling. All the while the left had fought like lions until 1989 to defend the Soviet Union model as a useful possible alternative social choice.

We reached the conclusion that intellectuals actually don't have a spine, and no real clue why they are rooting for any particular idea. They just follow fashion. And when public fashion changes, they change their affiliation.

Since that time I have been afraid that once the fashion shifts back to leftism - mostly because older people forgot how bad it was and young people don' know how bad it was - intellectuals would just jump ship and become leftists again. That time, unfortunately, has now happened.

Effem writes:


"This is precisely why utilitarianism is flawed and utility is the first priority is morally and logically absurd."

You are not arguing against utility. You are simply arguing that your version is superior to others.

Any world-view contains utility judgments. I'm assuming your utility-framework resembles "maximize aggregate wealth." Even if we agree with "wealth" as a decent benchmark, why not median wealth? What if I told you that maximizing aggregate wealth would result in all wealth accumulating to one monopoly actor...well then i'm guessing you'd object. So now your world view becomes "maximize aggregate wealth with some added notion of fairness and distribution." Well what is "fairness?" Already your utility framework is becoming fuzzy. There are no absolutes here...only certain "fuzzy" principles combined with judgement.

And what if it turns out that "maximize aggregate wealth" brings others negative utility? I don't think that's far from the truth: consider the predatory behavior of many wealthy entities; consider the "two sets of rules problem" for ordinary people; consider how ideals like "free trade" get applied in a skewed manner ("free trade for goods, protection for services").

We have no choice but to make utility judgments. And as such, I am at least open-minded to what the population is signaling (even though that's "fuzzy," like all utility judgments).

Brian writes:


You say " And what I find interesting is the willingness, indeed almost eagerness, of many economists to accept the new heterodoxy."

I think this is not a problem only with economics, nor with just the social sciences in general. One of the great flaws of academia is that success (at least in research) is predicated on being able to discover something new and innovative. What happens when most of the big issues in a field are well understood? Either the field becomes stagnant, or clever, ambitious academics have to find ways to challenge truths that are fairly obvious. The three issues you mention all fall into the latter category.
Unfortunately, the pendulum can't swing back to reality until the contrarians become the status quo in the field (thereby corrupting the whole field), allowing a new generation of scholars to make their mark by correcting the contrarianism.
We'd like to think that academia is all about the pursuit of truth, or at least reality, but it's really about novelty.

Shayne Cook writes:

Scott Sumner, et. al.:

Just a question ...

Would it not be true, of necessity, that an "economist" who questions/undermines/abandons the concept that free trade is beneficial, also have to simultaneously question/undermine/abandon the uniquely economic concept of Consumer Surplus in doing so?

Just thought I'd ask.

Scott Sumner writes:

Effem, You said:

"A situation where 50%+ feel as though they have been left behind by the current system does not afford the champions of our system the right to remain in charge."

That's fine, because I'm certainly not a "champion of our system", as you might have noticed.

Anonymous, Lots of economists liked the way they constructed the experiment, comparing neighboring states with different minimum wage policies. But I agree, no single study should be decisive.

Kevin, I'm very confident that a huge share of the affluent people in Middlesex county who voted for Trump were homeowners. Trust me, this is not about economic distress in Massachusetts, there are other factors going on here. That's not to say economic issues play no role, but they don't really explain the phenomenon. Young tech people in Boston paying high rents also have high incomes, and they aren't Trump voters anyway.

Tyler Wells, You said:

"Because they want to be both loved and lovely."

Then why do so many economists continue to agree with me?

Mark, I oppose the Nazi policies for utilitarian reasons.

On the minimum wage question, that monopsony argument predicts that firms would not raise prices in response to higher minimum wages. But they do.

Charlie, Krugman has a new post saying that free trade is a "scam" You don't find that worrisome?

Ben, You said:

"Economists are also their own worst enemies in that they constantly bash the minimum wage, or protectionism, or even reasonable limits on immigration, but never seem to mention property zoning or the criminalization of push-cart vending."

Actually, economists mention those issues a lot. They are among the most criticized policies by economists. And free trade is not just for the elites, they don't buy Chinese goods at Walmart. Free trade is good for the world's poorest people.

Zeke, I agree.

mbka, Good point. One reason my blogging was successful in 2009 is that I went against the consensus on monetary policy. But yes, I see too many followers of fashion. Not many people can think for themselves.

Shayne, I don't see why.

Robert Thorpe writes:

I think part of the problem is business cycles. These can't be predicted, and economists didn't claim this loudly enough. In Britain I remember Gordon Brown claiming to "End boom & bust" and few economists opposed that vocally. That's an important lesson for next time.

Several people have mentioned Noah Smith. I think he gets it far too easy from everyone, he says all sort of blatant rubbish.

Finally, a contrarian view on Trump from a non-american.... It's generally the right who are most sensible about economic policy. Especially given the views of the Democratic party today. To get sensible policies the right must be elected reasonably often, and in the US that means the Republicans. The biggest obstacle to that is immigration. Immigrants are solid Democrats, most probably will be for generations. Although Trump doesn't have good economic policies, he holds the best hope for good economic policies in the long run because he's anti-immigration.

Charlie writes:

"Charlie, Krugman has a new post saying that free trade is a "scam" You don't find that worrisome?"

You seem to be ignoring your normally high-tuned sense of nuance. He called the "elite case for free trade" a scam. gave a lot of examples of the types "elite" arguments he's referring to. Then he says, "Ripping up the trade agreements we already have would, again, be a mess."

I just read his post "The Mitt-Hawley Fallacy." I thought in general you'd agree with it. `Protectionism is bad, but not because it causes recessions.' Am I wrong?

Mark writes:

"Mark, I oppose the Nazi policies for utilitarian reasons."
Scott, suppose persons A, B, C, D, and E viciously hate person F, such that sending F to a prison camp would gain them each 2 utils, and F's internment would cost F 5 utils. Since F getting sent to a prison camp would cause a gain of 2 utils each for five people, it creates 10 utils, while costing 5, leading to a net increase of 5 utils. Does this mean sending F to a prison camp per the wishes of A, B

My point is that, when one talks of utility in an economic context, one is making the (dare we say, libertarian?) assumption that other people's choices must be taken as exogenous, and each person only chooses the bundle of goods and services or choices that maximize his or her utility.

Now, Effem seems to be suggesting that we modify the political and economic system in such away as to indulge changes in the utility functions of some people (Trump and Sanders supporters?). I'm saying, however, that, considering the changes that would be needed to assuage these people, this would amount to causing some people disutility in order to increase the utility of others. No doubt, some people would gain utility from coercing me into buying American made goods, or confiscating my property. My contention is that no matter how angry a Trump or Sanders supporter gets, I really don't care how much utility he gets from imposing coercive policies on me. Too bad. All the utility in the world that he might get from restrictions on my rights does not constitute economic justification of such restrictions.

So, in that sense, I disagree with Effem's claim that 'the system's purpose is to maximize utility.' The system should do no more than permit each individual to maximize his own utility *given the choices of others*. Changing the system to allow some to manipulate or coerce others as a means to increasing their own utility is to go precisely in the wrong direction, imo.

"...elite case for free trade..."
I wasn't aware there was a distinction between the elite and non-elite cases for free trade. And at this point, 'elites' (assuming that includes professional economists) seem to be pretty much the only ones making the case at all. How many populists are out there arguing for free trade?

It seems to me like Krugman is more accusing the case for free trade as being 'elitist' itself, and saying we shouldn't tear up existing FTAs is hardly encouraging, since he's implicitly saying that we shouldn't be initiating new free trade agreements, and I would say being against new free trade agreements constitutes being anti-free trade. Or maybe he's arguing that when it comes to free trade, we should 'wait until we sort out all this other stuff', like Donald Trump with Muslim immigration. Again, not encouraging.

Benjamin Cole writes:

Scott Sumner:

I thought I was the only one in the entire U.S. who is concerned about the criminalization of push-cart vending. You say economists "mention those issues a lot."

Really? Who? I love your blogs, but I do not recall you posting on the need to decriminalize push-cart vending. You have mentioned property-zoning a few times, but I do not recall a post devoted to it.

Obviously, you have mentioned free trade many times, and the minimum wage now and then. You are pro-immigration, that is clear.

I happen to believe in free markets---but it is hardly debatable that U.S. economists are far, far, far more vocal about the benefits of free trade and immigration than they are about the benefits of unzoned cities and decriminalized push-cart vending.

Think of your own blogs, and the amount of space devoted to these issues.

Franky, I think property zoning is the biggest structural impediment in the US today, perhaps followed by rural subsidies and parasitic "national security" spending now at $1 trillion a year.

But the the topic is always free trade and the minimum wage.

Just ask Don Boudreaux.

There are structural impediment to be discussed daily, and then there are structural impediments that are not discussed.

Effem writes:

What you call "some people" may actually be a majority of the country...time will tell. That certainly changes how I would think about it.

And I very much agree that imposing behavior on others is something to be avoided. However, any decision imposes something on others...there is no such thing as a neutral decision. "Free trade" imposed a decline in the value of low-skilled labor at the same time that it lifted the value of other activities. Not saying that's wrong, but it was definitely the imposition of a utility framework on many people who didn't like that framework. If a different framework becomes supported by the majority how is implementing that any different?

ThomasH writes:

Add in the fact that Keynesians continue to talk about fiscal stimulus even as interest rates rise above zero (and hence there is no case for it)

What I hear "Keynesians" like Larry Summers arguing for is for governments to act like smart investors and invest in things with future benefits when low real interest rates make their NPV's positive. This has zero zilch nada to do with whether the nominal interest rates are a few basis points above or below zero.

ThomasH writes:

Both the joy of contrarianism and events contribute to the tarnishing of neo-liberal ideas, whihc were themselves contrarian in their day. [Cue Wordsworth quote, "... to be young was very Heaven].

I think even the most neo-liberal economists have always known that free-trade has costs to some people. Our public stance rested on a) the belief that the benefits really were greater than the costs and b) the belief that the cost were small and transitory -- the benefits would be widely distributed -- and c) that the basic problem was that the costs were visible and the benefits invisible. Our role was to defend the public interest (the widely distributed benefits) from "protectionists."

Over time many of our assumptions have proven shaky. Trade deals nowadays are less about freer trade and more about extending copyright and patent monopolies. For reasons that may not have much to do with trade, the benefits of trade (and economic growth generally) do not seem to be as widely distributed as in the past and the opposition to using taxes and expenditures to redistribute income has gone from passive to fierce. The costs to specific groups of workers and geographic areas seem larger and less transitory than we thought.

I think the movement on thinking about minimum wages has many parallels. The costs seem less and the opposition to using higher EITC as an alternative way to shift income to low-paid workers has grown.

As for fiscal v monetary policy, I do not think there ever was a consensus that larger deficits were not desirable when real borrowing rates were low and there were important differences between marginal cost and market prices in many markets (unemployed resources). And as a matter of fact monetary authorities have acted as if low nominal rates have been a problem in maintaining trend NGDP (or even price level) growth. The new heterodoxy is "austerity" the idea that expenditures should be cut during recessions.

Mark writes:

Effem: "there is no such thing as a neutral decision. "Free trade" imposed a decline in the value of low-skilled labor at the same time that it lifted the value of other activities."
There is such a thing as individuals being permitted to make their own choices though.

With free trade, people choose to buy some goods over others; this causes some goods to be valued more than others, and therefore some labor to be valued more than others; just as when I switch from buying Sierra Mist to Sprite I "impose" a decline in value of the labor of those working for Sierra Mist. But it's not really an imposition on them. All transactions are voluntary; the value of their labor is not a right of theirs; it is rather the product of the voluntary transactions others choose to make with them; they are not morally (nor should they be legally) to have their labor be valued at or above some level.

However, with restrictions on trade, value is not being determined b voluntary transaction. The value of some laborers' labor (and all consumers' money) is being reduced, not because some people chose to buy different goods, but because the state either forced them to, or penalizes those who don't.

And I would still argue that there is a net loss in utility when the state does that, so even from a utilitarian perspective it is not justified. So why is the state forcing people to change their behavior in ways that reduces their utility and the utility of others, this is not as bad as when some people change their behavior voluntarily and that results in a loss of utility to some others? Why is state-imposed detraction of utility more permissible, and therefore,somehow, and acceptable remedy for voluntary changes in consumer behavior?

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