Sunday, February 27, 2011

Economic Ignoramus

FLG doesn't always agree with E D Kain, but in general when it comes to social and political questions, FLG thinks Kain is pretty reasonable. On the other hand, when he starts to blog about economics, well, he's the drunk, crazy guy at the end of the bar rambling on incoherently about stuff he knows shitall about. Has Erik ever taken an economics class? For example, he writes:
Globalization has been little more than a corporate-statist effort using pernicious instituions like the World Bank to plunder the labor and resources of developing nations at the expense of workers everywhere and to the benefit of the powerful.

Really, asshole? Hundreds of millions of people have been lifted out of poverty in China alone. Sure sounds like horrible fucking plunder of the little people to FLG.

Now, in complete fairness, Erik is riffing off of Kevin Carson who does make some valid criticisms of the neoliberal, Washington consensus. The valid criticism is that too many people equate free market with privatization. If a big business horns its way into a developing country through lobbying, etc, or countries offer subsidies to big business to develop factories, then that's not truly free markets.

But, look, we've known there were gains from trade international trade since David Ricardo. And to be honest, we knew that people could specialize and trade since Smith. Ricardo was just extrapolating to nations. So, there are definitely gains to be had. Are there problems? Sure. But let's not throw the baby out with the bath water.

Erik should really stop reading Kevin. All of Kevin's concerns are distributional, which is to say premised on a static analysis of wealth as fixed. The trouble with focusing on distributional aspects in a static analysis is that you miss the dynamic aspects. Trade generates gains. There are winners and losers, but what economics tells us is that the gains necessarily outweigh the losses. Yes, in the short run, there are winners and losers, but in the long run nations adapt to specialize where they have comparative advantage and are better off.

As FLG has said before, arguing against free trade is like arguing to block out the Sun because people get skin cancer. Skin cancer is obviously a serious issue, but you wear a hat and put on sunscreen, not block out the Sun. Kevin's take seems to be a tad more reasonable than that. He's not for blocking out the Sun. He's complaining about the regulations regarding the production, distribution, and sale of suncreen and hats. Again, that's fair insofar as it goes. Unfortunately, his solution is to socialize hats and sunscreen, which simply won't work.

And the idea about getting rid of the WTO is just silly on its face.

1 comment:

The Ancient said...

If you haven't already watched this, Gordon, Krugman and Mankiw all make interesting points.

I was surprised to hear Mankiw say that at the time of the financial collapse, there was little discussion of relative effectiveness of fiscal policy vs public spending. (Perhaps he and Bob Barro should have lunch more often.)

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