Which War Matters?
As I said in my last post, we face a tradeoff between tinkering with policy and fighting off the protectionists (and other enemies of free markets). Consider the contrast between the way we discuss economic issues and the way a law firm functions. Internally, lawyers might have sharp disagreements about the merits of various legal positions. They need to discuss these legal issues in order to give good advice to their clients. However, they do not air these disagreements in public, much less in the briefs they submit to the court. They don't want their own internal arguments cited back to them by the opposing party.
In economics, though, there is much more transparency. Anyone with internet access can download a pretty wide range of econ papers. People like Dani Rodrik write blogs about economic policy. In fact, there is a fairly smooth continuum from completely ignorant people to economists who write highly regarded papers. Policymakers tend to listen to the economists, but arguably not enough. Meanwhile democratic pressure is brought to bear, so that it helps if voters understand the basic issues.
In other words, we don't have the privilege of running our society like a law firm. The debates that are internal to the field of economics are freely available to people outside economics. That's why there's a tradeoff between tinkering with the machine and preventing an idiot from smashing it with a hammer.
My inclination is to see the protectionist risk as low. To be precise, the effect of the low-level debate is small, and the effect of its misuse of high-level arguments is even smaller. In contrast, the risk posed by well-organized interest groups is acute, but that's another story.
Meanwhile, I put a high value on the kind of dissent expressed by Rodrik. This stems in part from my understanding of research on how groups make decisions, but I also have a general belief that dissent is valuable. This stuff matters. For years, the "Washington consensus" - that the path to prosperity is through free trade, privatization, and free flow of capital - governed development policy. It has recently fallen out of favor, but the point is that the consequences of ideas are very real. It matters that the case for free capital markets is different from, and probably weaker than, the case for free trade in goods and services. It matters that free trade isn't as good as advertised. It matters that cartels are much more prevalent than some people once thought (I'll write a post about this soon).
We can figure these things out, and make better policy, but only if people like Rodrik voice their doubts.
I suppose I'll have to write another post on the public discussion of economics, but that might have to wait.
In economics, though, there is much more transparency. Anyone with internet access can download a pretty wide range of econ papers. People like Dani Rodrik write blogs about economic policy. In fact, there is a fairly smooth continuum from completely ignorant people to economists who write highly regarded papers. Policymakers tend to listen to the economists, but arguably not enough. Meanwhile democratic pressure is brought to bear, so that it helps if voters understand the basic issues.
In other words, we don't have the privilege of running our society like a law firm. The debates that are internal to the field of economics are freely available to people outside economics. That's why there's a tradeoff between tinkering with the machine and preventing an idiot from smashing it with a hammer.
My inclination is to see the protectionist risk as low. To be precise, the effect of the low-level debate is small, and the effect of its misuse of high-level arguments is even smaller. In contrast, the risk posed by well-organized interest groups is acute, but that's another story.
Meanwhile, I put a high value on the kind of dissent expressed by Rodrik. This stems in part from my understanding of research on how groups make decisions, but I also have a general belief that dissent is valuable. This stuff matters. For years, the "Washington consensus" - that the path to prosperity is through free trade, privatization, and free flow of capital - governed development policy. It has recently fallen out of favor, but the point is that the consequences of ideas are very real. It matters that the case for free capital markets is different from, and probably weaker than, the case for free trade in goods and services. It matters that free trade isn't as good as advertised. It matters that cartels are much more prevalent than some people once thought (I'll write a post about this soon).
We can figure these things out, and make better policy, but only if people like Rodrik voice their doubts.
I suppose I'll have to write another post on the public discussion of economics, but that might have to wait.
posted by James | 1:16 PM
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