Without intending to, I again came across an essay by Paul Krugman that I had first read 3 years ago, in which he seeks to understand why anyone could be opposed to the claims of mainstream economics in favour of free trade, particuarly anyone intelligent and informed. Unfortunately, Krugman fails at his self-appointed task, because he resorts to arguments which are essentially ad hominem attacks on the opponents of free trade theories.
In the context of the assessment of alternative public policies I view ad hominem arguments as invalid and irrational, a sign that a proponent cannot provide substantive justifications for his or her claims. (Such personalist attacks are not necessarily invalid or irrational in all contexts.) I believe economists do themselves and their profession a great disservice by dismissing arguments against free trade on the grounds of ignorance or insufficient intelligence, or any of the other ad hominem arguments Krugman uses.
There is a perfectly respectable intellectual argument, not based on ignorance, against Ricardo’s argument. This is that his theory ignores the single most important question in the debate, which is: Where does a comparative advantage come from? A national comparative advantage is almost never, despite what many free trade advocates seem to think, an act of God. It is almost always the result of human actions, witting or unwitting. The Republic of Korea (South Korea) has no “natural” reason to be a world-leading steel-producer or world-class large-ship-maker. But successive ROK Governments intended the nation to lead these industries, and the nation has in consequence succeeded in doing so: through direct government investment; through subsidies to Korean companies; through discriminatary trade practices against foreign companies; and through large-scale, concerted, long-term public and private pressure on private Korean companies to invest in particular ways, and not in other ways.
I note in passing that a strong national desire to establish an international lead in a particular commercial sector does not necessarily mean it will happen. Japan’s powerful Ministry of International Trade and Industry (MITI), when it existed, tried repeatedly to establish Japan as a global leader in avionics, electronics used in aircraft, without any success at all.
So, imagine you are a political leader of a country with an existing large-ship-building industry faced with rising Korean competition, for example the UK in 1980. Your chief economic advisor tells you that free trade is an unmitigated good, and that your markets should all be open, because the economic benefits outweigh the costs. These economic benefits may outweigh the associated costs or they may not in any particular case, and they may well fall differentially upon different stakeholders with different political power. Even if the economic benefits outweigh the economic costs, the social cost-benefit analysis may be very different (eg, long-term unemployment; increased crime as a result of unemployment; the destruction of local communities; the dispersal or loss of a skills base; the loss of defence-related industries and companies; etc).
Whatever the cost-benefit outcomes, what really sticks in my craw is that the advice from economists is to do nothing to protect local industrial capabilities, so that others who have ignored such advice (eg, the Government of the ROK) should prosper. You would think that, of all people, economists would have learnt some game theory!
The argument here is not between the ignorant and the wise, as Krugman seems to think, but between people with conflicting sets of values. My values tell me that economic theory should include discussions of political power, discussions of social, cultural and institutional structures, and discussions of the reasons for and the consequences of differing preferences over outcomes; most mainstream economists do not think these issues are part of economic theory.
To be called ignorant because I have different set of values to an economist is not only an insult, and not only disrespectful of my rights as a stakeholder in the society in which I live; it is also revealing of the vapidity of mainstream economics, busy building abstract theories which ignore all the most important questions.
Economists have heard these criticisms of free trade theory since at least the time of Marx. Is it recalcitrance or malfeasance that allows mainstream economists to write articles as if ignorant of such criticisms?