Some Sort Of Iconic Status Among Economists
Paul Krugman sets out the questions that bug him about the failure of the idea of comparative advantage to take hold in the popular press and among public intellectuals:
Why do journalists who have a reputation as deep thinkers about world affairs begin squirming in their seats if you try to explain how trade can lead to mutually beneficial specialization? Why is it virtually impossible to get a discussion of comparative advantage, not only onto newspaper op-ed pages, but even into magazines that cheerfully publish long discussions of the work of Jacques Derrida? Why do policy wonks who will happily watch hundreds of hours of talking heads droning on about the global economy refuse to sit still for the ten minutes or so it takes to explain Ricardo?
This is why Allan Fotheringham said that to be a journalist, the best education you can get is a broad one, because it will arm you with the intellectual tools you need but don't have, where J-school will give you tools you already possess.
One of the reasons Krugman believes that the idea has yet to hold is partisan blindness:
At the shallowest level, some intellectuals reject comparative advantage simply out of a desire to be intellectually fashionable. Free trade, they are aware, has some sort of iconic status among economists; so, in a culture that always prizes the avant-garde, attacking that icon is seen as a way to seem daring and unconventional.
Before taking a couple of first-year-level economics classes, I was one of those who thought that free trade was inherently a Bad Thing. That was mostly coloured by my political opposition to NAFTA, which had a lot to do with partisan opposition to Brian Mulroney. After being introduced to the concept, comparative advantage, at least arithmetically, made sense.
Another reason Krugman thinks the idea of comparative advantage is unpopular (in the sense that it is not well-known enough) is that it is a concept that can be difficult to explain in a paragraph or two:
At a deeper level, comparative advantage is a harder concept than it seems, because like any scientific concept it is actually part of a dense web of linked ideas. A trained economist looks at the simple Ricardian model and sees a story that can be told in a few minutes; but in fact to tell that story so quickly one must presume that one's audience understands a number of other stories involving how competitive markets work, what determines wages, how the balance of payments adds up, and so on.
In my university notes, somewhere down deep in the archives, is an explanation of how the balance of payments affects things like interest rates, currency exchange rates, and investment and trade levels. I'll be durned if pressed to remember how the relationships work without the notes, but I can at least claim to have taken a couple courses in economics in my university years, which is a lot more than a lot of people.
Krugman on a further reason why comparative advantage is not well-known or understood: “At the deepest level, opposition to comparative advantage -- like opposition to the theory of evolution -- reflects the aversion of many intellectuals to an essentially mathematical way of understanding the world.” Krugman then cites C.P. Snow (echoes of Den Beste) to suggest that those armed with mathematical models invaded territory "owned" by those who didn't.
Getting to the theory itself, first by refuting its critics, Krugman writes about the mistaken belief that trading with "low-wage" nations is ethically wrong: “one never teaches the Ricardian model without emphasizing precisely the way that model refutes the claim that competition from low-wage countries is necessarily a bad thing, that it shows how trade can be mutually beneficial regardless of differences in wage rates. The point is not that low-wage competition never poses a problem.” Krugman then posits that economists mistakenly assume that intellectuals understand the idea of comparative advantage, when really, “they don't -- and they don't even want to hear about it.”
The second explanation for intellectuals' unwillingness to accept comparative advantage is a cultural one:
Modern intellectuals are supposed to be daring innovators, not respecters of tradition. As any publisher will tell you, books about startling new scientific discoveries always sell better than books about known areas of science, even though the things science already knows are in many ways stranger than any of the speculations in the latest cosmological best-seller. Old ideas are viewed as boring, even if few people have heard of them; new ideas, even if they are probably wrong and not terribly important, are far more attractive. And books that say (or seem to say) that the experts have all been wrong are far more likely to attract a wide audience than books that explain why the experts are probably right.
I'm on record as being a fan of minority opinions, but one needs to strike a balance between accepting old ideas which are correct and rejecting those that aren't. All ideas should be questioned (especially the old ones, but also the new ones), but rejecting old ideas simply because they are old is not evidence of a critical mind.
The third reason is that the concept may be more difficult for non-economists to understand than economists think it is. He lays down the assumptions behind the Ricardian model (the following three points are not paraphrases but the actual Krugman's headings to the assumptions themselves):
- Wages are determined in a national labor market
- Constant employment is a reasonable approximation
- The balance of payments is not a problem
The fouth section deals with a comparison between the popular explanations of the theory of evolution and natural selection and the theory of comparative advantage, and Krugman notes that mathematical models have been better presented in the former rather than the latter (with one exception of mathematical models that may be so complex as to be meaningless but yet still challenge the orthodoxy in such a way as to lend them validity).
I alluded above to minority opinions, and Krugman, in his advice for economic intellectuals to help them explain comparative advantage, makes the case that the orthodoxy is actually the minority opinion: “one can seem to be a courageous maverick, boldly challenging the powers that be, by reciting the contents of a standard textbook.”
Link to the essay via winterspeak.com, who calls the essay a “pre-insanity piece by Krugman”, alluding to the latter's second-only-to-Ann-Coulter partisanship blindness.
