Introducing the BBPI

by Henry on March 4, 2008

Some of the things that are most interesting to international political economy scholars such as meself are notoriously difficult to measure. To take one example, there’s a lot of muttering in the US and elsewhere about international trade, whether multilateral and bilateral trade deals are good or bad for the US economy, and so on (these debates also have close equivalents in Europe and elsewhere). But how to cut through the hype to figure out whether or not there is a real likelihood of change in the current regime or not? The usual approach is to look for an indicator variable of some variety that will allow you to track underlying processes that you can’t directly measure. I think I’ve found one – and it’s _at least_ as good as the Economist’s famous Big Mac index for figuring out shifts in PPP. My claim is that the degree of rhetorical overkill in Jagdish Bhagwati’s op-ed fulminations on trade is a very good indicator of what the free trade establishment actually thinks about the underlying risks or threats to the existing regime, and (to the extent that this establishment is politically plugged in) a plausible leading indicator of what’s likely to happen in the future. I’ll endeavour to test this hypothesis by keeping track of the Bhagwati Blood Pressure Index (or BBPI) over a period of time, and testing whether it maps well onto the expected outcomes.

Bhagwati’s piece in today’s “FT”:http://www.ft.com/cms/s/0/f24fa1c4-e92b-11dc-8365-0000779fd2ac.html is a good place to start. Those unfamiliar with his writing style might think that language such as “faintly ludicrous,” “denigration of freer trade,” “witless fear of trade,” and “disturbingly protectionist” indicates a BBPI that is alarmingly high, both for free trade and for Professor Bhagwati. Comparative analysis with previous op-eds and writings would suggest, however, that these criticisms are almost genial by historical standards; at worst they’re love taps. By my reading, the BBPI has dropped quite significantly since mid 2007 or so, suggesting that the free trade establishment believes that the current fervor over free trade is froth that will mostly disappear after the primary season. On the evidence of this article, we may expect the BBPI to drop still further if Barack Obama is elected President (one presumes that Bhagwati believes Austan Goolsbee’s representations to the Canadian government), but to rise substantially in the unlikely event that Hillary Clinton snatches the crown. Also of interest is the evidence that the article provides on the mental modelling processes that underlie these empirical predictions:

whereas Mr Obama’s economist is Austan Goolsbee, a brilliant Massachusetts Institute of Technology PhD at Chicago Business School and a valuable source of free-trade advice over almost a decade, Mrs Clinton’s campaign boasts of no professional economist of high repute. Instead, her trade advisers are reputed to be largely from the pro-union, anti-globalisation Economic Policy Institute and the AFL-CIO union federation.

Clearly then, your soundness on trade depends on the extent to which your campaign employs economists whom Professor Bhagwati approves of. I suspect that Hillary’s campaign is doubly damned because it’s supported by Paul Krugman (whom professor Bhagwati condescendingly refers to as an apostate ‘former student’). Nor had I hitherto realized that the economists of the ‘pro-union, anti-globalisation Economic Policy Institute’ were unprofessional economists of little repute; silly me.

Update: “Megan McArdle”:http://meganmcardle.theatlantic.com/archives/2008/03/a_fair_trade_index.php suggests that a basket of pundits would be preferable.

{ 20 comments }

1

Kieran Healy 03.04.08 at 4:36 pm

Is the effect of “U.S. Political Party Presently in Charge” an intervening variable that complicates the interpretation of the BBPI and related indices?

2

Tom Hurka 03.04.08 at 4:53 pm

And some of us can track the CTSI (Crooked Timber Sarcasm Index) — definitely on the rise!

3

Kieran Healy 03.04.08 at 4:55 pm

Yeah but we’re a lagging indicator.

4

jacob 03.04.08 at 5:07 pm

Is this true, that Obama’s main trade advisor has been a “valuable source of free-trade advice over almost a decade” and that Clinton’s trade advisors are from EPI? If so, I may have to entirely reevaluate my support for Obama over Clinton. I had not before heard that Clinton’s advice was coming from EPI. Indeed, this Louis Uchitelle article from November compares the economic advice that Clinton, Obama, and Edwards were getting and argues that Clinton and Obama were pretty much the same, and that Edwards’s advisors were further left.

5

a. y. mous 03.04.08 at 5:22 pm

On an off-note, it is interesting (and not pleasantly. I am quite familiar with that geography/society in general and its ‘forebears’. So to speak. After all, I am of that ilk.) to note that, of late, there have been quite a few articles that have made their way into the blogo-sphere, including the hallowed halls of Crooked Timber (I remember a blog post that was linked to here. The response there was “Holy Shit! Crooked Timber! Must become intelligent!” or something close to that.) that are authored by gentlemen who have a markedly Sub-Continental names.

But, this is not surprising. This attitude towards the “winning side” is endemic with us. Unfortunately, history (and geography. Hey! I am the ‘mons montis quod flumen’ guy!) shows that we have this bad habit of joining the winning side just when their luck has run out. Or is slowly, but surely beginning to.

This has happened with the Mughals (Akbar’s period was when the locals actually become amalgamated but two kings hence, the Brits bought us lock, stock and barrel.), then with the Brits; just as the Queen crowned herself over us, we began saying ‘OK’ to her and immediately after Europe committed suicide. Twice. Fat Man Cigar was forced to lose an empire to win a battle. And then the Soviets. Non-aligned for a very long time and then got pally-pally with Gorbochev and… And now America….You get the picture.

This vociferous commentary and public visibility of Indian sounding names attached to essentially non-Sub-Continent subjects, is by itself proof enough that something is going to change. Soon. And to their detriment.

Be prepared.

mons montis quod flumen!

6

Righteous Bubba 03.04.08 at 5:49 pm

I’m guessing A.Y. stands for Adonis Yolanda.

7

Jeff 03.04.08 at 5:53 pm

Some of the things that are most interesting to international political economy scholars such as meself are notoriously difficult to measure.
To that point, everyone using data should read Oskar Morgenstern’s “On the Accuracy of Economic Observations” (1963, 2nd ed.) which masterfully puts one in the right frame of mind when using such numbers. No doubt many of the data series he discusses are better than they used to be, but nothing he says is dated.

8

a. y. mous 03.04.08 at 6:02 pm

LOL! Bubba, I am far too tone deaf to even know those names! No. A. Y. stands for something much too mundane, in keeping with the anonymous nature of this mode of communication. :-)

9

Walt 03.04.08 at 6:51 pm

That’s very funny, Henry. Having been subject to Bhagwati editorials over the years, I think I’ve already been subconsciously using your index.

10

notsneaky 03.04.08 at 7:21 pm

I dunno. This seems only slightly better than that “Paul Krugman kicks his cat” index that Jonah Goldberg came up with. Same thing. Same amount of substance. Different ends of the political spectrum.

And yes, when it comes to trade policy, the EPI does suffer a serious credibility gap. Just ask the former student, Paul Krugman, who’s taken them to task on it several times in the past.

11

Max Renn 03.04.08 at 7:54 pm

“of whom Bhagwhati approves.”

Ask not for whom the Bhagwhati tolls.

12

P O'Neill 03.04.08 at 8:42 pm

It’s important that the BBPI controls for inconsistency in the underlying rhetoric over time. For example, part of Bhagwati’s evidence that Democrats have shifted to protectionist is that they tend to vote against free trade agreements such as NAFTA and the later bilateral and regional deals that have come before Congress.

Could this be the same Jagdish Bhagwati who has slammed such deals as “termites in the trade system”, since (as that incarnation of Bhagwati correctly points out) they are actually preferential trade deals that give special benefits to some countries and thus divert trade from the most efficient partner?

One of his arguments for why Hillary is more protectionist than Obama is so weak —

Fourth, while Mr Obama’s anti-Nafta rhetoric is disturbingly protectionist, as is Mrs Clinton’s, remember that this is also strategic. If both are anti-Nafta in the campaign now, her opposition is reinforced because she carries the burden of having supported her husband in backing it.

Since Bill supported it, she has to be more against it? Isn’t the usual complaint about Bill and Hillary that it will be Bill running the show?

It will be truly miraculous if the BBPI can surive the volatility in its underlying driver.

13

notsneaky 03.04.08 at 8:54 pm

I believe that Bhagwati is simply assuming that your general anti-Nafta rhetoric is positively correlated with general protectionist feelings. Which makes more sense than assuming that general anti-Nafta rhetoric is a symptom of a nuanced view which sees bilateral trade agreements as bad but is in favor of multilateral ones. Seriously. Give a guy a break. I don’t see anything crazy in that op-ed. He wants to argue that Obama will be less protectionists than Hillary and he does.

14

Kevin Donoghue 03.04.08 at 9:26 pm

notskeaky: I don’t see anything crazy in that op-ed.

Neither does Henry – he remarks on Bhagwati’s (relatively) genial tone. Maybe P. O’Neill has put his finger on the reason: Bhagwati believes that PTAs foster protectionism and he won’t shed any tears for Nafta. If so he is being reasonably consistent, but Henry will need to examine the issues closely if the BBPI is not to mislead him.

Bhagwati is quite a snob though, isn’t he? As if the managers of a political campaign would boast about having a highly reputable professional economist on their team. Even when they actually do have one they usually go out of their way to disown the poor sod. Quite right too – Lloyd George had Keynes on his side in 1929 and what did he get? A memorable pamphlet. And look what Alan Walters did for Mrs Thatcher. These guys are ballot-box poison.

15

Kevin Donoghue 03.04.08 at 9:27 pm

For notskeaky read notsneaky. Sorry.

16

PHB 03.04.08 at 11:56 pm

Now what was it I was saying the other days about economists?

Its not every economist that carries on this way but it does not exactly appear to be bad for one’s career to do so.

Same thing happens in Architecture, you get ahead by designing pretty buildings, not buildings that actually work well.

Obama has suffered a significant political setback as a result of this, the Clinton campaign are using it as evidence that he might not be quite the straight talker he presents himself as. And you can be sure that the McCain people will do the same.

17

terence 03.05.08 at 12:18 am

And yes, when it comes to trade policy, the EPI does suffer a serious credibility gap. Just ask the former student, Paul Krugman, who’s taken them to task on it several times in the past.

Which, given Krugman’s support of Clinton, would suggest one of two things: the EPI really isn’t running Clinton’s economics shop; or Krugman thinks that, on balance, their policies are more good than bad.

You tell me, Notsneaky.

18

notsneaky 03.05.08 at 12:32 am

Or he’s willing to overlook this aspect because of other aspects. It’s a multidimensional policy space after all. He probably thinks health care is more important.

19

terence 03.05.08 at 3:43 am

Hi Notsneaky,

Personally, I really doubt that the EPI are doing the economics for team Clinton (if they were she’d probably have my hypothetical vote). However, I think you’re right about Krugman supporting the overall policy package on the balance of certain key components (like health). For what it’s worth though, Krugman is one of the group of economists who have recently starting arguing that globn., while good for developing countries, is harming working class America*. He’s blaming China not NAFTA, of course. But I think the point still stands – and that Bhagwhati is wishing away the side of the ledger he doesn’t like.

Or, to put it another way, would ‘protectionism’ really have such resonance amongst the voters of Ohio if global trade really was a win win for them.
______________________________
*this is a big simplification of his argument, sorry. I gotta run to take a class. But I think you know what I mean.

cheers

Terence

20

Tim Worstall 03.05.08 at 10:23 am

“Clearly then, your soundness on trade depends on the extent to which your campaign employs economists whom Professor Bhagwati approves of.”

Well, if you were a trade economist by, er, trade, then that seems like a remarkably logical way of evaluating the candidates.

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