Not changing minds on TPP

The use of the large number “trillion” as opposed to a relative change in GDP is all I need to see to ignore Cowen on this. Because it is only that use of a large absolute number that makes the reduction “by half” seem somehow generous rather than both completely arbitrary and an avoidance of the actual uncertainty in the models, which is much larger – in fact, much larger than the predicted relative impact on GDP.

Remember, we can’t accurately forecast monthly jobs numbers—yet we can somehow tell you to count on a miniscule change to GDP 10 years hence.

On the other hand, we can’t accurately forecast the weather a month in advance—yet we can with some accuracy forecast the climate 10 years hence.

In other words, I don’t think that this kind of forecast in inherently absurd. But to make such a forecast the details of the treaty matter.

derived from a model of a 29-chapter trade agreement that the modelers never saw

And that’s where any forecast turns into so much garbage: it can at best be based on educated guesses about what is in the treaty, and will at worst just be derived from whatever assumptions are baked into the forecaster’s ideology.

“it can at best be based on educated guesses about what is in the treaty…”

And even that’s assuming there is a coherent definition of economic growth, which there isn’t. See Simon Kuznets’s 1947 Journal of Economic History article, “Measurement of Economic Growth,” for a discussion of the difficulties involved in DEFINING and MEASURING growth (let alone projecting it). “Growth theory” gets around these profound difficulties by simple assuming that they can be disregarded at least “for the time being” (which eventually stretches out into forever).

But the real secret is the marvelous device called the “built-in mechanism” that ensures that labor and natural resources will appear when and where they are needed and won’t be exhausted because that trusty built in mechanism will “turn off consumption gradually and in advance.”

Models that rely on hypothetical but unspecified or fantastical “built-in mechanisms” are not “models of complex systems”.

See “Denial, Then and Now”

http://econospeak.blogspot.com/2015/05/denial-then-and-now-is-end-of-world-at.html

The Peterson International Economics Institute? Peterson is a bloody loon! He’s an advocate of abolishing Social Security, cutting the debt, etc., etc., etc. Though the PIIE has some respectable researchers, they’re mostly a purveyor of right-wing junk economics, and they’ve been wrong a lot more than they’ve been right.

Seriously, why is this work treated as anything other than propaganda?

What Sam and infovore said:

For many systems you can compute the incremental effects of a perturbation to the system (in this case the trade agreement) better than the actual trajectory of the system. Thats very much the case with climate, we can fairly accurately calculate the size of the change in the planet’s energy balance, even if we cannot determine the details of its trajectory through time.

So the issue, is whether the data and theory that go into the computation of the perturbation make sense.

Some thoughts:

a) the Peterson Institute model is designed to basically include only the benefits of trade agreements. The economic costs of trade agreements can only come from trade diversion. The authors try to estimate the labor adjustment costs and they claim that they are minuscule compared to the benefits; but, still, the 1.9 trillion figure is gross of those adjustment costs. There is nothing necessarily wrong with the model per se but the results based on the model provide only one input of the cost-benefit analysis, not all of them. It is like reporting the effects of a medical treatment without really assembling info about collateral effects. One should be clear about this. Those who just use the PI model to proclaim victory and go home are either unaware of the literature or in bad faith.

b) I really wish we abolished the “trade deal” misnomer. We may as well call it IP deal or investor protection deal etc.

c) I have checked briefly who are the economists who came out in favor of the TPP. Posen, Cowen, Smith Krueger, Mankiw etc.: none of them is a trade economist while some are more properly considered bloggers. Still, it is true that, except Krugman (a trade economist), very few economists have so far come up against TPP.

d) As always, Rodrik is worth reading. Josh Bivens had a nice post too.

Another key nugget of wisdom from One-Minute MBA is this:

“Good ideas do not need lots of lies told about them in order to gain public acceptance.”

Apparently, the lawyers haven’t heard this adage:

http://efila.org/wp-content/uploads/2015/05/EFILA_in_response_to_the-criticism_of_ISDS_final_draft.pdf

(I know ISDS is only part of TPP, but it’s an important and highly controversial part, and obviously one EFILA thinks is worth writing 40+ dense pages about).

“if economists as a profession are incompetent and corrupt boobies…”

Don’t you think that’s a little harsh on our blue-footed friends, Bruce?

Oh, for non-Americans, perhaps, the allusion was to “Be Kind to our Web-footed Friends”.

Bruce and others: I am an economist and I won’t comment on the profession’s incompetence and corruption. I just want to note that, while I like sardines, I did not attract my mate by flaunting my feet.

More seriously, I was just noting that even using the literature on the subject – and so implicitly assuming that that literature is not tainted by the incompetence and/or corruption of the profession – one need not come in favor of TPP.

Wait – so Cowen is not a risible hack?

What next? A CT post on McArdle’s TPP misapprehensions?

What is this trade agreement of which you all speak? TPP is an IP agreement. (Okay, with a bit of trade.) And as we all know, too much IP can be welfare-destroying. Indeed, with patents, it is pretty easy to argue that any IP is welfare-destroying, except in pharma. Pharma IP is better than no special incentives, but better incentives for innovation probably exist.

To whom will those economic gains accrue?

US society is already dangerously unbalanced economically, socially and politically. If a trillion dollars in gains go to the top 10% of the society, and a net minus (or even a small plus) accrues to the bottom 90%, that only makes the balance problem worse and does not make the US a stronger society. A net GDP gain, even a sizable one that – implausibly – raises all boats, does not automatically equal a net value gain, since there are many and various forms of value that GDP does not measure. Some of these have to do with the health and integrity of the social contract, the dignity and efficacy of democratic self-government, the economic bargaining power of the least advantaged members of society and the intangible but very real hope and confidence that come from living in a society in which one has not been consigned to a lower caste from which there is no escape.

There are other values in play as well, most of which economists have no viable techniques for measuring. And if they did come up with such techniques, nobody should trust them – since in most of the areas, economists are, in the words of the great Walter Sobchak, out of their element.

Globally, TPP will probably accelerate the regulatory race to the bottom: the most people-hostile, business-friendly countries will acquire enhanced power to set the regulatory agenda. TPP will also increase the power of corporations and organized private capital, and decrease the power of representative governments. This is precisely opposite from the direction in which we should be going. But is a direction that a lot of economists probably heart, since hatred of representative government and fascination with the cold, authoritarian efficiency of capital seems to be woven into the moral and intellectual DNA of the economics community generally.

TPP will make it easier and less risky for US-based capital to establish manufacturing subsidiaries offshore, and export more jobs. We’re still waiting for the creative destroyers who love this aspect of capitalism, and who think entirely in terms of crude, measurable aggregates, to clean up the colossal messes they have made in the Rust Belt and the other derelict communities and classes that are only some of the rotten fruits of the free, poorly regulated and poorly planned flow of capital.

I like the point in the OP that on policy everyones views are:

“the product of political values [rather] than dispositive evidence.”

And was going to launch into a jeremiad about it, but decided against it as it would be too uninformed and tedious.

Going from this though:

http://nautil.us/issue/24/error/the-trouble-with-scientists

I’ll ask a few questions instead.
How far do ideological priors and value judgements skew research (rather than policy advice) in the social sciences (I’ll leave out natural sciences as it will lead to too much defensiveness)? My impression is that most peoples intellectual priors are built in by the second year of grad school, and most of what follows (in ones career) is just making more or less interesting/convincing arguments in support of their ideological preferences and values ? Is this too strong a statement ? And following from that, what do all those other factors that implictly skew research, (ie social/tribal pressures, a naturally limited set of tools/models (obtained early in someones career), professional socialisation etc) mean about the relevance of research for policy purposes, or research in general ? I assume most of this is meant to come out in the wash, but does it ?
(Obviously, I know social scientists(economists included) are clearly aware of all of this, it’s just rarely if ever acknowledged by their public personas. Instead what we get is ‘show me the evidence’ , and evidence selected to suit their argument.)
I guess all that leads to, what should be the experts role in policy debate ? (Don’t get me wrong, I think expert engagement in public debate is great, especially for those of us with an interest in but without the ability/drive to learn a subject in such detail. But I’m starting to wonder is it all really mostly just ideology, motivated reasoning and tribalism?)

In response to TM (7, 29): No, capital mobility is not a problem for trade theory, and Herman Daly was embarrassingly wrong on this. Ricardo’s assumptions in the early 19th century are irrelevant: open up any mainstream textbook on modern trade theory and you will see at least a chapter and probably more on models with capital flows.

This particular error has been harmful for the movement against neoliberal “trade” agreements. Daly’s prestige was apparently strong enough that activists with no direct knowledge of the topic started repeating the mantra that economics was wrong on trade because their models assumed that capital would never cross borders. This served to convince those who had studied economics that the alter-globalizationists were a bunch of ignorant crazies. In my experience, those who reacted that way included a large swath of academics in the social sciences (not just economists), journalists and other “thought leaders”. I won’t say that this was decisive in the larger scheme of things (it obviously wasn’t), but it was a costly unforced error.

The irony is that, as Joan Robinson point out decades ago, the problem is that the “capital account” is something of a misnomer, and economists are too prone to attribute trade imbalances to capital allocation decisions.

Unfortunately, you don’t get to pick your opponents. Tyler Cowen seems like a tool to me, but when a tool gets space in the NYT, you have to deal with him. So I am happy CT is throwing bricks at Cowen’s claim, because it is going to pop up as the DC conventional wisdom to push this terrible treaty down our throats.
Just wait. It will become the “Saddam Hussein was behind 9/11” of this push.

Roger Gathmann @ 32

Obviously, someone picks Tyler. The NY Times among them. Left neoliberals love Tyler. Brad DeLong and Noah Smith can’t get enough of him.

“Tuna labeled “dolphin safe?” Products advertised as not being produced by sweat-shop labor? These agreements are a regulatory race to the bottom.”

Bingo. I’m kind of surprised by the radio silence on this WTO ruling. Kinda puts lie to Obama’s claim that we won’t have to change our laws due to TPP and the ISDS. Even the GOP could get on-board with opposing these sorts of tribunals if you tell them that they can no longer have US raised beef, but will have to take their chances on mystery meat.

Peter Dorman @30:

I’m not sure why capital account is a misnomer; it’s simply the mirror image obverse of the current account. And while it is true that imports/exports of capital equipment and intermediate goods are not much different from FDI, it was unrestricted, unregulated flows of finance capital that Keynes focused on as the danger and sought to remedy with his Bretton Woods proposals. Without some such system to regulate often sheerly speculative and short-term financial flows, then the disruptive and predatory pathologies of globalized trade will likely swamp the virtues of any comparative advantage effects. (And the doctrine of comparative advantage does operate with fixed and static endowments, not to mention full employment assumptions, and doesn’t really address the sequential “inter-temporal” effects, as various countries move up- or-down- the value-added chain, in this high-tech age with strategic “new trade” theory. Nor does it necessarily say anything about how the increased economic surplus it would realize would be distributed between and within countries, only that each country would reap some portion of the gain).

And the gains to “an increased division of labor, limited only by the extent of the market” carry as their obverse an increase in oligopolistic concentration and “competition”, shifted to an international level. MNC production platforming, (which I think goes together with the hypertrophied financial sector and especially the explosive growth in financial derivatives, as a means to manage the risks of such globalized operations), amount to arbitrage strategies with respect to currencies, wages, taxes and regulations that weaken the capacities of notionally sovereign (and at least potentially democratic) governments to select and implement their own policies in response to the needs and interests of their own people, in favor of the extra-territorial “rights” of capital. While the vast volume of financial flows, where the gross astronomically exceeds the net, has made nonsense of any notion of “equlibrium” FX rates, leading experts such as Obstfeld to through up their hands in futility, announcing the meaninglessness of annual current account and NIIP figures.

It’s too late to reverse the global “integration” of the economy, since production supply chains are now too firmly embedded in it. The horses have left the barn and are in the next county by now. Old fashioned protectionism and any of its traditional justifications amount to shutting the barn door after the horse have fled. But it’s notable how economists simply denounce any opposition to “free trade agreements” as simplistic appeals to old fashioned protectionism, (without acknowledging that there once might have been merits to such policies), while themselves appealing irrelevantly to the old fashioned comparative advantage argument, when tariffs are already minimal and any further gains to trade along such lines correspondingly negligible, while the gains-from-trade as a source of growth were always exaggerated, (compared to, say, tabooed fiscal policies). Only a mind as supercilious, shallow and conformist as Obama’s could think the TPP a “signature” achievement. The doubling-down on failed neo-liberal policy regimes after the GFC has revealed their essential bankruptcy.

It’s my view that global current account imbalances were a prime causal factor in the GFC. The claim of the “Washington Consensus”, (with whatever admixture of self-delusion and bad faith), was that global “liberalization” of trade would lead to increased investment and growth in the “developing world” and “emerging markets”, due to the relative scarcity and thus higher returns to capital there. Yet the U.S. ended up running current account deficits of 6% in 2006 and 2007, maybe 1.2% of total global output, which means it was importing an identical amount of capital. (Latvia, a postage stamp sized country and thus irrelevant to the world at large, ran a current account deficit of 23% those 2 years. Who among the Latvian officials or the Swedish bankers financing them thought that was a good idea?). It’s true that capitalist “market” economies contain “built-in” equilibriating adjustment mechanisms. But the problem is they might well be equlibriating fundamental underlying disequilibria. There’s something very screwy in such a global “architecture” that economists, doubling down on their theories, don’t seem to lay a finger on.

@39: I thought that you wanted to buy the pig in the poke; that pork was the superior meat that you’d think you were buying so long as the seller didn’t let the cat out of the bag prematurely.

The paper Cowen points to (http://www.iie.com/publications/pb/pb12-16.pdf) not only incorporates capital mobility, but indeed gets much of its postulated TPP benefits *from* capital mobility!

Cowen has not troubled to be clear in his arguments and so while I think Henry is getting him wrong, it’s pointless to try to figure that part out. I will point out that “Ricardian” can be used in roughly the way “Newtonian” or Darwinian” often are, to indicate classes of effects or arguments. “Ricardian” does not necessarily mean that someone is cranking all their results out of a primitive one-factor model, which the authors Cowen draws on most emphatically are not doing. (Tom @12 has good points about that paper.)

PD: all standard text book examples (going back to Ricardo with his wine/textile example) tacitly assume capital immobility. Why don’t they come up with realistic examples that actually work? Because there aren’t any.

More importantly, where are the empirical validations of the trade theories you are talking about incorporating capital flows? If you compare Daly’s with Cowen’s predictions of the actual results of trade liberalization with capital mobility, who is closer to the truth?

TM: I don’t want to get into an e-tiff. (1) No, the trade textbooks don’t assume capital immobility. Look at Salvatore, to take one prominent example. Can you cite a trade textbook that *does* assume capital immobility throughout? (2) Read what I wrote to JCH. I am not an apologist for “vulgar” trade theory. I am not Krugman either, for better or worse. Pointing out a flawed argument about X does not mean you accept Y. FWIW, I absolutely agree that the endogeneity of employment is a big part of the story.

Peter Dorman @43:

I didn’t mean to implied that you had swallowed the mainstream orthodoxy on trade. (Given what I’ve read of yours, it would surprise me, if you did). The part that was specifically addressed to you was the bit about Robinson’s objection to the term “capital account”, since it is just an accounting identity (or whatever one should call the same thing with opposite math signs) and doesn’t imply any “causal mechanism”. But I thank you for your informative response. For the rest, I was just speaking for myself. But even if H. Daly made a crude simplistic error, that doesn’t mean that a) more “sophisticated” criticisms can’t be brought to bear along the same lines and b) that standard mainstream invocations of “comparative advantage” aren’t equally crude and simplistic. Which was part of the point I was trying to make. Comparative advantage is a logically sound argument. (Though it’s worth noting that Ricardo made it in a specific historical context and with a specifically partisan intent). As such, it’s reasonable to think that such effects exist. But it is not a timeless and unconditional “truth”, as it is presented to the public (and treated among economists, even if qualified, as a badge of tribal loyalty). And, of course, there are other effects of trade that might countervail and even swamp such tendencies.

43:|” In the case of the TPP, however, trade theory is not even at issue.” Yes yes yes. To get into a conversation about free trade, here, is to be lured into the desert of red herrings, where all the losing causes go to die. No, this is a straightforward power play on the Intellectual Monopoly and De-regulatory front. That is all there is to it. What can’t be squeezed out of democracies that are already dominated by cash will be enforced by a higher level – which, of course, we have to submit to. A higher level that would, for instance, try George Bush and Cheney at the Hague would be laughable – it would never happen.
The first and last thing to say about the TPP is that it is not about free trade, except as a sidecar.

Something to keep in mind:

http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_d68906VNWqVmiGN

Distinguished economists overwhelmingly agree that (1) fast-track increases the likelihood of trade deals coming to pass, and (2) past trade deals have benefited most Americans. Countless surveys show the universality of these views in the profession, including specialists in the economics of international trade.

There is nothing irrational or necessarily mistaken about opposing TPP, of course. TPP may not be like past trade deals in some respects. One may have political-philosophical disagreements with mainstream economists that render their welfare assessments incomplete. And of course, one may disagree with the underlying reasons why economists hold these views.

Still, the case for TPP is not some analysis produced by the Peterson Institute. The case is that (1) TPP is likely to resemble past trade deals in numerous respects, (2) those past deals have benefited most Americans, and most importantly (3) those past deals have enormously benefited foreigners (who ought to count for something, surely).

If you want to see the arguments for (2) and (3), don’t look at one analysis by one think tank–look at the entire literature on this topic, which includes thousands upon thousands of analyses by countless extremely smart and disinterested people who have studied the issues very carefully. Engage that literature–don’t trivialize it by calling it “a Ricardian model”. You may find that many of the arguments you find compelling on these topics have been considered and been critiqued into oblivion by economist after economist. Again, you can disagree, but make an academically respectable argument, or cite one that lays out its argument clearly so we can see whether it has already been answered by the literature.

Notice that Krugman doesn’t do this, probably due to his familiarity with this literature. Instead he questions (1), suggesting TPP is not like past trade deals, ones he has supported time and again. Maybe so, but saying that TPP is “about” IP, is a non-sequitur. TPP, like any policy, will be about a lot of things. Among other things, it will be about liberalizing international trade. What elements of typical international trade deals will TPP leave out? We don’t know, since TPP is not a finalized policy yet, but we have a long history of presidents negotiating trade deals, and Obama has indicated his intention to pursue a similar sort of deal, and this suggests TPP will, in many respects, resemble past deals, even if it includes some new, more dubious elements. So Tyler’s question is very much on point: what do you think TPP will include and why? What do you disagree with about any number of analyses suggesting the conventional elements would be beneficial? And can you give us an argument for estimating costs for the dubious elements exceeding these benefits that doesn’t pass the laugh test? The silence on this from the TPP critics is striking.

“I’d respond that they are both remarkably silent (publicly) and remarkably ineffectual, if your statement is accurate.”

Both responses are true, sadly. Lots of academic economists have marginalised themselves through an exclusive focus on esoteric journal articles, and the rest have largely been marginalised by media preference for more easily accessible bank “economists”.

@52 a couple of things:

1 as john halasz wrote there is a strong appeal to authority in your post. I don’t think mainstream economists on average have earned the status of being taken as a reliable authority. Some of the individual economists on that list should rather be distrusted.
2 ” past trade deals have benefited most Americans.”
That is still compatible with these other claims
– past trade deals having harmful effects to the worst off 10% of the population.
– doing a different trade deal that cuts out some stuff (IP fluffing; investor protections; …) and add some other things (e.g. much more cooperation against tax evasion activities) would be much better for most Americans.

The case: “Overall” there will be net benefit.

(Which will accrue, overall, to those who, overall, own things, overall.)

@53: Yes, it was an argument from authority, also known as deferring to the experts. My point is precisely that none of us commenting on this topic are well-read in the trade economics literature, hence it is presumptuous to make claims that this literature can summarily be dismissed. We can either defer to the consensus of those who are well-read in this literature, or we can, you know, do our homework. I prefer to defer to the experts on topics about which I’m not myself an expert, or if the relevant authorities disagree on the subject, to remain agnostic. Here, however, is a topic where the uniformity of opinion among experts is remarkable.

@56: Yes, not everyone agrees that mainstream economics deserves the kind of deference we give to, say, natural scientists. When economists say, I have a model which says “X”, I’m usually not convinced by that either. But the trade literature is full of theoretical work (models), data analysis and interpretation, and policy studies. The judgment that trade deals have been beneficial in the past isn’t based on one model that says “X”, it is based on the judgment of people who have studied all of these ideas and information extensively, in a way that non-experts in general have not.

As to your second point, I conceded that one may philosophically differ from economists, by for example weighting the interests of the least well-off Americans far more than the rest of Americans, and the rest of the world. Fair enough, but then what’s all the business about TPP not really being about trade, or TPP being a raw deal for the middle class, etc. etc.? Those are empirical claims, and they can be evaluated, and I don’t think it looks good. You don’t make those claims, perhaps, but then I suppose my comment wasn’t addressed to you.

And yes, we should always critique policy in hopes that better policies will come in their place. However, trade deals are notoriously hard to make happen without giving presidents a free hand to negotiate, and when presidents have done so in the past, we’ve tended to get a certain kind of deal. So the relevant question is: is it likely to be a good deal or a bad deal? I can see why it would be a good deal (see all past trade deals), and I can see that it might have bad aspects (eeek, IP protection!), but I haven’t see a serious effort to balance the cost/benefit ledger.

PD 46: I haven’t said that the text books explicitly assume capital immobility. That is part of the point, that the assumption is implicit but hardly ever explicitly discussed and justified. I have said that the standard textbook examples – usually variants of Ricardo’s original thought experiment – clearly would fall apart under unlimited capital mobility (you haven’t said whether you disagree, if you do I’d be curious why). These examples, and not the mathematical formalism, are what is used to convince people of the theory of comparative advantage. As jch said above, if Daly’s argument is crude and informal, so is almost all of the pro-trade rhetoric yet we rarely hear those supposedly sophisticated economists you are referring to in 30 (“those who had studied economics”) make the same kind of condescending noises about the shallowness of the pro-trade discourse.

Instead of more back and forth, I think it would really be enlightening if you could answer my question from above: can you give us a statement of the assumptions underlying the mathematical theory of comparative advantage? As Krugman says:
“Both comparative advantage and natural selection are ideas grounded, at base, in mathematical models — simple models that can be stated without actually writing down any equations, but mathematical models all the same.” Surely you can give us a statement of this “simple model”?

TM: Where are you getting these claims? Have you ever actually looked at a textbook in international econ? The ones I have learned from or taught from are explicit about the assumptions on which the simple Ricardian model rests, and then move to models with less restrictive assumptions, including mobile capital.

Why are you pestering Peter for stuff that’s so readily available? Here is the first google hit, a standard textbook exposition of the model. Note the discussion of assumptions. http://internationalecon.com/Trade/Tch40/Tch40.php

There *are* important critiques to be made of the model, the way it gets taught, and the way it gets deployed in argument.

Thanks Colin, this is helpful. Have you noticed that the statement of the model you link to assumes not capital immobility but actually that “there is no capital needed for production”? Is that supposed to refute Daly’s critique? Wow. I’m speechless.

The following discussion (from the overview) is instructive. I am grateful that this textbook is explicit about assumptions and admits that they are highly unrealistic (which in introductory text books is not usually the case). And yet the following discussion is utterly illogical and completely defeats Krugman’s claim that comparative advantage is a scientific theory like natural selection.

From the Suranovic text book (emphasis added): With so many unrealistic assumptions it is difficult for some people to accept the conclusions of the model with any confidence, especially when so many of the results are counterintuitive. Indeed one of the most difficult aspects of economic analysis is how to interpret the conclusions of models. Models are, by their nature, simplifications of the real world and thus all economic models contain unrealistic assumptions. Therefore, to dismiss the results of economic analysis on the basis of unrealistic assumptions means that one must dismiss all insights contained within the entire economics discipline. Surely, this is not practical or realistic. Economic models in general and the Ricardian model in particular do contain insights that most likely carry over to the more complex real world . The following story is meant to explain some of the insights within the theory of comparative advantage by placing the model into a more familiar setting. (And the story then is of the kind that I criticized above).

I’m getting tired of this. PD asked in 46: “No, the trade textbooks don’t assume capital immobility. Look at Salvatore, to take one prominent example. Can you cite a trade textbook that *does* assume capital immobility throughout?”

The text book you Colin linked to explicitly makes assumptions that are even more restrictive than capital immobility! Ricardo himself opted to stress capital immobility rather than omitting it altogether because clearly he thought that ignoring capital would be ridiculous and nobody would buy such an obviously flawed theory – so Ricardo deserves credit for trying to be a tad more realistic than modern economists!

Conclusion: Question answered, yes text books do make these – highly unrealistic – assumptions. So what is your point? That everybody already knew the model is primitive? Great and how is that an argument in its favor? Is Daly wrong to criticize the model because one cannot expect it to be anything other than primitive? Or are you saying that real trade theory is not encapsulated in the comparative advantage model? But that is the model that the text book gives, and contrary to your claim it doesn’t give any less restrictive version of comparative advantage. That according to the text book IS comparative advantage, take it or leave it (and I quoted above at full length what the text book has to say to justify the unrealism of the model – it’s frankly depressing. And Mankiw and the likes are making the case for trade being universally beneficial by appealing to Ricardo and comparative advantage. But those who criticize him are the ones guilty of ignorance. Yeah very convincing.

^ “comment favorably” should say “comment unfavorably”

SamChevre: “But that’s absolutely typical of models of complex systems–from fluid dynamics all the way to global climate models: the overall impact is predictable, even if the details aren’t.”

To within an error of 0.4% after 10 years????? And we really want an error at least one order of magnitude less than our prediction, don’t we? I.e., an error of 0.04%. You’ve got to be kidding.

Come ON now, is there any disagreement that when you have to compete in a larger market that there is not a forceful drive where every company has to do better or the ability to allocate resources flowing from demand/purchases will be directed towards some other company.

Competition is real.

But only a few critiques are needed to place the net gain in doubt. First, there is learning by doing, and in part due to comparative advantage, some countries might find their economies stuck in a situation where their exports are low value added and their imports are high value added and they cannot enjoy the same gains from trade as other countries. Second, unchecked markets have time and time again shown their proclivity towards monopoly, and in the absence of effective intergovernmental cooperation and regulation, it is easy to imagine monopolistic or oligopolistic situations arising over time.

Is that enough to create the “reasonable doubt”?

In each specific trade deal, it should be possible to take inventory of specific costs and benefits in different industries. Aggregate modelling will too easily be subject to arbitrary or poorly motivated parameters, etc.

Finally, if it were such a good deal, then why can’t they tell us enough about it for potential opponents to be able to raise their concerns? The democratic deficit in the deal is in my mind sufficient cause to oppose it regardless of any supposed economic gains which may be expected.

Ronan(rf): “My impression is that most peoples intellectual priors are built in by the second year of grad school, and most of what follows (in ones career) is just making more or less interesting/convincing arguments in support of their ideological preferences and values ? Is this too strong a statement ?”

For scientists, yes. Scientists are trained to do their best to demolish their own arguments, to murder their darlings. That does not mean that they do not become dogmatic, like everybody else. But not until they have undergone their ordeals.

So what this tiff amounts to is that H. Daly was precisely wrong, but broadly or maybe just vaguely right. IOW his “criticism” of the prevailing international trade regime lacks adequate specification in terms of the “correct” models, even if there is some prima facie relevance as to what he is gesturing at. (Kaldor, for instance, long ago, pointed out, with a specified model, how countries with a concentrated, high value-added industrial sector would be advantaged in term-if-trade over countries which specialized in low value-added raw materials exports. And financial crises due to unregulated financial flows are hardly new; the difference with the GFC is that it originated and struck at the center rather than the periphery). So, yes, maybe he has failed to make his case, in terms of congeries of precisely specified models. But then the goods or ends that he seeks are also different that the goods or ends embedded in conventional economics, a “steady state”, no growth environmentally sustainable economy, rather than growth, expressed in GDP terms, as “full employment” and the continuing accumulation of “wealth”, (or the maintenance of debt). So there is something of an unreflective argument across a chasm here. Now I happen to think that a transition to an energy-and-resource efficient, thus environmentally sustainable economy is indeterminate with respect to GDP growth, (since GDP is a flow measure and it is the transformation of the treatment of stocks, “wealth”, that is the end-in-view), such that no growth or “de-growth” is not the immediate, nor ultimate objective. But the marginalization of Daly on purely formal grounds, rather than addressing the substantive issues, is all too typical of the contemptuous way that “mainstream” economists operate.

But Nathan, whether the deal is beneficial or not is hardly a standard for evaluating it.

One would at a minimum, if one were serious, want to know “For whom is it beneficial,” “Are there groups for whom it will not be beneficial,” “What are the compositions of these groups experiencing different projected outcomes from the deal?”

Instead, what we hear is: “Oh it’s just going to be a rising tide like these deals always are.” And so we stick to the charade of debating — admittedly with no data at all — the question of how much the tide will rise.

Colin 77: “your truculent confusion stems from conflating “comparative advantage” as a concept with a particular model that’s useful for elucidating it.”

That is a really interesting statement. Why don’t you pontificate about the confusion of economists like Krugman instead of pestering me for using the term model in exactly the way that everybody else uses it:

“Both comparative advantage and natural selection are ideas grounded, at base, in mathematical models — simple models that can be stated without actually writing down any equations, but mathematical models all the same.” (Krugman, http://web.mit.edu/krugman/www/ricardo.htm). Several times now I have asked you and Dorman for a statement of the model behind the idea and you Colin in lieu of an answer pointed to a text book which in every respect confirms what I have said. Either you show me a better model – one that incorporates capital mobility while still supporting comparative advantage – or, frankly, you shut up.

“Has either of us denied the obvious truth that the Ricardian cloth-wine model is a one-factor model?” You have said that Daly is a fool for saying that comparative advantage doesn’t take capital mobility into account. Yet the only statement /model of comparative advantage that either of you so far has provided does exactly what Daly said it did – it doesn’t take capital mobility into account (in addition to other flaws, of course).

“Textbooks have more than one chapter, usually.” Enough hand-waving. So far you have referenced the chapters that support my claims. Why don’t you show me the chapter that supports your claims.

@83:

It would be better if you would provide a marker to what you’re responding to, (rather than requiring the chore of finding the exact comment in an otherwise dismal thread).

Oh, silly me. But it’s been several days, is my excuse. Still perhaps part of Henry’s point is that it is not simply a matter of having some correct and comprehensive value-neutral model, (and it’s doubtful that any such fully predictive model exists, given the predictive record of economists, on trade in particular), but that it is always as much a matter of conflicts in values or ends-in-view, which conditions the choice and application of models. (And that people always at least implicitly have some sort of conceptual model in their heads isn’t a guarantee of any correspondence with reality or even an undistorted grasp of practical experience).

But then the larger scandal is the secrecy in which the proposed agreement is wrapped, which accords with the anti-democratic authoritarianism which is part of the “essence” of neo-liberalism. So no analysis and public evaluation of the distributive and other likely effects of the proposed agreement is possible. Which accords with that other key tenet of neoliberalism, that only Mr. Market, in his infinite complexity, can know anything for sure. Which amounts to agnotology, the deliberate production of ignorance. So maybe the taunting of the presumptuous and pretentious ignorance of the claims of others is in order.