Economists, Foreign Competition, and Self-Interest: Rodrik's Doubly Wrong
By Bryan Caplan
Here’s how Dani Rodrik closes his defense of popular anxiety about globalization:
And by the way, Harvard cannot fire me because I have tenure (as does Tyler). Which makes any pontification on our part about job anxiety a very poor guide to reality.
Seldom have two sentences been so wrong-headed.
1. Rodrik’s insinuation – that economists don’t worry about job destruction because they have high job security – was empirically tested years ago in my 2001 JEL and 2002 EJ articles; for a more readable version, see my book. The results: Yes, economists have slightly higher job security than the general public (economists average 2.32 on a 0-3 scale; non-economists average 1.88); and yes, there is a mild tendency for job security to “make people think like economists.” But the magnitude of the effect is miniscule.
Consider the two questions in the Survey of Americans and Economists on the Economy most relevant to Rodrik’s thesis. Respondents were asked whether the following were major (=2), minor (=1), or non-reasons (=0) for sub-par economic performance:
Q16. “Companies are sending jobs overseas.”
Q17. “Companies are downsizing.”
On the outsourcing question, economic training reduced the average answer by .87 units. Making the public’s job security match economists’ would have reduced this gap by .01 units.
On the downsizing question, economic training reduced the average answer by .81 units. Making the public’s job security match economists’ would have reduced this gap by .03 units.
If you look at the whole survey, raising the public’s job security to match economists’ would have eliminated about 2.6% of the typical belief gap. That’s it.
If these results surprise you, they shouldn’t. Contrary to a few economists who torture the facts until they confess, it’s well-known in public opinion research that self-interest has little effect on people’s political views. (And if Rodrik tells you that education, controlling for income, is a decent measure of self-interest, I have to disagree).
2. While it’s true that tenured professors have near-total job security, it’s also true that research professors in American universities work in one of the very few American labor markets that is almost completely open to international competition. American-born professors like me and Tyler Cowen have to compete with Turkish-born professors like Dani Rodrik, and even Canadian-born professors like Alex Tabarrok. Just imagine how much my wages would rise – and where I’d be teaching – if American universities could only hire American-born Ph.D.s!
Even if an American professor has tenure, then, foreign competition in his labor market imposes an enormous financial cost. But you know what? I enthusiastically support the right of foreign-born professors to work in the U.S. As far as I can tell, most tenured professors – especially economists – feel the same way.
In sum, not only does self-interest empirically fail to explain economists’ support for globalization; but if American-born economists were really self-interested, we’d want to close the massive immigration loophole that has filled our departments with foreigners.
So why don’t we? Partly it’s our deep appreciation of the social benefits of trade; partly it’s our cosmopolitan values; and partly it’s the fact that the foreign-born economists who compete with us are also our dear friends.