International Trade Economists are Bayesians
By David Henderson
In Bryan’s excellent recent post on why most economists aren’t Bayesians, he writes that the position of economic theorists is:
If no one has proven that Comparative Advantage still holds with imperfect competition, transportation costs, and indivisibilities, only an ignoramus would jump the gun and recommend free trade in a world with these characteristics.
I agree with the thrust of Bryan’s comments–which is why I said his post is excellent–but I think he used, in the quote above, the worst example he could have chosen. His minimum wage example is much more appropriate. What I have found, first studying under international trade economists as an undergrad, then studying them, then talking to them and reading their work over decades, is that they “get” it. They understand that the world would have to be a weird place indeed for free trade not to work.
Here’s what I wrote about that issue in my book, The Joy of Freedom: An Economist’s Odyssey, in a section where I discussed what I learned in some advance undergraduate courses at the University of Western Ontario:
The first lesson I learned was that the rules for the debate between freedom and government intervention varied from one economic subdiscipline to another. Take international trade. My professor, J. Clark Leith, appeared to be a complete free trader, as were the other trade economists in a school that was thought of as having the strongest international trade group in Canada, a country known for producing economists who are strong in trade. In a large part of the course, Leith considered the various arguments that had been made for tariffs rather than free trade. In each case, he would lay out the argument clearly and then show the problems: Imposing tariffs would cause other countries’ governments to retaliate with tariffs of their own; in rare circumstances, tariffs could benefit a country, but the information a government needed to set tariffs at the “right” level was information it was unlikely to have; governments with the power to set tariffs would abuse it because the government officials involved didn’t have the right incentives. These were not just Leith’s views but were–and are–the dominant views of international trade economists around the world. An international trade economist who advocates tariffs or import quotas is about as rare as a whooping crane.
I then went on to discuss how the rules for debate differed from those in welfare economics. Now maybe Bryan would respond that that makes his point: the hands-on economists “get” it and the theorists (such as those in welfare economics) don’t. In that case, then, as Saturday Night Live’s Emily Litella, played by Gilda Radner, said, “Never mind.”