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There are at least two serious criticisms of free trade that I can think of that are not addressed in this article: 1. Borrowing from Taleb's latest book, free

by darawk 11y ago

There are at least two serious criticisms of free trade that I can think of that are not addressed in this article: 1. Borrowing from Taleb's latest book, free trade encourages economic fragility. A country that specializes in textiles will be completely ruined when textile manufacturing is automated. Further, this level of specialization may crowd out other opportunities for growth and suppress the evolution of an economy towards even more productive exports by suppressing variability. 2. It is possible, as we are seeing in the US to some extent, that the comparative advantages that a country may have simply don't need to employ very many people. In the case of the United States, some of our biggest exports are tech and finance, and those industries simply cannot support massive employment on the scale necessary to give everyone a job. I'd be curious to hear any counter-arguments to these ideas.

jimmytidey 11y ago
1a) Fragility - yep that's a fair point, however, you'd have to weigh the opportunity cost of not produce your most efficient good with the size of the predicted crash. I guess this is the notion of the Banana Republic. 1b) Crowding out - On conventional wisdom (if such a thing exists) this is not valid, the economy should automatically target production to whatever is most effective through the profit motive. However, some think that doesn't always work: this is the idea of 'lock-in' or 'path dependency'. As you say, maybe it's hard for a developing country to switch from the garment industry to more sophisticated manufacturing, and they get stuck on a particular course. You'd have to explain why that didn't happen in the West. 2) Comparative advantage says nothing about how many people will be employed. All it's saying is that the sum total of the value of goods will be greater. However, in theory, even if the US had very low employment rates, the few remaining high earners could redistribute that wealth and make everyone richer. Politics may come into play here!
- darawk 11y ago
  1b) I think i'd say that it is both path-dependent and also the simple lack of variation (as in any evolving system) produces poorer results with respect to long-term innovation and sustainability. If I had to venture a guess as to why this didn't happen with the west, i'd say it's because we were first. It was easy for us to transition into new markets because there were no established players already doing it better - making a shitty car is a great business if everyone else is riding horses. 2. Ya, that's fair. But I think it's a pretty huge caveat to "free trade is good" to have to say "free trade is good on the whole, but harms poor, low skilled workers in the absence of concomitant and independent wealth distribution reforms (which are, here at least, politically untenable)". And it's strange to me that Krugman who I think is generally considered leftist wouldn't address this seemingly obvious shortcoming.
  - jimmytidey 11y ago
    On point 2, it's worth noting the Corn Laws in UK, where the poor pushed for international trade in grain, because they wanted cheap bread. The rich owned farms, and wanted high grain prices, so pushed back against free trade. There is no 'default' distributional effect from free trade, it can go in any direction.

by darawk 11y ago

jimmytidey 11y ago

1a) Fragility - yep that's a fair point, however, you'd have to weigh the opportunity cost of not produce your most efficient good with the size of the predicted crash. I guess this is the notion of the Banana Republic. 1b) Crowding out - On conventional wisdom (if such a thing exists) this is not valid, the economy should automatically target production to whatever is most effective through the profit motive. However, some think that doesn't always work: this is the idea of 'lock-in' or 'path dependency'. As you say, maybe it's hard for a developing country to switch from the garment industry to more sophisticated manufacturing, and they get stuck on a particular course. You'd have to explain why that didn't happen in the West. 2) Comparative advantage says nothing about how many people will be employed. All it's saying is that the sum total of the value of goods will be greater. However, in theory, even if the US had very low employment rates, the few remaining high earners could redistribute that wealth and make everyone richer. Politics may come into play here!

darawk 11y ago
1b) I think i'd say that it is both path-dependent and also the simple lack of variation (as in any evolving system) produces poorer results with respect to long-term innovation and sustainability. If I had to venture a guess as to why this didn't happen with the west, i'd say it's because we were first. It was easy for us to transition into new markets because there were no established players already doing it better - making a shitty car is a great business if everyone else is riding horses. 2. Ya, that's fair. But I think it's a pretty huge caveat to "free trade is good" to have to say "free trade is good on the whole, but harms poor, low skilled workers in the absence of concomitant and independent wealth distribution reforms (which are, here at least, politically untenable)". And it's strange to me that Krugman who I think is generally considered leftist wouldn't address this seemingly obvious shortcoming.
- jimmytidey 11y ago
  On point 2, it's worth noting the Corn Laws in UK, where the poor pushed for international trade in grain, because they wanted cheap bread. The rich owned farms, and wanted high grain prices, so pushed back against free trade. There is no 'default' distributional effect from free trade, it can go in any direction.