Monday, March 17, 2008

Greg Mankiw on Free Trade

Mankiw writing for the New York Times,
NO issue divides economists and mere Muggles more than the debate over globalization and international trade. Where the high priests of the dismal science see opportunity through the magic of the market’s invisible hand, Joe Sixpack sees a threat to his livelihood. This gap in perspective grows especially wide whenever the economy experiences short-run difficulties, as it is now. By all indications, the issue could come to dominate the presidential campaign.

Economists are, overwhelmingly, free traders. A 2006 poll of Ph.D. members of the American Economic Association found that 87.5 percent agreed that “the U.S. should eliminate remaining tariffs and other barriers to trade.”

The benefits from an open world trading system are standard fare in introductory economics courses. In my freshman course at Harvard, we start studying the topic in the second week, and we return to issues of globalization throughout the year. The basic lessons can be traced back to Adam Smith of the 18th century and David Ricardo of the 19th century: Trade between two countries creates winners and losers, but it leaves both nations with greater overall prosperity. [link]

Ok, a few things: First, isn't it a pity when most policy-makers remain ignorant to one of the fundamental lessons taught by people like Smith as early as the 18th century?

Secondly, Mankiw rocks. I highly recommend his textbook for anyone interested in learning about economics. It should be the standard textbook book in intro-econ courses.

Thirdly, the rest of Mankiw's article confirms much of what I said about Obama. He's bad on Trade. Do read the whole thing.

No comments: