Who's the Impractical Theorist?

by Don Boudreaux on December 22, 2006

in Economics, Myths and Fallacies, Science, Trade

As both an economics and a law student, I was very lucky in the professors I had.  Fritz Machlup‘s International Trade course at NYU will always rank among the intellectual highlights of my life.

Another truly great teacher is Leland Yeager, from whom, at Auburn University, I learned much about money, banking, macroeconomics, and political philosophy.  Leland is a scholar’s scholar: careful, thorough, brilliant, learned, wise, and possessing not a whiff of self-importance.  (See also this wonderful article, by Bill Breit, Ken Elzinga, and Tom Willett, on Leland.)

I recently discovered a monograph Leland wrote back in 1954, entitled Free Trade: America’s Opportunity.  (Although long out of print, the wonders of the market enabled me to buy a copy for $9.99.)  This monograph bursts with wisdom and insight — for example, consider Leland’s response to those persons who assert that free trade is good "in theory" but not so good "in practice."

The Protectionist actually takes pride in his narrow viewpoint.  He sticks to plain facts — clear examples of benefit from Protection or of damage from foreign competition.  He does not concern himself with remote, intangible, theoretical consequences.  Thank God, he is no impractical theorist who never met a payroll!  If he happens to be a watch lobbyist, he must struggle for patience with the poor understanding of Congressmen who never had practical experience in retailing watches.  If he is a fishing-tackle man, he pities the ignorance of trade-agreements negotiators who never had practical experience in manufacturing fishing tackle.  He scorns the theorist’s "over-all" view of the economic system and sticks to the down-to-earth case-by-case approach.  In so doing, he refuses to consider the decisive heart of the tariff controversy.

[Leland then offers this quotation from Norman Campbell, What is Science? (1952)]:

The plain man — I do not think that this is an overstatement — calls a "theory" anything he does not understand, especially if the conclusions it is used to support are distasteful to him…. It is only because he does not understand "theory" that the plain man is apt to compare it unfavorably with "practice," by which he means what he can understand.

The practical man is apt to sneer at the theorist; but an examination of any of his most firmly-rooted prejudices would show at once that he himself is as much a theorist as the purest and most academic student; theory is a necessary instrument of thought in disentangling the amazingly complex relations of the external world.  But while his theories are false because he never tests them properly, the theories of science are continually under constant test and only survive if they are true.  It is the practical man and not the student of pure science who is guilty of relying on extravagant speculation, unchecked by comparison with solid fact.

For all his vaunted realism, the Protectionist theorizes without knowing it.  Furthermore, his haphazard theories are far less able to stand inspection than those of the trained theorists whom he scorns [pp. 33-34; original emphasis].

The next time you hear someone praise the "practical" insights about trade issuing from people such as Ross Perot, Lou Dobbs, or the well-meaning but economically uninformed business executive who pleads with Congress for protection from competition, remember the above slice of wisdom from Leland Yeager.

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{ 7 comments }

David Z December 22, 2006 at 11:54 am

Good, good – right up until the point you mention the "well-meaning but economically uninformed business executive…" pleading with congress for special protection. I think in a great number of cases, it can be shown that the business executive is not factually ignorant, but rather cares only for the short-term gain he can make at the expense of others in society – whether this be in the form of preventing domestic competition through licensure or preventing foreign competition through trade restrictions. They fully understand the consequences of their actions, and their rent-seeking desires can only be acheived through the violent, coercive employment of state violence.

ben December 22, 2006 at 4:35 pm

Great post, right on the money. Probably the most common catch all objection to trade from lefties that I see is "its all fine in theory". This is a helpful response to that.

Franz December 22, 2006 at 4:46 pm

Theory and practice are the same in theory … but not in practice

Ray G December 22, 2006 at 9:59 pm

I left school years ago for a job at Morgan Stanley – at which I proved to be inept, and so I'm going back to ASU (Az) to get my economics degree this next school year.

Older now, and domesticated, moving isn't an option, and so I'm a little anxious about what the economics department at ASU is like. I've been fortunate throughout life in general to always find the wise and avuncular for guidance, I hope I don't run aground now.

Ray G December 22, 2006 at 10:04 pm

And the "plain man" language in the quotation is archaic though accurate. One is just not allowed to speak (write) so bluntly anymore.

Unintended consequences are always well beyond the "plain man's" understanding, and thus, this argument will never fully go away.

Steve December 23, 2006 at 10:16 am

This practical versus theoretical is a reason that we will always have a tougher battle for the mind. As I once wrote,

"One of the difficulties in making a case for free trade, besides the fact that the principle of comparative advantage is counter-intuitive, is that the effects of lowering trade barriers are immediate, felt,
dramatic, particular, and often painful, but the benefits are subtle, distant, diffuse, and gradual. It makes our job much harder in many ways. But…, we have the data."

Another economics lecturer put it this way, "Economists care about statistical people." In other words, if Lou Dobbs wants to make the case for protectionism, he has only to go to that broom factory in Illinois (an example used by Russ in The Choice: A Parable of Free Trade) and interview Joe who has been laid off because people are now buying cheaper, high quality brooms being imported from Guatemala.

Who are we going to interview?

Great post,

Steve

True_Liberal December 24, 2006 at 8:25 pm

Lou Dobbs et.al. are journalists first and foremost. Their job is to sell THEIR product, and they know the easiest way is to shove a camera and microphone into someone's face and ask "How does this make you feel?" The health of the nation's economy has nothing to do with it. Dobbs doesn't WANT to learn anything that interferes with the direction of his career.

That's why I admire John Stossel, who at least has the guts to admit he was wrong for the early years of HIS career.

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