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"Faith" In Free Trade?

Posted By Don Boudreaux On July 12, 2007 @ 3:28 pm In Economics,Myths and Fallacies,Trade | Comments Disabled

The blogosphere doesn’t lack for good commentary on this article [1] that appeared in yesterday’s New York Times — an article that suggests that (1) the vast majority of economists are advocates of laissez faire, and that (2) those few economists who dissent from this dogmatic position are treated as scum by the rest of the benighted profession.

Alex at Marginal Revolution [2] hits this nonsensical nail square on the head, and Greg Mankiw makes some important points [3].

I weigh in here only to express my on-going problem with Dani Rodrik’s complaint (also featured prominently in the NYT article) that most economists have a “faith” in free trade — a faith that keeps us from looking at arguments and evidence on trade with open eyes and minds.  Because Rodrik isn’t blinded by any such faith, he (he implies) is a more objective scholar.

I don’t want here to rehearse debates over the meaning of the term “faith.”  I would say that I have no “faith” in free trade; rather, the evidence and the theory of free trade are powerful enough to convince me that it is practically superior to any form of protectionism if the goal is widespread prosperity.  Faith is required when neither evidence nor theory support whatever proposition you choose to (or happen to) believe.  Even if Rodrik is correct about the errors and oversights of traditional trade theory and evidence, it is an unjustified smear to say that those who accept these as the basis for supporting a policy of free trade do so as a matter of “faith.”

But my problem with Rodrik’s position runs even more deeply.  If it’s true that theory and evidence in favor of protectionism are sufficiently strong to warrant economists abandoning their conclusion that free-trade policy is generally sound, then why shouldn’t economists — led by Dani Rodrik — also start exploring the potential benefits of intra-national protectionism?  Surely a scholar not benighted with the free-trade “faith” ought to take seriously the possibility that, say, Tennesseeans could be made wealthier if their government in Knoxville restricts their ability to trade with people in Kentucky, Texas, Rhode Island, and other states?

Indeed, such an objective scholar should be open also to the possibility that residents of Knoxville can be made wealthier if their leaders restrict their ability to trade with people in Nashville, Memphis, Chattanooga, and other locales in that state.

I suspect that if someone proposed to Dani Rodrik that he explore the wealth-creating potential of state-level protectionism, he would refuse.  He would likely (and correctly) say that it’s ridiculous on its face to suppose that such protectionism would make the people of Tennessee as a group wealthier over time.  If my suspicion is correct, then to what would Rodrik himself attribute his out-of-hand dismissal of the notion that Tennessee tariffs might well make Tennesseeans richer?  Would he realize to his chagrin that he is a benighted, faith-based non-scholar?  Or would he instead understand that the case for an extensive, market-driven division of labor is so strong — and that the political border that separates Tennessee from other states is so economically meaningless — that it would be as pointless for a serious economist to explore the economic potential of Tennessee protectionism as it would be for a serious oncologist to try to cure a patient of cancer by bleeding that patient with leeches.

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[1] this article: http://www.nytimes.com/2007/07/11/education/11economics.html?ex=1341806400&en=bf38f9dddc8c8ecc&ei=5090&partner=rssuserland&emc=rss

[2] Alex at Marginal Revolution: http://www.marginalrevolution.com/marginalrevolution/2007/07/fundamental-non.html

[3] Greg Mankiw makes some important points: http://gregmankiw.blogspot.com/2007/07/how-to-be-apostate.html

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