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Please, No More Policy Voodoo

Here’s a letter to a new correspondent:

Mr. E___:

Thanks for your e-mail in response to my linking earlier today to this essay on trade by David Henderson.

You argue that Henderson’s case for free trade “would have been stronger if he qualified it by agreeing that any tariff cut should first have to pass an empirical benefit-cost test…. [J]ust because overall welfare was ordinarily raised by past tariff cuts does not mean every future tariff cut would be beneficial.”

With respect, I disagree with you. Here are three reasons why:

First, there’s no practical way that even super-genius econometricians can measure the full range of detailed costs and benefits that will result tomorrow from tariff cuts today. All such attempts at soothsaying are nonsense.

Second, given free-trade’s long track record (alluded to by David) of successfully promoting economic growth and of raising the living standards of the masses, the burden of proof is properly placed not where you’d have it – on the case for free trade – but instead on the case for protectionism.

Third – and as David says in a somewhat different context – your argument, if valid, has implications that I’m sure you reject. Making trade freer simply means allowing fellow citizens greater freedom to deal commercially with foreigners. Yet if you’re correct that any such freeing of trade “should first have to pass an empirical benefit-cost test,” then you must also believe that the abolition of, say, Jim Crow legislation ought not to have occurred until and unless “an empirical benefit-cost test” showed that net gains would result from freeing non-blacks to deal commercially with blacks. Ditto for policy changes that removed men’s barriers to deal commercially with women. Would you have wished to condition these policy changes on their ability econometrically to meet such a burden?

Calling for empirical evidence of the likely cost-benefit consequences of this or that policy is well and fine. But unless issued with a proper appreciation of the categories into which proposed policy changes fall, with a wise and ethically defensible determination of the appropriate location of burdens of proof, and with full awareness of the inherent strict limitations of empirical predictions, such calls aren’t so much for scientific policy analyses as they are calls for policy voodoo.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030