Frankly, I now suspect the same is true in a lot of other areas of economics. Famous economists like Paul Krugman pull their hair out on a regular basis over how people just casually toss off assertions like "The Fed is debasing the currency by expanding the money supply" without paying the slightest heed to what actual theoretical and empirical evidence says about such questions. Krugman seems to think it's a dastardly Republican plot. I strongly suspect it's something much more depressing: simply the norm.
You think it's an accident that we have such a mediocre economy? What would you expect in a country where economics is never actually rationally discussed, only bandied about like so much political sloganeering?
Now here's the shocking question: does this all mean that technically substantial economics is simply a waste of time, because nobody pays it any attention? This includes seriously powerful people in Congress etc, who have said some of the most ignorant things. (Paul Ryan, I'm looking at you.)
I hate to say it, but I honestly don't know. It's entirely possible that it is. And if that's the situation, I have no solution. The best we can hope for is that irrational discussion of economic subjects somehow produces correct policy conclusions just by virtue of compromise and the balance of competing interests involved.
So my depressing conclusion is that on the pure economics of my book, I think I can say I was right, but being right didn't count for anything.
Now let's look at the politics of the book. The key section is the one at the end where I made some predictions (edited a bit for space and clarity):
Support for free trade will probably fall apart over the next few years. As of early 2011, there are four missing prerequisites for free trade to explode as an issue:
1. Everyone is still preoccupied with the financial crisis, its aftermath, and recovery from recession, especially job recovery.
2. There remains a residual sense in the minds of the public and the lawmakers that somehow free trade, despite all its problems, is still sound economics, and that perhaps we should just keep on eating our spinach because it will be good for us in the end.
3. There is no obvious alternative policy on the table. There is instead a grab bag of issues, ranging from Chinese currency manipulation to the proposed Korea, Colombia, and Panama free trade agreements. This paucity of credible alternatives feeds the attitude that nothing fundamental can be done.
4. A specific crisis has not happened to force the system out of its old way of doing things as the debacle in subprime mortgages upended our financial system in 2008 and made continuation of prior policy impossible whether anyone wanted it or not.
For the first prerequisite above to be supplied, all it will take is time, as recessions, even double-dip recessions (?), always eventually end, and the financial crisis of 2008 was successfully patched (albeit at astronomical cost and without fixing its underlying causes, risking a repeat).
For the second prerequisite to be supplied, all it will take is sufficient public debate, between persons perceived as credible, for free trade to become established in the public mind as an issue with two legitimate sides to it. As the reader has hopefully gathered by now, once one seriously scrutinizes the underlying economics of free trade, even if one is not disabused of the policy outright it becomes hard to deny that it is a legitimately controversial issue. So when public debate finally cracks open, free trade will lose its innocence very fast.
Once protectionism is perceived as a legitimate choice, it will become the actual choice of large numbers of people whose protectionist
instincts have been held back by the belief that it is somehow an ignorant
position to take. They will not need to master the details of why it is legitimate; they will only
need to know that it is legitimate.
The third prerequisite above (no obvious alternative) can emerge overnight if some major political figure launches a tariff proposal that captures the public's imagination. Or the myriad individual issues that currently comprise the opposition to free trade could force the soldering together of an omnibus proposal on the floor of Congress.
The fourth prerequisite (a sudden crisis) is difficult to predict
as to time, but we can rely securely upon the fact that unsustainable trends
are always, in the end, not sustained. At some point, America's giant overdraft against the rest of the
world must come to an end. Although our government is trying to postpone the
day of reckoning as long as possible, this day will come.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
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