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May 07, 2007

Economist Groupthink

In recent months, the eminent economist Alan Blinder has been making waves with article arguing that offshoring represents a serious economic threat that may genuinely degrade the conditions of the American workforce. Blinder reprised those arguments in a Washington Post op-ed this weekend, where he complained that "lately, I'm being treated as a heretic by many of my fellow economists. Why? Because I have stuck my neck out and predicted that the offshoring of service jobs from rich countries such as the United States to poor countries such as India may pose major problems for tens of millions of American workers over the coming decades."

Reading this, Kevin says,"I'm squinting to detect any apostasy here, but I just can't find it. In fact, this sounds like very standard mainstream liberal economic advice. Is Blinder seriously suggesting that it's apostasy in the economics profession merely to point out that some people will be hurt by offshoring, and that we ought to think about helping them? That's hard to believe."

But true nonetheless. It's not that such ideas are an empirical apostasy, that mentioning them at lunch with some economists will cause your tablemates to scarf down their ham-and-cheese sandwiches and dash back to the safety of office hours. It's that making a public issue out of the dark side of globalization puts you on the wrong team.

This is, in fact, one of the things I found irritating about Jon Chait's article on the blogosphere, which sought to set bloggers apart as some sort of new phenomenon wherein speech is evaluated for impact rather than platonic Truth. Every group operates from an internal consensus that, consciously or unconsciously, it seeks to protect. This goes for activist writers of both stripes, of course, but it also holds true for journalists, who protect certain conceptions of their professions and conventional judgments as to the essential characters of politicians and events, and even for economists, many of whom conceive of themselves as locked in some epic battle against rising tides of protectionism.

For some of Blinder's colleagues, the emphases in his recent work, and the public way in which he's presenting his conclusions, offers protectionist scare-mongering a patina of intellectual legitimacy that could embolden "free trade" opponents. And so, common though his conclusions may be, his attention to the underbelly of globalization is at odds with the ideological ends that many economists, consciously or unconsciously, are pursuing. This may not make him a heretic, as such, but it makes him unhelpful to the cause.

Update: This, however, is a smart critique of Blinder.

May 7, 2007 in Economics | Permalink

Comments

Is there a parallel between the left's critique of free trade and the right's critique of climate change?

Posted by: Jason | May 7, 2007 10:42:59 AM

How dare you criticize free trade !!!

Unless we offshore every single American worker, the Earth will crash into the sun !!!

After all, just look how free trade has made every American worker more prosperous and secure over the last three decades !!!

You Communist !!! It's too bad my good friend Jeanne Kirkpatrick can't have you dealt with like she did with Salvador Allende !!!

Posted by: Bradford Delong | May 7, 2007 10:50:31 AM

I see myself as a fairly strong globalization proponent, but I don't consider it a political apostasty to admit that there will be growing pains. I'm sure the same goes for economists. But in terms psychology, the average American understand job losses and plant closures. What they don't see the new jobs, the cheaper products, the increases in efficiency, and the increasing wealth of the world (which makes us richer as well). This by nature makes it an uphill battle for free trade propnents.

In the '60s, people actually proposed that we should ban the computer and automation technologies. They predicted unrecoverable job losses and horrible changes to the American social framework. And it's true, we did lose jobs to the computer. But we became vastly richer and created even more jobs through the "creative destruction" of the computer.

I agree with Ezra that there are two sides of the debate. Regardless if it is right or wrong, though, I think it's understandable why many economists are uncomfortable with being too critical.

Posted by: Jason | May 7, 2007 10:58:15 AM

Ezra, I think it's very unfair to say that there isn't a great deal of debate within the field on how globalization operates and affects different groups. The difficulty for economists lies in the conflict between the academic nature of their research and the political interest that research inspires. Some economists try to engage the political world and explain their work while others reject it, but they all tend to emphasize the importance of the process: research, writing, and rigorous peer review.

Blinder's claims have serious implications, and I think that economists are uncomfortable with those claims because he has engaged in political debate at the expense of the process.

The cause, Ezra, is knowledge. Economists aren't afraid to turn a paradigm on its head if the evidence warrants.

Posted by: ryan | May 7, 2007 11:20:55 AM

Ezra,

Interesting commentary.

As an aside, do you consider yourself to be an "activist writer" or "journalist"?

Posted by: Wisewon | May 7, 2007 11:21:18 AM

please point out the new jobs jason since the rest of us don't see them.

Posted by: akaison | May 7, 2007 11:27:20 AM

Is there a parallel between the left's critique of free trade and the right's critique of climate change?

No.

If there's anything else you'd like to know, don't hesitate to ask!

Posted by: Stephen | May 7, 2007 11:34:51 AM

If there's anything else you'd like to know, don't hesitate to ask!

Your explanation justifies your conclusion.

Posted by: Jason | May 7, 2007 11:36:43 AM

What they don't see the new jobs, the cheaper products, the increases in efficiency, and the increasing wealth of the world (which makes us richer as well).

Who's this "us," Jason? 'Cause most of us aren't in the top tier that has been reaping all the financial rewards recently. And I'm with akaison: truly, the opportunities in fast food service and wiping the asses of rich old people are booming. But what else have you got to offer? Besides becoming economists, I mean.

Posted by: mds | May 7, 2007 11:53:11 AM

And I'm with akaison: truly, the opportunities in fast food service and wiping the asses of rich old people are booming.

Myth. A study from 1989 to 2002 analyzed this "McJobs" claim. The number of low wage jobs grew by 17.5 percent, which is very close to the overall job growth rate. Meanwhile, the number of high wage jobs grew by 28.4 percent. So in the past decade, there have been more "good" jobs created than "bad" jobs.

Posted by: Jason | May 7, 2007 12:03:44 PM

"I think it's very unfair to say that there isn't a great deal of debate within the field on how globalization operates and affects different groups. The difficulty for economists lies in the conflict between the academic nature of their research and the political interest that research inspires."

This is, literally, exactly what I wrote ("It's not that such ideas are an empirical apostasy..."). And it sort of proves the point, too. I agree that there's much debate within economics circles on the merits and impacts of globalization. And when it leaves those circles, and laymen begin questioning, or economists begin giving perceived ammunition to those laymen, the profession closes up instantly. And that's what Blinder is doing: Giving his conclusions to laymen, whom the profession doesn't trust to incorporate them correctly. They may be right in that judgment, but that's what it is...

Posted by: Ezra | May 7, 2007 12:34:32 PM

Is there a parallel between the left's critique of free trade and the right's critique of climate change?

The right's critique of climate change, in sequence:

1) It doesn't exist.
2) OK, it exists to some small degree, but the observed changes are random fluctuations over time.
3) OK, maybe they're not so random, but the causes are still natural.
4) OK, maybe people are contributing to the problem to some small degree, but it would be premature to do something about it.
5) OK, maybe people are contributing to the problem to more than a small degree, but doing something about it would be far too expensive.
6) It's too late to do anything about global warming, so why bother?

The left's critique of free trade, as a package:

1) It exists.
2) It enables producers to provide goods at lower prices.
3) It does this in part by holding down wages, by putting every worker in the world in competition with every other worker in the world.
3) The net result is that the economic elites are the only significant winners; everyone else in America is treading water.
4) The only political response available is to block free trade agreements. The elites will be worse off as a result, but the rest of us will still be about the same.
5) Then maybe we can bargain: if the elites want more free trade, the rest of us want universal health care, easier unionization, and stuff like that.

No, no parallel.

Posted by: RT | May 7, 2007 12:50:07 PM

This from your referenced...'knzn'

"...accounting is easily offshorable; onsite auditing is not. Computer programming is offshorable; computer repair is not. Architects could be endangered, but builders aren't. Were it not for stiff regulations, radiology would be offshorable; but pediatrics and geriatrics aren't. Lawyers who write contracts can do so at a distance and deliver them electronically..."

As a surgeon, I wondered about my favorite subject...me, usually.

Pretty secure for now ...in making the cut, in that I MAKE the cut.
Unlike the radiologist who deals with perceiving & understanding information
(lots of it, noise and signal together)
and has the job of bringing sense to the flood.
So he has -today- to hide behind his Guild and his Government...and endures for the moment.

And I, because I make the actual cut,
am even more secure
("largely because I am simply a more real-world actually-skilled person", he glowed).

But...wait!
Robotic arms, image-guided instruments & really fast pipes, algorithms for 'making the cut' which are even more secure and safer...
knives that can 'see' into what they cut...

WTF...I am not a speck more secure long term! in the job than the despised & protectionist radiologist.

Dear me!, Septic tank cleaning..but even that? perhaps...

Posted by: has_te | May 7, 2007 12:52:09 PM

provide the link to the study jason.

Posted by: akaison | May 7, 2007 1:02:31 PM

there will be growing pains [from free trade].

Actually, there will pains from no-growth and negative growth.

Athough some economists are beginning to see the real-world impacts of their theories, they stil are not saying the truth:

The US will have a declining standard of living as our wages for 'work' go down as wages are spent elsewhere.

We are seeing that already in stagnant incomes for a large part of the work force, but the big hits (actual declines) are yet ahead when the middle class jobs are exported also.

Can an empire be maintained (all that 'defense' money) on a national income that is moving rapidly to 2nd world status? The re-investment money that we could be using to prepare for a very different future for our working citizens is being spent on investments in non-growth-creating armaments and other costs of being 'the indespenible nation' in war/peace matters.

Hold on to your hats, folks, the decades ahead are not going to be friendly to the US economy.

Posted by: JimPortlandOR | May 7, 2007 1:21:15 PM

Fair enough, Ezra, but that should hardly be taken as evidence of groupthink. Rather, it seems to me that economists are expressing a legitimate desire for caution; Blinder's work is one undigested datapoint in a very complicated debate. It isn't closing ranks around orthodoxy to want to give the public context.

Posted by: ryan | May 7, 2007 1:45:21 PM

Friends:

Forgive an old-fashioned social democrat. But I think we sometimes get caught in a false choice between rapacious neoliberalism and economic nationalism. Both, in their own way, pit workers against each other.

There is an alternative: worker internationalism, i.e. a global labor movement that can coordinate campaigns across borders. These days, capital can leap from continent to continent via instantaneous electronic transactions. It will take working class internationalism to check this kind of highly liberalized capital flow.

All the best,
Adrian

Posted by: Adrian | May 7, 2007 1:54:34 PM

I think that the real reason that many economists are uncomfortable with Blinder's writings is that he's giving reasonable weight to the downside. It might be that the majority of the American people will be (and have been) net losers over the past few and next few decase, but economists don't want them to realize it.

Posted by: Barry | May 7, 2007 2:16:20 PM

RT- your analysis is brilliant done. It encapsulates every argument at this point in history between the left and right.

Posted by: akaison | May 7, 2007 2:16:48 PM

I've read Blinder on Brad deLong's website, and I think you're right, Ezra, but what really sets Blinder apart is that he sees outsourcing as a huge threat to workers. Most mainstream economists (deLong is an example) think outsourcing helps the economy overall, but hurts a few classes of workers in high-wage economies. Blinder thinks the number of workers that will be hurt by outsourcing is much, much bigger than has been predicted, to the point that whole economies will be damaged, and workers may well revolt (and support protectionism) if they aren't helped. I think that's the difference.

Posted by: beckya57 | May 7, 2007 3:06:07 PM

This may not make him a heretic, as such, but it makes him unhelpful to the cause.

Assuming you mean this makes him perceived to be unhelpful to the cause, that's true. That he really is unhelpful in any serious way is doubtful. He's giving the bad case scenario that's needed to keep free traders honest.

The principle of what Jason is arguing for can be seen easily enough in basic economics texts. I don't see the point of asking him to explain what has been throughly explained over and over here and elsewhere. The question isn't whether some degree of free trade is helpful to jobs; it obviously is. The question is what degree is helpful, and when it becomes more disruptive than helpful.

Posted by: Sanpete | May 7, 2007 3:37:44 PM

Free trade means that eventually all working people all around the world will have the standard of living of a Pakistani truck driver. This will mean an increase for most and a decrease for the privileged few. Why would anyone be opposed to it?

Posted by: bloix | May 7, 2007 5:31:42 PM

It is posts like these that make a man feel like quoting … Imre Lakatos!

“ All scientific research programmes may be characterized by their “hard core” The negative heuristic of the programme forbids us to direct the modus tollens at this ‘hard core’ Instead, we must use our ingenuity to articulate or even invent ‘auxiliary hypotheses’, which form a protective belt around this core, and we must redirect the modus tollens to these. It is this protective belt of auxiliary hypotheses which has to bear the brunt of tests and get adjusted and readjusted, or even completely replaced, to defend the thus-hardened core.”

Posted by: roger | May 7, 2007 10:27:53 PM

what happened to jason and his link to the data he's providing? hmm weird.

Posted by: akaison | May 7, 2007 10:44:22 PM

akaison:

Ilg and Haugen (2000) p. 22, 24-25

Another source is the 1997 CEA Report to President Clinton

Posted by: Jason | May 7, 2007 11:43:56 PM

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