Comment by MrTonyD | Hacker News Reader

Comment by MrTonyD | Hacker News Reader

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I think Krugman is both brilliant and blinded by his own brilliance. Krugman's focus on economic data blinds him to the second and third order consequences of worldwide trade. In particular, trade outside borders allows schemes for hiding income, evading taxes, harming particular groups of people, undermining governments, ignoring social values (eg. climate change, workplace safety, quality of life for workers, wages) and amassing fortunes for multi-billionaires who then create even more problems. If that weren't enough, there are still many "fuzzy" areas of economics, and I think that many of those areas are fuzzy precisely because they are so complex due to the "open systems" created by free trade (unlike "closed systems" which can be controlled by a nation's laws and monitored using modern Big Data techniques.) So, while Krugman is brilliant, he is also very flawed - dragged down by the very data that he understands so well. But isn't that always the case for technocrats?

I think Krugman was trying to make the case for why many smart people don't seem to understand how the theory of Comparative (as opposed to absolute) Advantage works.

I don' think he was arguing that that theory is the be all and end all of trade policy. The theory is a abstract model of the world - it is a useful guide like all abstract models but does not capture the world in all its complexity.

Both theoretically and practically, over the last 30 years, there is increasing evidence that Free Trade effects - like everything - depends on context and policies.

Krugman himself writes alot about this on his blog. Can't search for everything right now - but here is an example from a few weeks ago:

http://krugman.blogs.nytimes.com/2016/04/20/101-boosterism/

He has also been consistently lukewarm on the TPP trade deal exactly because of these issues:

http://krugman.blogs.nytimes.com/2015/04/26/this-is-not-a-tr...

"One thing that should be totally obvious, however, is that it’s off-point and insulting to offer an off-the-shelf lecture on how trade is good because of comparative advantage, and protectionists are dumb."

Do you think his assertion about the labor share of income providing information about the impact of trade is wrong or otherwise not a good measure?

It is information...but if you read my original comment you will see that the benefit of such increased income is far outweighed by other considerations. As I recall, even Krugman himself described that gain as very small (small single digit percents), and potentially mistaken (depending on the average of small numbers across studies.) We, as a society, are paying huge prices for what may be a statistical anomaly.

He says as everyone who is even slightly familiar with the numbers knows, the share of compensation in U.S. national income has been quite stable in recent decades. The implication of that is that workers are receiving the benefits of trade and increasing productivity, and it doesn't read as ambiguous or potentially mistaken to me.

I've been reading Krugman for decades. He has said a lot of things.

In the case of climate change, social values, etc, wouldn't you just apply a regulation to price in the cost of those values and comparative advantage still holds after adjustment?

Regulation has a scope defined by governments. And when money can be moved easily outside any particular government, it becomes impossible to regulate. Just look at how Walmart moved cash to offshores to loan to themselves so that they could then claim that their profits were losses to loan payments - avoiding taxation and any incentives/disincentives done by our tax system. So the "trade" of offshores providing "services" is routinely used to evade any regulations - the Walmart example is just an extreme example of how even cash transactions can become something "gamed" by trade and used to undermine the autonomy of a society.

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