Dean Baker's Blog, page 189

Neil Irwin Is Far Too Generous to Economists: They Only Care About Efficiency When the Policy Redistributes Income Upward

Neil Irwin raises the question of whether economists have been too single-minded in pushing efficiency, while ignoring issues of distribution. This is way way too generous to economists. In fact, economists have been totally happy to ignore efficiency considerations when the inefficiencies redistribute income upward. This situation pops up all the time.

As I frequently point out in comments here and elsewhere, we protect doctors, dentists and other highly paid professionals from competition w...

Trump 1, Fareed Zakaria 0

It is possible to make serious arguments against Donald Trump's views on trade, but apparently the Washington Post can't find anyone with sufficient knowledge and skills. Instead they assigned Fareed Zakaria the task and he failed badly.

Zakaria tells readers:

"The appeal of both Trump and Sanders has many politicians mouthing cliches about the deep problems with globalization. It is true that two gifted populists have been able to give voice to people’s fears about a fast-changing world. But...

European Central Bank Says Austerity Is Three Times as Bad as Brexit

A new study from the European Central Bank (not official bank policy) estimated the size of the output gap in the euro area at 6.0 percent of GDP. Most analyses put the cost to the UK's from its exit from the European Union at around 2.0 percent of GDP. If the ECB's estimate of the output gap is correct, then austerity is imposing three times as much harm on the Euro zone countries as Brexit is projected to impose on the UK.

David Brooks' Class Bias Is So Deep He Doesn't Even Realize He Is a Protectionist

David Brooks apparently thinks he has things down. The major divide isn't between supporters of big government and small government, it's a debate between supporters of an open economy that looks to increase trade and a closed economy that looks to protectionism. This is the theme of his column that tells us about "the coming political realignment."

To make his case, he gets a lot of things wrong. For example, he seriously misrepresents research on the impact of trade liberalization. Brooks r...

Paul Krugman, Brexit, and Bubbles

Paul Krugman has an excellent blogpost ridiculing the doomsayers on Brexit. I agree with just about everything he says. His basic point is that, while the UK will pay a substantial economic price if it leaves the European Union (especially if the EU imposes punitive tariffs), there is not a plausible story that Brexit will lead to a near-term recession.

Krugman furthermore makes the point that many economists feel the need to exaggerate their case when arguing on trade. The point is that they...

Hey Kids! Great Jobs Available Doing Silly Caricatures of Arguments on Trade Policy

Sure, it's tough to get a job in reporting that pays a decent wage. But now you can get on the fast track to a successful career in journalism by writing pieces that make fun of opponents of U.S. trade policy.

No knowledge of the economic theory of trade or actual trade practices is required. You just have to be able to trivialize any argument against a current or future trade deal by saying that opponents want to end trade and close borders. Apply at the Atlantic or other major news outlets....

Donald Trump and U.S. Trade Policy: Different Isn't Necessarily Tougher

Media coverage of U.S. trade policy with China and other countries has been remarkably one-dimensional. The coverage almost exclusively treats the issue as being one of relative toughness. While this is certainly the way some politicians, notably Donald Trump, speak about trade, it conceals the real issues involved.

The United States pursues a variety of agendas in its trade negotiations. Naturally it does not get everything it wants, it prioritizes some items over others. In some areas it cl...

France's Near Stagnant Economy and Membership in the Euro are the Same Issue

The NYT ran an article on how France's far-right sees the vote in the UK for leaving the European Union as a boost to its own efforts. After outlining the state of anti-EU sentiment in France, the piece tells readers:

"Given the array of other issues facing France, including a near-stagnant economy and high unemployment, it remains to be seen how central an issue membership in the bloc might be in the presidential race."

Actually, since France is in the euro (unlike the UK), its stagnant ec...

Do the Bond Rating Agencies Think Brexit Will Cause the UK to Forget How to Print Money?

This is a serious question. BBC told readers that Fitch and Moody's both lowered their outlooks for debt issued by the British government following the Brexit vote. The question is, what do these bond-rating agencies mean when they lower the rating of a country that issues debt denominated in a currency it prints.

This issue came up back in 2011 when S&P downgraded the debt of the United States following a long standoff on a budget agreement between President Obama and the Republican Cong...

Philippe Legrain NYT Column Makes the Argument Against Economic Expertise in the U.K.

Phillippe Legrain began his NYT column denouncing the supporters of Brexit by noting their contempt for economic expertise. He then went on to give good reasons for such contempt.

Legrain tells readers:

"Experts are, of course, known to make mistakes. But in this case, the people who voted for Brexit will pay a big price for ignoring economic expertise. The harmful effects of this vote are both immediate and lasting.

"Britons are already worse off. The pound has — so far — plunged by nearly...