It's easy to tell workers how great globalization is when your "job" is guaranteed for life and it consists mainly of bullshitting with other economists at conferences.

One quote from Thomas apology for economists:
"When we looked forward with our crystal balls using theory and empirical evidence in the 1990s, we didn't anticipate the kinds of costs and adjustments that actually occurred. We knew there would be winners and losers, but our very best estimates said the costs wouldn't be that high - we didn't think there would be huge adjustment costs for workers to absorb. We understood we'd need to help some workers through transitions, but it could be a targeted approach where workers in those industries that were harmed could be helped as needed. That's what economists advocated, open the doors and reap the benefits of globalization, then use some of the benefits to help displaced workers in the specific industries that were harmed.

Now I simply remark, if you can't make a prediction about the things of absolutely greatest importance, namely precisely the things that affect the happiness of the greatest portion of the population, then of what earthly use is your "science"? Why indeed call it a science at all? What is your right to the majesty and authority of that name? A science is above all determined by its ability to get the truths of most fundamental importance in its domain -- and that is precisely where economics has failed, on the basics.

The simple fact is that economists' recommendations have led to the greater misery, instead of happiness, of the great majority of the American public. How could economics be a more worthless discipline?

Economists have failed to predict the increasing separation in income between the rich and everyone else. They have failed to predict the devastating loss of jobs to American workers in the face of globalization.

It is, therefore, as a science, an utter failure.

While Thoma pretends that its models have done a fine job, but just with wrong assumptions, how could that possibly be a correct assessment of the degree of the inadequacy of economics? If the models are incapable of understanding what the correct kinds of assumptions might be, of what real value is the discipline as a whole? Again, getting basic predictions right is everything in a science; there are really no excuses.

What troubles me most about Thoma's lame exculpation of economics is that he's obviously dead set on continuing along the same mindless path of essentially unfettered globalization. It seems that NO amount of countervailing evidence against the "goodness" of globalization" can possibly change his mind about it.

It seems to be unthinkable for him to acknowledge that globalization is NOT in fact a good thing, and that economists should instead find a way to moderate its progress. Instead, he blames politicians -- despite the fact that the bad things globalization entails has taken place under both Republican and Democratic administrations.

The arrogance is pretty breathtaking.

Who needs a Republican when you've got an economist?

Sorry, I meant in my post above that following only was quoted from Thoma:

When we looked forward with our crystal balls using theory and empirical evidence in the 1990s, we didn't anticipate the kinds of costs and adjustments that actually occurred. We knew there would be winners and losers, but our very best estimates said the costs wouldn't be that high - we didn't think there would be huge adjustment costs for workers to absorb. We understood we'd need to help some workers through transitions, but it could be a targeted approach where workers in those industries that were harmed could be helped as needed. That's what economists advocated, open the doors and reap the benefits of globalization, then use some of the benefits to help displaced workers in the specific industries that were harmed.

Shorter Thoma:

The operation was a success, but the patient has died.

As a long time economic theory ethusiast, I will go with Old Hat.

Economists think they have a handle on truth, but they don't. Only a very few, J.Maynard Keynes among them, have proved to have theories that work. The rest of them are rubbish.

Show me a modern economist that is relevant.

There are a few, but you tell me which they are!

Well, notthere, I leave the econ to the voodoo priests in the social sciences building, as I prefer the replicable and verifiable...but I would say Krugman is pretty relevant. (However, in the spirit of fairness, I should fess up that he is about the only one I can name.)

And now I will do what I tend to do on econ threads...Read, listen and learn - and keep my yap shut. (Would that RDW should take a page from that text! I don't know from econ, but I know enough to know that he is barking fucking mad.)

franklyO

Died is so wrong, these days it is "The operation was a success but had a negative outcome."

What we need to do is outsource some economist. Their research can be done anywhere, can't it?

Now I do know from current medical lexicon...The patient either "expires" or "suffers a demise." But we don't spend all that time in college and training to use a pedestrian word like "died." Sheesh.

Economics is a dumbed-down form of sociology for autistics.

The economists are hired hands. They are part of a PR machine folks used to dazzle us with bullshit as their masters, the folks at the very top of our economy, pick our pockets. They use big words and long meaningless sentences collected into tortured paragraphs to blow smoke up our skirts. We all nod knowingly as they dazzle away, unwilling to diagram their "ideas" and all too eager to believe they know "important stuff."

"Economists" must be good at what they do because we continue to listen to them eventhough what they propose is for us to continue suffering while their masters move from picking our pockets to grand theft on an industrial scale.

delete "folks" between "machine" and "used" in the first line.

One of the problems with "economists" is that a) they think it's all about dollars and cents, when at least to me the field should take *all* costs and benefits into account, not just first level financial impacts, b) they fail to note what they don't know, and c) their "reports" are frequently used to PropagandizeIssues.

In fact, here's one of them admitting that his study failed to take all issues into account.

(Note: WM may have edited this comment after I posted it.)

Ron Byers (corrected per his instructions)>"The economists are hired hands. They are part of a PR machine used to dazzle us with bullshit as their masters, the folks at the very top of our economy, pick our pockets..."

Economics is mathematical politics

TLB >"One of the problems with "economists" is that a) they think it's all about dollars and cents, when at least to me the field should take *all* costs and benefits into account, not just first level financial impacts..."

Those things left out are called externalities and in current practice are the majority of the factors in any situation. Current economical behavior is ALL about making benefits of any activity private (to a very small group) & the costs of any activity public (every one else). An honest society would label this a high crime.

"...economics runs around trying to figure out how people rationalized what they just did." - Stirling Newberry

Brilliant article regarding Globalization and the 'Dismal Science'. 1 key trend Mr. Thoma left out was the change in the philosophy of who really 'owns' (and should benefit from) corporations. In the pre-union era (up till WW2?) corporations were run primarily for the benefit of top executives, who for the most part ceded the workers no control and only grudgingly paid subsistance wages. The shareholders were expected to be be content with their quarterly dividend.

The onset of unions forced management to share a little management control and a LOT more of the profits with their workers. The decline of unions and the emergence of new ideas on corporate governance in the 80s and 90s gave rise to a new philosophy: that the corporation existed primarily to increase the wealth of its shareholders. Of course, top management and boards of directors continue to mandate generous compensation for themselves, but they also diverted as much of the corporations profits as possible to the shareholders. This is the reason average wages remained flat even as the stock market boomed.

The shift of corporate profits from workers to shareholders intensified with the rise of powerful investment funds and their aggressive managers. To borrow Edward Luttwak's phrase, Globalization may have 'turbocharged' the process, but it was already well underway before the rise of India and China.

Economists have no way of lab testing their wild global theories, so economics is merely opinion that shouldn't be taken very seriously. Anyone can chime in with equally valid hypotheses.

U.S. economists seem to be on a par with U.S. businessmen--merely short term bean counters with a glorified accountant's tunnel vision perspective.

My very first class I ever attended as a freshman at the University of Washington was ECON 211, proctored by the monotoned J.R. Huber, Ph.D. It was then, at the tender age of eighteen, that I first noticed that my eyes would glaze over during discussions about supply and demand curves. To this day, I think that it was the most boring and stifling class I ever took.

Okay, now I understand that people don't like what Thoma is saying, but I think you misunderstand him. I was a student of his a few years back, and his point is really easy to understand (Krugman just made the same point in an op-ed a few days ago too). Economists' failure to predict the huge impact of globalization was based on two facts they could not predict: the Internet and China deciding to remain an open economy. Mind you, these predictions were all done around 1990-1995 during the NAFTA debate, and no one saw these two facts being relevant. Communism had collapsed, China was open, but some thought fragile (Tiananmen square?), and most of our previously poor trading partners (Taiwan, S. Korea, Singapore) had all become rich and were no longer cheap labor pools. In these circumstances economists estimated that the worst case scenario was a 5% reduction in wages for non-college graduates. When compared with massive gains due to trade, for both Americans and the poor workers of our trading partners, this seemed rather easy to compensate. When our politicians made the trade deals, they simply did not do anything to correct for the inequality of the gains from trade. That is not economists' fault, that is a political failure. Republicans don't like to spend money on poor people, unless it is to lock them up, or ship them off to war. And Democrats didn't hold Congress. So who was supposed to get this done? Clinton? (Impeachment might have made it tricky to get Congress to help him out) Moderate Republicans? Whom? As Thoma points out, Democrats are starting to address these long overlooked problems, but it's just the tip of the iceberg, because Republicans have long benefited from the destruction of Union-jobs and the profits of mega-corporations.

My beef with economists is that they assume human beings make rational decisions. NEWSFLASH - They don't. Look at the election of George W. Bush, the AMC Pacer and the Christmas rush to buy "Tickle Me Elmo". People are foolish, irrational creatures who often make decisions that are adverse to their own best interests.

Economic decisions in America are also skewed and distorted by the bane of a free society - ADVERTISING.

Anyone who accepts globalism as anything other than a shell game used to funnel money to the worlds elite at the expense of the vast majority is either evil or ignorant.the forces of globalization keep promising things that never come to pass. Even if they were mistaken in the 80's, they should know better by now so it must be viewed as selfish malice.

Conservative Deflator up there points out to the largest fallacy of economics: The myth of the rational actor. Economics fails because it supposes that humans are beings of rational logic. We aren't, we're beings of irrational emotion. We are animals that follow instinct. The entire purpose of advertising isn't make people aware of products, but to manipulate that instinct to void peoples rational thought process.

> Now, with the costs so widespread and the
> benefits so concentrated at the top of the income
> distribution, there will be more resistance."
>
> "So that's it? The rich will be unhappy so we
> can't do it? Figures."
>
> "We have to keep articulating to politicians
> and the public that the costs are different now,
> they are widespread, and that the gains are
> concentrated at the top.

The cluelessness and arrogance captured in that 2nd response, and the failure of the essay's author to respond to the question, are breathtaking. The author /wrote the socratic questions/ for gosh sake, and he STILL isn't able to answer them. That tells you quite a bit about economists right there.

Cranky

> Economists' failure to predict the huge
> impact of globalization was based on two
> facts they could not predict:

So tell me Tim: were economists chastened by these failures to predict key outcomes? Are they more humble today about their policy prescriptions than they were in the early 1990s? What are the _next_ two key outcomes that they are going to fail to predict?

I have to say, the outcomes that the economists now claim they surprised by were NOT all that difficult to predict as early as 1990; many (particularly left-leaning labor economists) in fact did so. Which raises the question (that Brad DeLong alone as far as I am aware has even dared to touch upon) of whether or not those who were hiring and funding the economists knew exactly what those outcomes would be, and used the economists to provide an academic smokescreen for implementing their power grab and winner-take-all preferences.

Cranky

My model says that when gas reaches 1 penny a gallon we'll move all the toilets to Bulgaria.

Regionalization Activists Unite!

Cranky,
You mean Democrats, liberals, and labor leaders knew the Internet was going to allow a larger quantity of jobs, and even more types of jobs to be outsourced? Really? And everyone knew that China would become an economic engine to drive the world economy? That we would establish MFN status with them, and that GATT would become the WTO, and China would join? All of this was predicted? Gosh, I must have missed that oracle. My point is that while economists pointed out that programs would be needed to help those who would not directly benefit from more trade, and in fact would be directly hurt by being put into competition with cheap foreign labor, their policy proposals for re-distribution were ignored.
And if you read the Krugman article (which is behind the timeselct barrier unfortunatly) he is apologetic for getting it wrong on trade. Quite directly, he states, and many others have said the same thing, that they got it wrong, and they cannot assume they know the course of global trade at this point. China is big, and still open, parts of Africa might replace China if Chinese labor standards start to rise, Mexico still is poor, and India is now acting to replace higher income white-collar jobs. Lots of stuff going on, and economists still insist on two things: trade does make all of us better off (we need to include in our thinking the poor Vietnamese villager who gets a better job due to trade with the US), but it will make some of us (rich people mainly) better off, and some of us (mostly those who jobs can be shipped overseas) worse off. If we take from the rich and give to the poor, we can make all of us better off. These economists might seem bad, because they advance trade agendas, but most of them are very Robin-Hood like when it comes to taxes and many policies. I should know, I am one, and I know many of them.
Oh, and by the way, many economists keep saying that we need more government programs to correct these _massive_ imbalances caused by our trade policies. And the Republicans still don't care. They ignore the parts of economists' views they disagree with, and hype the few economsts (mostly neo-classical idiots) who say that "to get rich is glorious" and screw the little guy. They are the minority of opinion within our field, but they are promoted by the few rich people who like their 'reasoning.'
Lastly: yes economists make the silly assumption that people are rational. However, there is an entire branch of economics, called behavior economics, which is attempting to find the correct way to understand how people make decisions and how best to understand their behavior. It is still a new science (with lots of neuropsychologists getting into the mix too) and they have not yet been able to answer that simple question: why do we do what we do. So we economists stick with the assumption that people are rational and self-serving. It works with most people most of the time, just look at the Bush administration, rational self-serving decisions abound.

Tim,
Sorry to disappoint you, but yes, all those issues were being discussed as early as 1980. Again, primarily by trade unions and left-leaning labor economists - who of course are never taken Seriously(tm) by the Seriously Serious People(tm) who dominate our political economy. But they were being discussed. American consumer products companies were salivating over the possibility of doing business in the PRC as early as the 1970s, and when the post-Mao group took over thoughts turned immediately to all those low-wage workers. It took longer than had been expected in, say, 1985 to get the infrastructure built, but it has been planned for a long time.

Throwing out Kruguman's name doesn't mean much because Krugman was a standard-model free-trade economist (and could easily have been classified as a traditional Republican with a bit of compassion in his soul) until he saw the light around 2002. As he himself admits.

Cranky

Cranky,
You are right that people wanted to do business with the PRC very early on, but my point is that prior to the mid-to-late 90's, we didn't know if it would continue. Our trade with them prior to around 1994 was almost nothing, especially because politicians like Nancy Pelosi were fighting to limit our cooperation with them because of human rights issues. Again, we were not sure that China would become such an important economic player. Considering that in the last 500 years the only way the Chinese economy was opened to the world was through brute force colonialism. Especially after 1989 no one was certain that China was stable and would remain open to trade.
Economists based their rosy models of trade on the info they had at the time (Krugman's analysis said 5%, others said 10% drop in wages for non-education based jobs). They got it wrong, they're sorry, and they're now trying to get it right. Economists like Thoma and Krugman are not the Ann Rand stereotype you might think. My big point was that outside of a few idiots (called neoclassical economists, very much the minority of economists) all of them said: "Yes there will be adjustment problems with trade, that is why we need social protections and aid to those who will lose." The problem of the last two decades has been that Republicans and other politicians (B. Clinton was one) ignored them. The politicians made grandiose claims about trade, based it on economic models, and then ignored the parts of the same models which included costs to real people. I think you and I mostly agree on what happened, I think we just disagree on who is to blame. I think economists made a few errors, but fundamentally were right that overall trade is good; and that the problem was the failure to actually help the people hurt by the global competition. You seem to think that the economists told politicians to go ahead and set up these trade agreements and that there would be no consequences. I know some economists did say this, but they were mostly hacks posing as economists. Real economists always had the caveat that some would be hurt by trade, and that is a matter of record.

So what's the policy recommendation of the anti-economists? The return of Smoot-Hawley?

If we really worked at it, we could have a 21st Century as prosperous as Argentina's 20th Century.

who could have anticipated that finding cheap labor overseas would have led to unemployment here?

Adam "condoleezo" Smith

I'm afraid the first line quoted is right, economists do suck. They have only the vaguest sense of how economics actually work because theirs is a*very* immature field of study. They have a ways to go before they reach the level of empirical rigor that we associate with alchemists and medival barbers.

But at the same time they are supremely self confident in their abilities no matter how often and badly they fail to predict reality.

There is no excuse for letting them set policy when they have shown themselves to be utter incompetents. An advanced degree in economics almost qualifies you to flip burgers.

"Finally, what will happen to white-collar jobs in the future as digital information technology progresses? After reading Charlie Stross's "Tomorrow's Future Today!," it's clear that no matter what we think might happen ten, twenty, fifty years or more into the future with digital information technology, we are probably wrong. So let's do our best to be ready no matter how it turns out. Fixing health care, which helps workers under most any globalization scenario, would be a good place to start."
http://economistsview.typepad.com/economistsview/2007/05/robert_samuelso_1.html

Does this sound like an arrogant elitist who is nothing more than a syphocant for the crazy right wing of this country? The point of his post here is that Samulson's view that Globalization ain't that bad is simply silly. Again, these kinds of economists are the most common type. Neoclassical idiots are only known, because their rich corporate masters make sure that they are known.

thersites: who could have anticipated that finding cheap labor overseas would have led to unemployment here?

This comment says directly what a number of other comments imply: The US has high unemployment.

But, that's simply not the case. Our unemployment rate is only 4.5%. This compares favorably with an average unemployment rate of approximately 5-6%.

So, please quityerbellyachin'.

Economics is politics with charts.

This comment says directly what a number of other comments imply: The US has high unemployment.

But, that's simply not the case. Our unemployment rate is only 4.5%. This compares favorably with an average unemployment rate of approximately 5-6%.

What it doesn't compare favorably with are rates of those who once had high-wage jobs and now have not-so-high-wage jobs, which is why dishonest tools like "ex-liberal" love to focus, dishonestly, on the unemployment rate (which itself is far from a perfect yardstick).

If I want to sell a drug in this country I am required to submit a new drug application to the FDA.

The application will be supported by data from multiple multicenter clinical trials attesting to the safety and efficacity of the drug.

Because we don't want to get it wrong. Hundreds of thousands of people could be affected.

What burden of proof is required to enact an economic policy that will obviously harm a subset of the population? A bad economic policy can potentially harm millions of people.

Is that burden of proof met? If not, why is an intervention justified?

"But, that's simply not the case. Our unemployment rate is only 4.5%. "

That number is bullshit. It fails to take into account everyone who has given up on finding work. Our real unemployment rate is probably closer to twice the stated value.

Just another example of how lying with statistics in economics.

Tlaloc - the Bureau of Labor Statistics measures the number of workers who have given up. It's called "discouraged workers" in their tables. The discouraged worker rate generally moves up and down with the unemployment rate, It's low right now.

The framing (or whatever the current buzzword is) of this debate is all wrong. See Dean Baker's column Loser Liberalism Versus Power Populism.

This compensating the losers garbage is not, never has been, and probably never will be very politically palatable, even to the people it helps.

Shocking! a one-sided conversation with a straw man sucks ass and fails to illuminate any issues at all.