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What do you owe the world, and what does the world owe you?
Steven Landsburg writes:
Even if you’ve just lost your job, there’s something fundamentally churlish about blaming the very phenomenon that’s elevated you above the subsistence level since the day you were born. If the world owes you compensation for enduring the downside of trade, what do you owe the world for enjoying the upside?
Progressive taxation, some would say in response!
Tim Harford, however, nails it:
...people lose their jobs all the time for reasons that have nothing to do with foreign trade. I'd argue that they deserve some help. Why are jobs lost to foreign competition so privileged?
I am most interested in Dani Rodrik on the same, most of all when writes:
The question of how we should respond to a trade-induced change in income distribution is not one on which economists can offer any expertise. This is a question about ethics, values, and norms, none of which is part of an economist's training. Landsburg's take on this is as good as mine--which is as good as that of any person on the street.
Every now and then I feel a deep responsibility to rebut an argument. In my view anyone doing policy economics has an obligation to learn more about ethics -- much more -- than the guy in the street would know. Would someone doing experimental economics feel free of the obligation to learn some empirical psychology? Would someone doing trade feel free of the obligation to learn some trade law, some history, and some political science? No. What's the difference? Economists like to separate the "positive" and "normative" aspects of what they do, but this distinction has not much impressed the moral philosophers who have looked at it nor has it impressed Amartya Sen. The very decision to use economic tools emphasizes some considerations and excludes others. The final policy analysis is not just pure prediction but rather it is also an implicit presentation and weighting of both different kinds of information and different values. So if you are doing policy economics, it is imperative that you think about ethics at a very deep level, and read widely in ethics. You are doing ethics whether you like it or not! Furthermore I don't doubt that Dani already has a deeper understanding of ethics than the (often very crude) man in the street.
That said, I don't agree with the ethics Dani does discuss, noting that he must have felt he had some good reason to put forward the concerns he did and not others. (As a rule of thumb I'll note that those who profess the impassability of ethical terrain have just in fact traversed it.) I don't worry much about the procedural fairness if a poor country trades at better prices by paying its labor less or by polluting. Low wages are precisely the wages we want to see bid up, and if there is a concern for the losers I would not call the issue a procedural one but rather one of outcomes. And pollution can be a moral crime but attacking trade is not usually a good way to go after it. Tax the pollution, not the trade.
Posted by Tyler Cowen on January 18, 2008 at 07:42 AM in Philosophy | Permalink
Comments
The irony is beautiful. You use a "rule of thumb" to discuss ethics. I hope none of your readers know the origin of the term.
Posted by: JHill at Jan 18, 2008 8:17:54 AM
One thing Landsburg discussed that I think is relevant and is right up an economists alley is when he compared losing one's job to Chinese competition with eating at McDonald's. No one who eats at McDonald's compensates the other restaurants in town, even though the reason they're eating at McDonald's instead of at another restaurant is exactly the same as the reason they're losing their job to Chinese competition (i.e. lower costs). Pointing out the hypocrisy sort of undercuts the moral aspect a bit.
Or said another way, either the gains from creative destruction are bad and we should tax them away to keep the losers happy, or they are good and should be left alone. That's your moral argument, but it shouldn't be applied selectively.
Posted by: Josh at Jan 18, 2008 8:32:28 AM
In my view anyone doing policy economics has an obligation to learn more about ethics -- much more -- than the guy in the street would know.
Since when is there anything to know?
Posted by: TGGP at Jan 18, 2008 8:37:59 AM
Some say that the companies that close factories in the USA and move them to cheaper markets are acting immorally but one could argue that if companies were run as charities to benefit workers that they would have no business keeping factories in the USA but would move the factories to the lowest wage countries.
Posted by: Floccina at Jan 18, 2008 8:44:28 AM
Some say that the companies that close factories in the USA and move them to cheaper markets are acting immorally but one could argue that if companies were run as charities to benefit workers that they would have no business keeping factories in the USA but would move the factories to the lowest wage countries.
Posted by: Floccina at Jan 18, 2008 8:44:31 AM
Something that should be brought into the discussion is the concept of trade-offs. Trade is one of the areas where there is a real and present threat of government doing something to restrict free trade. In most other areas the government is not going to oppose actions to spread the benefits of competition as they do in trade. Governments generally do not try to prevent the spread of new technology, for example. Note I said generally, not always. So the trade-off is in trade you have a government offer compensation to the loser as a policy to prevent the loser and government preventing the gains from trade from actually occurring. In other words you offer trade assistance from the government to prevent the government from enacting tariffs or other restriction on trade.
Posted by: spencer at Jan 18, 2008 9:21:08 AM
"You are doing ethics whether you like it or not" Bravo! That's the reason Hanson's critique of Harvey Mansfield is so far from the mark. And why Mansfield's critique of economists is so important.
Posted by: Kent Guida at Jan 18, 2008 9:26:30 AM
The "world" owes me nuthin', but we are social creatures and forever discussing how to organize ourselves. I'm happy with moderate market democracies in that regard, and suspicous of fringes (people who would have us run all to the bow or stern of this ship).
Posted by: odograph at Jan 18, 2008 9:29:55 AM
Unfortunately, moral philosophers don't agree on much. The history of moral philosophy is merely the history of people attempting to justify their intuitions and cram them into some sort of consistent framework. It's not clear that out moral intuitions should be consistent at the end of the day - nor that our moral intuitions, however inescapable, have the substance we ordinarily attribute to them. This is, in any case, a metaethical question, which is frankly far too difficult for most people.
I'm not sure why economists need to be doing moral philosophy. It's perfectly acceptable for them to attempt to explain and predict if they can, and then let the people decide what to do in light of that information. Let the people know what the real upsides and downsides of trade are and let the decide whether the benefits outweigh the costs.
Of course the appropriate response to Landsburg is to say that the world does not owe us anything. Nevertheless, empathic creatures that we are, many of us tend to think it is worthwhile giving everyone a decent quality of life if possible. That includes some kind of social protection.
Posted by: Finnsense at Jan 18, 2008 9:43:34 AM
For people unfamiliar with what Kent Guide is referring to, see this Overcoming Bias post. Mansfield responded, and Hanson answered the response at the bottom of the post.
Finnsense, give it to them yourself rather than involving me.
Posted by: TGGP at Jan 18, 2008 9:54:53 AM
Of course, JHill, it's an urban legend that "rule of thumb" originated with the idea that a man could beat his wife with a stick as long as it was smaller in diameter than his thumb. 5 seconds on Google would have led you to dozens of pages which would help you with the origin of the phrase. It predates the beating idea by at least two centuries.
Posted by: billb at Jan 18, 2008 9:57:29 AM
JHill,
If you're referring to the claim that the phrase "rule of thumb" originally referred to the maximum legal diameter of a wife-beating rod, that's a myth.
Back on topic, it seems to me that Prof. Landsburg is completely missing the point. Compensation for losers in international trade is a political matter, not an ethical one. If we compensate the losers, we'll have less political resistance to free trade agreements.
In short, we should compensate the losers in international trade for the same reason companies offer generous severance packages to departing executives, and the international community lets former dictators live in luxury when they agree to go into exile.
Posted by: Brock at Jan 18, 2008 10:09:42 AM
This may be the first time I've seen Tyler defend his tendency to neglect the normative/positive distinction. I'm not against normative economics, but why isn't important to be able to separate your positive analysis and at least *try* to offer a disclaimer/warning when stating your normative conclusions?
Posted by: Steve Miller at Jan 18, 2008 10:38:19 AM
"Finnsense, give it to them yourself rather than involving me."
I thought I'd given you the perfect justification for not feeling morally obligated to anyone else.
Posted by: Finnsense at Jan 18, 2008 10:54:01 AM
billb and Brock beat me to it. The most arrogant* comments usually come from the people who know the least. My guess is that the correlation is about .7.
*Not only does JHill not inform readers what - in his view - is the origin of the phrase, nope, he also adds "I hope your readers do not know...". Bottom line: "Only I, the enlightened JHill, can see the irony in this." Geez!
Posted by: LemmusLemmus at Jan 18, 2008 11:28:10 AM
Would that more economists understood Tyler's point. I'm not sure it's necessary for economists to become versed in ethics, but it is certainly the case that too many, IMO, commit the naturalistic fallacy by inferring what ought to be done from descriptive propositions that simply state what is the case. Too many attach significant normative weight to efficiency, unreflexively, because sometimes it seems we ought to do inefficient things and other times we ought not do efficient things.
In my own field of health policy, I find this unceasingly aggravating, because issues of health policy almost invariably come down to normative issues: how ought we allocate these resources? Who ought to receive care? Reimbursement? Descriptive work, like health services research or health economics are indispensable to resolving these questions, but they are not remotely sufficient, in no small part because we cannot infer normative conclusions from descriptive premises. Health services and research cannot be taken to exhaust the field of inquiry in itself; they are not self-evident, as is so often presumed. This is why having -- and I am obviously biased -- trained humanities scholars, lawyers, or other social scientists like anthropologists and sociologists, because many of the scholars are trained to examine and weigh normative questions amidst inherent uncertainty and ambiguity.
Posted by: Daniel Goldberg at Jan 18, 2008 11:51:29 AM
Oh, no, it didn't impress Sen! Horrors! Let's go over his insights one more time:
-Democracies don't have famines [insert 6000 vague caveats].
-Libertarianism is inefficient because non-libertarianism is inefficient.
What else?
Posted by: Person at Jan 18, 2008 12:01:40 PM
"...humanities scholars, lawyers, or other social scientists like anthropologists and sociologists, because many of the scholars are trained to examine and weigh normative questions amidst inherent uncertainty and ambiguity."
Isn't that what all educated people are supposed to be able to do? Isn't that more or less the definition of a liberal education? In other words, isn't the neglect of that capacity, so well described by Mr. Goldberg, the thing that needs to be recognized, explained, and countered? And are economists helping with that?
Posted by: Kent Guida at Jan 18, 2008 12:04:33 PM
The reason people expect something to offset job losses from foreign trade has to do with basic questions abut identity and who is "us" versus "them." It's one thing to lose a job because a domestic competitior did better. The person who got "your" job at least still has loyalty to the same group as you do. If that is a foreigner though, then the person who benefited does not have the same group loyalties as you. His tax money does not go to the same programs, roads, and schools as yours did.
Seeing someone of your tribe argue that it doesn't matter hurts feelings of solidarity, and that decline in mutual bonds will eventually cause problems. If people don't think we're all in the same boat, it hurts the ability of a society to take collective action. There are real costs here.
I think it is very naive to assume that such identity questions are irrelevant, or should be irrelevant. It's a basic self-protection response. The world has not yet developed to the extent that such questions are meaningless.
It is possible to argue that in the aggregate and long term you will be better off. But that's offerring a potential future benefit to compensate for a real loss right now. The economists here should be know that the extra cost of risk and the time value of money means this answer is not sufficient. Boiled down to that logic, anyone would want to know a lot more details - specific details - before agreeing to an investment like that.
Posted by: Chris Durnell at Jan 18, 2008 12:12:04 PM
"Why are jobs lost to foreign competition so privileged?"
Maybe because the losses are geographically concentrated, and "comparative advantage" is not at work moving the job market forward?
Maybe because the federal government is pushing faster globalization as a means of rewarding weathy campagin contributors?
Or perhaps because some privileged categories of workers (say tenured professors) are not subject to the same market forces?
I'm economists don't buy this, but then many of them are in the sheltered categories.
Posted by: save_the_rustbelt at Jan 18, 2008 12:33:00 PM
Jobs lost to foreign competition should not be privileged.
However, one can make a good case that job losses that result from major changes in government policy should be at least partially compensated. When the government changes the "rules of the game" so that some people are better off and others are worse off, the both equity and efficiency support paying competition.
The efficiency argument is that if the policy change truly does increase total welfare, as say, NAFTA does, then it should be possible to re-arrange the benefits so that nearly everyone is weakly better off. If you cannot do this, then one might question whether the policy really does increase total welfare, or whether it simply benefits some constituencies at the expense of others.
Of course, frictions and other factors may make such transfers difficult, but the compensation principle is one that would disproportionately discourage bad policy changes since they could never pass the test.
Posted by: A student of economics at Jan 18, 2008 12:59:01 PM
There's a typo in my last post:
"paying competition" should be "paying compensation".
I guess my fingers are more used to typing "competition" :)
Posted by: A student of economics at Jan 18, 2008 1:02:35 PM
Fun posting and comments.
I think one thing that could use a little emphasizing here is something that Landsburg seldom (IMHO) pays any attention to. It's the possibility that the reason the person who lost his job lost it was because someone somewhere -- perhaps even an economist -- helped set a trade policy that made it likely the worker would lose his job.
Why *shouldn't* the displaced worker be furious at the policymaker? From a human (and even "ethical") p-o-v, can you really ask such a person to calm down because eventually everyone will be better off? (Assuming that's true, btw.) I mean, how would you respond if I demanded that you give up your job now for the long-term greater good of mankind? Which you might never live to see, and might not care that much about in the first place.
Add into the mix the fact that this policymaker sometimes is in the grip of a greater vision for all mankind ... Well, it starts to sound like regular everyday people are being sacrificed so that weirdo Utopians (Steve Landsburg, for instance) may thrive, or at the very least have a good time amusing themselves with theories.
So sure, there are lots of reasons for people who lose their jobs to foreign trade to feel miffed. Some of them are even plausible.
Ethicially speaking, it seems to me that it would behoove the policymaker and pundit class to -- at the very least -- respectfully acknowledge that they're often demanding that countrymen less-well-off than they are take the brunt of the policies they're advocating. Gravity, dignity, sympathy, and not mockery, please.
By the way, is there any guarantee that the vision the globalists have in mind For All Mankind will actually pan out well for all of us? And how about for us? And for me? In my lifetime? Really? Can I see a signed contract on that?
So explain to me again why I should have any patience at all with the globalists? And why I shouldn't do what I can do undermine whatever position of power the globalizers have achieved for themselves? It's in my self-interest to do what I can to mess wit' them, after all. Because, y'know, I get to define my self-interest. Economists have told me so.
"I" here in the sense of "regular Joe who has been put out of a job by policies formulated by globazlizing policymakers," of course...
Posted by: Michael Blowhard at Jan 18, 2008 1:09:14 PM
From "Student of Economics":
When the government changes the "rules of the game" so that some people are better off and others are worse off, the both equity and efficiency support paying competition
So, this should apply to all situations where government changes the rules?
Posted by: Yancey Ward at Jan 18, 2008 1:29:50 PM
I'm incredulous at people who think that "we" ought to compensate rent seekers when their rent seeking miraculously ends. This is like making a schoolyard bully stop robbing from the other kids, and then being forced to compensate that bully for his loss of income.
Posted by: happyjuggler0 at Jan 18, 2008 3:16:54 PM
