25 years ago, Ralph Gomory (mathematician) and William Baumol (econ professor at NYU) wrote a book called Global Trade and Conflicting National Interests.
It remains to this day the finest academic takedown of Ricardian-derived, free-trade theories.
They summarize Ricardo's original case of 2 trading partners and 2 products. Then lay out, in painstaking econometrics models, the great variety of equilibrium points that are possible once you extend that to dozens of trading partners and hundreds of products. Finally, they bring in game theory to alanyze how countries can use policy choices to shift the equilibrium in their favor.
It's truly a devastating critique. 25 years ago, and they were utterly ignored. Imagine where we'd be had the economics profession not been so convinced of their own superiority. (And I have an econ degree, so I'm allowed to knock them.)
The Stolper-Samuelson model that showed that tariffs can benefit workers in a country importing a lot of labor-intensive goods, at the cost of capital, is over 80 years old. It captures well the trade between China and the US.
It should at least have served as a warning light against bringing China into the WTO and put paid to arguments that supporters of tariffs don't understand comparative advantage.
That before considering the beloved concept of "network externalities", in this case the cost of building an adequate national defense against the military built by a prosperous China.
I think the reason Stolper-Samuelson failed to raise alarms was because (if memory serves) the effect is dependent on the Ricardian 2 partner / 2 product structure, and weakens rapidly as you add more of either. Since everyone knows Ricardo's structure was artificial, economists (at least the ascendant Austrians) thought they could safely ignore the criticism.
Gomory and Baumol's equilibria become MORE diverse as you add products and trading partners, which makes their critique far more robust.
You do realize that the economists that supported doing almost nothing to stop the hemorrhaging of manufacturing jobs to China from 2002-2008 are currently serving in the Trump administration?? We added manufacturing jobs under Clinton and after 2010 we added manufacturing jobs under Obama.
You do realize that the only push for tariffs in order to move manufacturing back to the US came from the Trump administration?? Also the only effort to prod companies to move their supply chains away from China.
Non-farm payrolls increased by a total of 1% over 8 years of Obama. Clinton brought China into the WTO which led to a significant outsourcing of jobs as Chinese goods entered the US with minimal tariffs.
The first 3 years of Trump's first admin created 450,000 jobs, about half of what came in 8 years of Obama; Covid then ruined that record in 2020.
Bush brought China into the WTO, so you have established yourself as either a liar or ignoramus. Results are the only thing matter and Obama and Biden reshored more jobs than Trump after the disastrous Bush regime.
China formally entered the WTO in December 2001, Bush's first year in office, after a process of many years that began only early in the first Clinton administration.
If I'm an ignoramus but I know that and you don't, what does that make you?
Bush completed the process when he had over 80% approval. And the point man in Congress under Clinton was a Bush loyalist.
You are a liar because you are ashamed you voted for Bushes. You were attempting to obfuscate because you know two Bush’s that were president for 12 of 20 years were both globalists that believed making China great again was the most important thing they could accomplish…and in their defense they believed it would help America for China to be great again. And you know what dragged Bush approval ratings down his first term was the initial jobless recovery after Clinton oversaw the last strong job market.
My BA and your HS diploma are equally unqualifying to PhDs, so academic economists can ignore us And they should; we know as little about economic modelling as we do about surgery or accounting.
Yes, the case against free trade can be summarized using a simple logic chain understandable by a middle-schooler. What Gomory and Baumol do is translate that logic chain into the language of economists -- econometrics and game theory -- so other economists will take it seriously. And yet... they didn't. That's an indictment of the entire field as far as I'm concerned.
I would point out the fallacy in what you're implying is that what we are seeing is a classic case of "can't see the forest for the trees" amongst economists. Starting with a surprising refresher on the oldest of all economic problems. How do you protect and defend your friends, family and territory. Ironically, starting with how do you keep your neighbor's goat out of your garden. Which is why we eventually realized the importance of private property.
Fast forward to why all those supposed intelligent economists can't see how much China is relying on America to keep the shipping lanes open even while America struggles to find the facilities and experience, much less the money to replace our aging war ships.
Reminds me of an article I read many years ago lamenting the rise of specialists in just about every field, while seeing the decline in generalists. The author was particularly using examples from the hard sciences. How you would find a physicist doing biology experiments and vice versa.
Granted the various fields have become far more complicated but his argument still stands. We keep giving too much power to highly educated people who don't have a clue of what's going on outside of their field of expertise, and even then, base their advice more on models then the real world.
To that extent, there is a guy on YouTube that has a channel called "Pax Americana" who clearly know military stuff. He goes on about what each nation needs. Sounds great until you realize he's completely ignoring that Belgium can't tax and spend 5% a year for defense and be in a union with Ireland, who is only spending 0.25%. Of course all those brilliant economists can't seem to spot the problem with that either. Yet over time, one business after another will either relocate their headquarters to Ireland, get bought by an Irish based company, or go bankrupt.
Your comment reminded me of Huxley's Brave New World. The workers (Betas, Gammas, even Alpha-minuses) were specialists, uniquely trained in the role they were fulfilling. For all of these people, reality was constructed by their betters. However the elite (Alpha++) had access to real knowledge, subversive knowledge, ideas that were banned to everyone else. Why? Because the world needs generalists, people who can "see the forest".
In Huxleyan terms, we've become a society of Betas (in both specialization and intellect I suspect).
I have never read so I'll have to take your word. For me it's a lot more reminiscent of all the learned people in Europe who believed in the might of their colonial empires even as their local populations were plotting revolutions.
One of those largely ignored parts of history, never discussed, is just how over stretched the British and French militaries were when Germany started WW2. When you really step back and look at the amount of land, natural resources, and people in both the British and French empires at the time, there really is no reason they couldn't defeat Germany without our help.
Until you realize that only a few wealthy people were making money off the plantations in India or the mines in Africa. Average Englishmen and Frenchmen were just expected to help defend the empires they didn't personally benefit from, even if it meant accepting their tax money would be spent building more warships rather then invested in the local schools. They had failed to build up any factories in Vietnam or Nigeria. Which also meant they had failed to create any loyalty to their empires in those nations. In turn they always had to keep large garrisons in those colonies to put down the perennial uprisings.
We're seeing a similar dynamic today. Average Americans, Frenchmen, and Englishmen are told we have to defend Chinese built ships, registered in Liberia, crewed by Filipinos, carrying Russia crude to India as it passes through the Red Sea. When you question it, someone claims "its in our interests", as if that's an actual explanation. Meanwhile socialist are actually winning primaries and looking to strip the lords and nobles bare before sending them to the guillotine.
At least it's more of a figurative, rather then a literal guillotine these days.
You would have liked speaking with my father a WW2 combat vet , he said the exact same things about Europe and if not for uncle adolfs decision to invade Russia the outcome would have been very different .
Yes concur Brian, these economists are bought and paid for. They say what they are directed to say. They don't let the truth get in the way. Thanks for the info, much appreciated.
I put a lot of the blame on Perot because the Bush family was very clear that making China great again was a priority for them. Perot was the classic “boy that cried wolf” about NAFTA when a very real dragon was lurking in the Pacific. So Americans were lulled into a false sense of security during the strong Clinton economy that globalism would always result in overwhelmingly positive results for America. I know NAFTA resulted in the loss of textile manufacturing jobs but those were the worst manufacturing jobs and they flourished in areas with high poverty.
“Taking down” a theory proposed in 1802 is not that impressive. They showed economics is complicated, which has been obvious for…a while now (like 150 years).
In any case, comparative advantage is still an insightful theory, but like every theory in economics, it breaks down with complication. Take anything Friedman wrote about inflation as a modern example. It’s all wrong now, but still an interesting thought experiment (though nowhere near as interesting as Ricardo’s comparative advantage).
Alastair nailed it. If the “new” right was serious, they’d advocate for a coalition of fellow democracies to stand against China, it’s the only way to match their scale. Instead, Oren ducks and spends his time fighting meaningless, backward looking battles against fellow establishment elites, most of whom wield little if any influence in today’s politics. Meanwhile, in the real world, the leader of his own movement controls the entire federal government. But predictably, Oren rarely musters a comment on the impacts of DonOrenomics. I suspect he fears being attacked by an administration that’s shown itself willing to use the full power of the federal government to smite those who criticize them. Gotta preserve your tax exempt status I guess…
Time to man up Oren, your team is in charge. Defend them. Enough with the fixation on the past.
Biden and Trump agree on more than they disagree on…Biden kept most of the tariffs Trump implemented in his first term. In fact Obama’s and Clinton’s top economists attacked Biden and then ended up admitting they got most things wrong by 2023. I followed Furman on X during the inflationary period and his main focus was on wage increases and conventional wisdom was that the Fed would need to increase the unemployment rate to stop the wage increases. That said, I do agree with Furman that the biggest missed opportunity of Biden was extending the expanded Child Tax Credit but it paid for itself and so it was stupid that Rubio opposed it when it was central to his 2016 campaign.
I agree there is plenty of legitimate debate to be had over the policy implemented during the pandemic. It was an unprecedented time, plus it was on the heels of the Great Recession. No one could be expected to get everything right. It was an easy time to be an armchair quarterback.
But for whatever reason, Oren seems obsessed with silly arguments over the past. Maybe it's his own insecurity as he strives to be taken seriously. Maybe it's his naïveté-having never held a policy making job, he might be unaware of the imperfect tradeoffs facing those tasked with actually governing. Regardless, I don't particularly care what Paul Krugman said a decade ago. I care infinitely more about the impact of the "new" right's agenda being implemented as we speak. The record setting deficits, the taco tariffs, the wealth transfer to plutocrats, the shredding of our alliances, the attacks on the rule of law, the massive corruption, and MAGA's Middle East war. All seem a smidge more important to today's economy than a spat among establishment elites.
The Trump/Cass economic agenda is ascendant. One day it too will be picked apart-the taco tariffs, the deficits, the corruption, all of it. I suspect that's the main reason Oren is desperate to change the subject as he casts about for someone else to blame for today's hugely unpopular economy. His reputation hinges on how history judges DonOrenomics. Unfortunately for him, he bought a first class ticket on the Trump train, now he's takin the ride...
Trump actually stated the obvious that the top rate needs to be 39.6%. A 39.6% top rate in 2026 after no tariffs in 2025 and not escalating Iran in 2026 would have reduced the deficit to under 4% which is what Bessent said was necessary when he was confirmed. Trump inherited a 3% deficit ratio from Obama and it was over 4% before Covid and so it should have been obvious to everyone the deficit wasn’t a Republican priority.
Indeed China is a mercantilist threat to the former West. So why on earth has Trump spent the last year and a half pissing off Europe, Canada and India instead of building a coalition of the USA's former allies against it? And why has Commonplace looked the other way while he did it?
Do you know one of the biggest impediments to getting on a sustainable path is the European Union. What all these over educated economists keep missing is the oldest economic problem known to man. Which is the "commons" problem. Also known as the "Tragedy of the Commons". There are a number of very serious commons problems we have been trying to ignore.
Protecting the environment is a pretty obvious one. How can you build stuff in the US without allowing companies to dump heavy metals into our rivers, if they can just move the factory to Indonesia. Protecting workers is another. If you can work a man in dangerous and unhealthy conditions with little to no regulations in Malaysia, then it's not really about the higher wages you would have to pay in Missouri.
But one of the biggest commons problem is protecting the shipping lanes and our territories from pirates, terrorists and adversarial nations like China and Russia. Here's where the EU becomes the biggest barrier to the future. It's a land where somehow, Belgium and Denmark are going to spend 5% a year on defense and not watch their wealthy relocate to Ireland for the lower taxes and better schools that come from only spending 0.25% on defense. Germany is going to spend 5% on defense and yet it's companies aren't going to slip across the border to Austria (1%). Though the magic of government debt, France and Italy are going to manage to pony up 5% a year, even while Spain refuses to spend more then 2.2%.
We've built a massive poverty trap by trying to disconnect trade from mutual defense and shared values. Now granted, Trump's doing a really lousy job when it comes to offering up a coherent vision for where things need to go, but stop and think about Canada. You would think, giving how much of their own blood and treasure they have spent helping us fight pirates, chase terrorists, and conduct freedom of navigation patrols in the South China Sea, that they would demand a better trade agreement then Mexico gets. Mexico has done nothing to help defend the supply chains that feed the Mexican factories that we used to put in Canada.
While I like "Commonplace', it does tend to be written from a tradition prolabor perspective. Less from a big picture view. So they tend to focus more on a simple "what's good for America stance", and seem to be opposed to "free" trade for ideological reasons.
Hi Oren, I appreciate your perspective, and certainly Paul Krugman has not been infallible. His views on Japan's economy 30 years ago and the EU economy since 2010 have also needed updating, which he has admittedly done in recent years. But I don't understand your finger-wagging toward Krugman for changing his mind when he is clearly saying "It’s not 20 years ago anymore" and "disregarding questions of national power made sense for about 70 years after World War 2," in other words the facts on the ground have changed. I could understand your pique if he was NOT changing his mind in the face of these shifting facts. It seems to me he deserves some credit for at least, um, letting the new landscape result in him coming to different conclusions. Or are you saying that his viewpoint was wrong 20-70 yrs ago too? If so, you have not convincingly made your case about that. Thanks, all the best
You mean the Paul Krugman that won a noble prize for his showing that the longer you let people go on un-employment, the longer they will remain un-employed. Then during after the 08 financial crisis, because he was a big fan of Obama, ran around claiming doubling the number of weeks of un-employment would be a good thing.
He just another insufferable partisan hack, who I'm sure spent years insulting and bad mouthing Case and anyone was else who didn't drink the Kool-Aid.
We need to give Krugman credit for openly acknowledging that he has been wrong. Economists so rarely do. Also, I sense that Oren will have several reasons to acknowledge error over the next few years, so I hope he is appropriately humble when the time comes. Meanwhile, I enjoy the fresh perspectives that Commonplace often brings. What I don't see is that Commonplace carries much weight with the real decision-makers of our current regime.
Oren is the economic guru of the new right for what it's worth. The young bloods of the admin are new right but Trump still goes with his investments being top priority, stocks and bonds.
Krugman was off by 40 years. Rusting was there before there was a name for it in the mid 70s in the north east.
I think China has a pretty good handle on things in that they seek to promote industries in China's best self interest. We only assist our corporations in making more money, which is good for me, but bad for the people up and down my street. Trade can't even be measured in dollars, a ton of wheat has almost no value added via labor, an iphone or even a nice piece of clothing has a lot of labor in it.
Then there is national security, which includes N-95 masks, and we should make 10% of every imported item here, no matter the cost. Notice China's strategic petroleum reserve isn't even close to empty?
Oh, I remember NAFTA. The Great Betrayal. It was clearly supported by majorities on both sides of the isle despite it being clear the sacrifice on the Free-Trade altar would be middle-class America. We fell for it. Big business made a killing by moving factories overseas. The factories here disappeared, town-after-town died, and we were left to live out our lives in blighted communities, plummeting tax-revenues, and crumbling infrastructure.
And here in the year 2026, it's getting worse. Catastrophic ideas like Socialism, Looting, and Redistribution are making a resurgence in the American mind, and it doesn't surprise me the DSA gets so much traction among today's younger voters.
Quite a few voted against it. All the big guys in both parties were for it, notable exceptions came from places with poor people or extremely conservative Republicans. Overall in the house Dems were like 150 against, 100 for it. Rs were 50 against it. Bill Clinton lobbied hard for it. Perot was right.
I live in the most manufacturing intensive state in the nation. In 2026, we produce more goods than we did in 1980, by a lot. A whole lot. But we employ far fewer people to do so. NAFTA is but one potential factor, and almost certainly not the most important one. I’m doubtful we’ll soon be outlawing automation and technological advancement, though MAGA apparently wishes we would.
Politicians are experts at exploiting the angst that a technological revolution produces. Simplistic blame is easy, and effective. Solutions are hard, and imperfect. The same economic trends, coupled with the same resulting political upheaval, are happening globally. As one example, it’s not a coincidence that Brexit occurred at the same time Don first appeared with his simplistic message regarding trade, brown people, and manufacturing employment. Throughout the western world, most of it not subject to NAFTA, the same trends prevail. Tellingly, throughout Don’s two terms, the same macro trends have marched on-we produce more, and manufacturing employment declines. Don will not reverse this. Be wary of aging, incoherent politicians promising simple solutions.
I'm 71 and retired thank God , I have been hollering about this since 1988 when I heard G H W Bushes vision for the global free trade economy , he said you can get a degree in advanced w - - - ing off or you can work s - - t jobs for the rest of your life , we will close your factories , eliminate decent jobs and destroy your small towns , it's a win win win ! Yeah it was for wall street , I can't imagine where trumpy came from .
One line of discussion about AI that I don’t see discussed is that it represents the culmination of the neoliberalism paradigm.
It also represents the culmination of Enlightenment rationality - taking a knowledge claim held to be true and reasoning from there what must also be true logically and grammatically.
There are no theorems that provide a substitute for judgement. Consider, for example, Wittgenstein’s discussion of “following a rule”, mathematical or linguistic.
The Enlightenment hasn't culminated. We just went down another dead end trail by believing you could disconnect trade from mutual defense, rule of law, and shared values like not dumping heavy metals into the environment. Similar to how we once believed that having governments micromanage our industries was the best way to run an economy.
AI is just some more automation, which is in fact what most of the last three hundred years have been about. A steal plow reduced the amount of time it took a man to plow a field. A tractor made men even more productive. An AI powered drone tractor will boost productivity again. The jobs for building, repairing and operating those AI systems will pay even more then driving the tractor did. Which in turn paid even more then walking behind a steal plow did.
There is no individualism without community. The culture you live in provides you with a language and general points of view. The culture does not and should not prevent individuals from making life choices. But it most certainly informs them.
Ahhh that old nasty no one wants to acknowledge, "century of humiliation!" Traders' businesspeople China never wanted to do business with you back in the 1700-1800's and still today. They thought they were superior then and they still do. You big nosed hairy barbarians need to know your places, in the kowtow line waiting to be next.
Remember, they remember. For a long time. They have beat the free trade capitalists at their own game and will pump out as much fentanyl as required to do the job. Yes, I know. it sucks having this conversation, but it is true.
My thoughts are, hasn't everyone been humbled and humiliated over a life? Isn't being humble and having humility considered a good trait? Buddha and Confucius spoke highly of this? So, get over yourselves and move on.
Actually, we've created a massive 'tragedy of the commons'. The tragedy being that everybody winds up worse off then they would have been. We did this by disconnecting trade from mutual defense and shared values, like protecting the environment.
For us, that means we are going to have less money to spend on pensions and healthcare while we rebuild our industrial base. This is going to happen no matter what a bunch of spoiled rich economist have to say about. Either good paying middle class jobs come back to America or good luck getting enough votes to keep spending our money protecting a bunch of foreign ships, carrying foreign goods, through foreign waters, to foreign ports.
For China, Their going to spend a generation or two trying to clean up the environmental wastelands they have produced. Despite all the jargon, China dominates the rare earths because they have been willing to dump the toxic waste into their rivers that we refused to go along with. They didn't come to dominate it with really innovative methods that avoided the toxic waste, or innovative methods for disposing that waste. The long term effects are increasingly starting to hit.
You can add in that China is facing an even bigger, in fact massive, lost decade similar to what Japan went through after it's property bubble burst. The ride is going to get bumpy.
Seriously, was Krugman ever right about anything??? It makes me nauseous to remember all the absolute lies that he was a part of being a member of the NYT's opinion columnists who were (and still are ex. Kristof and rape dogs) ridiculous fabulists
He was very good with the real estate crash in 07-09. Screaming. I sold the house I'd been renting. Made a very modest amount. Never got into real estate again except to live in, and that's not investing.
Micheal he was keeping his job and selling books and stuff. He had to spout this stuff off or he would have been dumped. He made a good living with his schtick. He basically just did what he was told. And made a good living doing it.
He is even lying about his own history. Here is Krugman in 1987:
These new models call into doubt the extent to which actual trade can be explained by comparative advantage; they also open the possibility that government intervention in trade via import restrictions, export subsidies, and so on may under some circumstances be in the national interest after all. To preview this paper's conclusion: free trade is not passe, but it is an idea that has irretrievably lost its innocence. Its status has shifted from optimum to reasonable rule of thumb. There is still a case for free trade as a good policy, and as a useful target in the practical world of politics, but it can never again be asserted as the policy that economic theory tells us is always right.
Ontologically, it is true that history has not come to an end. Epistemologically, to the contrary, can you think of anyway to move beyond the complete mechanization of the process of rational reasoning?
25 years ago, Ralph Gomory (mathematician) and William Baumol (econ professor at NYU) wrote a book called Global Trade and Conflicting National Interests.
https://direct.mit.edu/books/oa-monograph/2545/Global-Trade-and-Conflicting-National-Interests
It remains to this day the finest academic takedown of Ricardian-derived, free-trade theories.
They summarize Ricardo's original case of 2 trading partners and 2 products. Then lay out, in painstaking econometrics models, the great variety of equilibrium points that are possible once you extend that to dozens of trading partners and hundreds of products. Finally, they bring in game theory to alanyze how countries can use policy choices to shift the equilibrium in their favor.
It's truly a devastating critique. 25 years ago, and they were utterly ignored. Imagine where we'd be had the economics profession not been so convinced of their own superiority. (And I have an econ degree, so I'm allowed to knock them.)
The Stolper-Samuelson model that showed that tariffs can benefit workers in a country importing a lot of labor-intensive goods, at the cost of capital, is over 80 years old. It captures well the trade between China and the US.
It should at least have served as a warning light against bringing China into the WTO and put paid to arguments that supporters of tariffs don't understand comparative advantage.
That before considering the beloved concept of "network externalities", in this case the cost of building an adequate national defense against the military built by a prosperous China.
I think the reason Stolper-Samuelson failed to raise alarms was because (if memory serves) the effect is dependent on the Ricardian 2 partner / 2 product structure, and weakens rapidly as you add more of either. Since everyone knows Ricardo's structure was artificial, economists (at least the ascendant Austrians) thought they could safely ignore the criticism.
Gomory and Baumol's equilibria become MORE diverse as you add products and trading partners, which makes their critique far more robust.
You do realize that the economists that supported doing almost nothing to stop the hemorrhaging of manufacturing jobs to China from 2002-2008 are currently serving in the Trump administration?? We added manufacturing jobs under Clinton and after 2010 we added manufacturing jobs under Obama.
You do realize that the only push for tariffs in order to move manufacturing back to the US came from the Trump administration?? Also the only effort to prod companies to move their supply chains away from China.
Non-farm payrolls increased by a total of 1% over 8 years of Obama. Clinton brought China into the WTO which led to a significant outsourcing of jobs as Chinese goods entered the US with minimal tariffs.
The first 3 years of Trump's first admin created 450,000 jobs, about half of what came in 8 years of Obama; Covid then ruined that record in 2020.
https://en.wikipedia.org/wiki/Jobs_created_during_U.S._presidential_terms#By_presidency
Bush brought China into the WTO, so you have established yourself as either a liar or ignoramus. Results are the only thing matter and Obama and Biden reshored more jobs than Trump after the disastrous Bush regime.
China formally entered the WTO in December 2001, Bush's first year in office, after a process of many years that began only early in the first Clinton administration.
If I'm an ignoramus but I know that and you don't, what does that make you?
https://en.wikipedia.org/wiki/China_and_the_World_Trade_Organization#United_States'_role
Bush completed the process when he had over 80% approval. And the point man in Congress under Clinton was a Bush loyalist.
You are a liar because you are ashamed you voted for Bushes. You were attempting to obfuscate because you know two Bush’s that were president for 12 of 20 years were both globalists that believed making China great again was the most important thing they could accomplish…and in their defense they believed it would help America for China to be great again. And you know what dragged Bush approval ratings down his first term was the initial jobless recovery after Clinton oversaw the last strong job market.
I have a high school diploma and will also knock the out of touch elitist morons .
My BA and your HS diploma are equally unqualifying to PhDs, so academic economists can ignore us And they should; we know as little about economic modelling as we do about surgery or accounting.
Yes, the case against free trade can be summarized using a simple logic chain understandable by a middle-schooler. What Gomory and Baumol do is translate that logic chain into the language of economists -- econometrics and game theory -- so other economists will take it seriously. And yet... they didn't. That's an indictment of the entire field as far as I'm concerned.
I would point out the fallacy in what you're implying is that what we are seeing is a classic case of "can't see the forest for the trees" amongst economists. Starting with a surprising refresher on the oldest of all economic problems. How do you protect and defend your friends, family and territory. Ironically, starting with how do you keep your neighbor's goat out of your garden. Which is why we eventually realized the importance of private property.
Fast forward to why all those supposed intelligent economists can't see how much China is relying on America to keep the shipping lanes open even while America struggles to find the facilities and experience, much less the money to replace our aging war ships.
Reminds me of an article I read many years ago lamenting the rise of specialists in just about every field, while seeing the decline in generalists. The author was particularly using examples from the hard sciences. How you would find a physicist doing biology experiments and vice versa.
Granted the various fields have become far more complicated but his argument still stands. We keep giving too much power to highly educated people who don't have a clue of what's going on outside of their field of expertise, and even then, base their advice more on models then the real world.
To that extent, there is a guy on YouTube that has a channel called "Pax Americana" who clearly know military stuff. He goes on about what each nation needs. Sounds great until you realize he's completely ignoring that Belgium can't tax and spend 5% a year for defense and be in a union with Ireland, who is only spending 0.25%. Of course all those brilliant economists can't seem to spot the problem with that either. Yet over time, one business after another will either relocate their headquarters to Ireland, get bought by an Irish based company, or go bankrupt.
Your comment reminded me of Huxley's Brave New World. The workers (Betas, Gammas, even Alpha-minuses) were specialists, uniquely trained in the role they were fulfilling. For all of these people, reality was constructed by their betters. However the elite (Alpha++) had access to real knowledge, subversive knowledge, ideas that were banned to everyone else. Why? Because the world needs generalists, people who can "see the forest".
In Huxleyan terms, we've become a society of Betas (in both specialization and intellect I suspect).
I have never read so I'll have to take your word. For me it's a lot more reminiscent of all the learned people in Europe who believed in the might of their colonial empires even as their local populations were plotting revolutions.
One of those largely ignored parts of history, never discussed, is just how over stretched the British and French militaries were when Germany started WW2. When you really step back and look at the amount of land, natural resources, and people in both the British and French empires at the time, there really is no reason they couldn't defeat Germany without our help.
Until you realize that only a few wealthy people were making money off the plantations in India or the mines in Africa. Average Englishmen and Frenchmen were just expected to help defend the empires they didn't personally benefit from, even if it meant accepting their tax money would be spent building more warships rather then invested in the local schools. They had failed to build up any factories in Vietnam or Nigeria. Which also meant they had failed to create any loyalty to their empires in those nations. In turn they always had to keep large garrisons in those colonies to put down the perennial uprisings.
We're seeing a similar dynamic today. Average Americans, Frenchmen, and Englishmen are told we have to defend Chinese built ships, registered in Liberia, crewed by Filipinos, carrying Russia crude to India as it passes through the Red Sea. When you question it, someone claims "its in our interests", as if that's an actual explanation. Meanwhile socialist are actually winning primaries and looking to strip the lords and nobles bare before sending them to the guillotine.
At least it's more of a figurative, rather then a literal guillotine these days.
You would have liked speaking with my father a WW2 combat vet , he said the exact same things about Europe and if not for uncle adolfs decision to invade Russia the outcome would have been very different .
We are aware of what's happening around us which is more than I can say of a lot of academics and their models .
Thanks for the link; I shall read the monograph with the deepest of interest.
Yes concur Brian, these economists are bought and paid for. They say what they are directed to say. They don't let the truth get in the way. Thanks for the info, much appreciated.
The truth or reality . 👍
I put a lot of the blame on Perot because the Bush family was very clear that making China great again was a priority for them. Perot was the classic “boy that cried wolf” about NAFTA when a very real dragon was lurking in the Pacific. So Americans were lulled into a false sense of security during the strong Clinton economy that globalism would always result in overwhelmingly positive results for America. I know NAFTA resulted in the loss of textile manufacturing jobs but those were the worst manufacturing jobs and they flourished in areas with high poverty.
“Taking down” a theory proposed in 1802 is not that impressive. They showed economics is complicated, which has been obvious for…a while now (like 150 years).
In any case, comparative advantage is still an insightful theory, but like every theory in economics, it breaks down with complication. Take anything Friedman wrote about inflation as a modern example. It’s all wrong now, but still an interesting thought experiment (though nowhere near as interesting as Ricardo’s comparative advantage).
Alastair nailed it. If the “new” right was serious, they’d advocate for a coalition of fellow democracies to stand against China, it’s the only way to match their scale. Instead, Oren ducks and spends his time fighting meaningless, backward looking battles against fellow establishment elites, most of whom wield little if any influence in today’s politics. Meanwhile, in the real world, the leader of his own movement controls the entire federal government. But predictably, Oren rarely musters a comment on the impacts of DonOrenomics. I suspect he fears being attacked by an administration that’s shown itself willing to use the full power of the federal government to smite those who criticize them. Gotta preserve your tax exempt status I guess…
Time to man up Oren, your team is in charge. Defend them. Enough with the fixation on the past.
Biden and Trump agree on more than they disagree on…Biden kept most of the tariffs Trump implemented in his first term. In fact Obama’s and Clinton’s top economists attacked Biden and then ended up admitting they got most things wrong by 2023. I followed Furman on X during the inflationary period and his main focus was on wage increases and conventional wisdom was that the Fed would need to increase the unemployment rate to stop the wage increases. That said, I do agree with Furman that the biggest missed opportunity of Biden was extending the expanded Child Tax Credit but it paid for itself and so it was stupid that Rubio opposed it when it was central to his 2016 campaign.
I agree there is plenty of legitimate debate to be had over the policy implemented during the pandemic. It was an unprecedented time, plus it was on the heels of the Great Recession. No one could be expected to get everything right. It was an easy time to be an armchair quarterback.
But for whatever reason, Oren seems obsessed with silly arguments over the past. Maybe it's his own insecurity as he strives to be taken seriously. Maybe it's his naïveté-having never held a policy making job, he might be unaware of the imperfect tradeoffs facing those tasked with actually governing. Regardless, I don't particularly care what Paul Krugman said a decade ago. I care infinitely more about the impact of the "new" right's agenda being implemented as we speak. The record setting deficits, the taco tariffs, the wealth transfer to plutocrats, the shredding of our alliances, the attacks on the rule of law, the massive corruption, and MAGA's Middle East war. All seem a smidge more important to today's economy than a spat among establishment elites.
The Trump/Cass economic agenda is ascendant. One day it too will be picked apart-the taco tariffs, the deficits, the corruption, all of it. I suspect that's the main reason Oren is desperate to change the subject as he casts about for someone else to blame for today's hugely unpopular economy. His reputation hinges on how history judges DonOrenomics. Unfortunately for him, he bought a first class ticket on the Trump train, now he's takin the ride...
Trump actually stated the obvious that the top rate needs to be 39.6%. A 39.6% top rate in 2026 after no tariffs in 2025 and not escalating Iran in 2026 would have reduced the deficit to under 4% which is what Bessent said was necessary when he was confirmed. Trump inherited a 3% deficit ratio from Obama and it was over 4% before Covid and so it should have been obvious to everyone the deficit wasn’t a Republican priority.
Indeed China is a mercantilist threat to the former West. So why on earth has Trump spent the last year and a half pissing off Europe, Canada and India instead of building a coalition of the USA's former allies against it? And why has Commonplace looked the other way while he did it?
Do you know one of the biggest impediments to getting on a sustainable path is the European Union. What all these over educated economists keep missing is the oldest economic problem known to man. Which is the "commons" problem. Also known as the "Tragedy of the Commons". There are a number of very serious commons problems we have been trying to ignore.
Protecting the environment is a pretty obvious one. How can you build stuff in the US without allowing companies to dump heavy metals into our rivers, if they can just move the factory to Indonesia. Protecting workers is another. If you can work a man in dangerous and unhealthy conditions with little to no regulations in Malaysia, then it's not really about the higher wages you would have to pay in Missouri.
But one of the biggest commons problem is protecting the shipping lanes and our territories from pirates, terrorists and adversarial nations like China and Russia. Here's where the EU becomes the biggest barrier to the future. It's a land where somehow, Belgium and Denmark are going to spend 5% a year on defense and not watch their wealthy relocate to Ireland for the lower taxes and better schools that come from only spending 0.25% on defense. Germany is going to spend 5% on defense and yet it's companies aren't going to slip across the border to Austria (1%). Though the magic of government debt, France and Italy are going to manage to pony up 5% a year, even while Spain refuses to spend more then 2.2%.
We've built a massive poverty trap by trying to disconnect trade from mutual defense and shared values. Now granted, Trump's doing a really lousy job when it comes to offering up a coherent vision for where things need to go, but stop and think about Canada. You would think, giving how much of their own blood and treasure they have spent helping us fight pirates, chase terrorists, and conduct freedom of navigation patrols in the South China Sea, that they would demand a better trade agreement then Mexico gets. Mexico has done nothing to help defend the supply chains that feed the Mexican factories that we used to put in Canada.
While I like "Commonplace', it does tend to be written from a tradition prolabor perspective. Less from a big picture view. So they tend to focus more on a simple "what's good for America stance", and seem to be opposed to "free" trade for ideological reasons.
Because everyone on the right browns their noses for the orange overlord .
Hi Oren, I appreciate your perspective, and certainly Paul Krugman has not been infallible. His views on Japan's economy 30 years ago and the EU economy since 2010 have also needed updating, which he has admittedly done in recent years. But I don't understand your finger-wagging toward Krugman for changing his mind when he is clearly saying "It’s not 20 years ago anymore" and "disregarding questions of national power made sense for about 70 years after World War 2," in other words the facts on the ground have changed. I could understand your pique if he was NOT changing his mind in the face of these shifting facts. It seems to me he deserves some credit for at least, um, letting the new landscape result in him coming to different conclusions. Or are you saying that his viewpoint was wrong 20-70 yrs ago too? If so, you have not convincingly made your case about that. Thanks, all the best
You mean the Paul Krugman that won a noble prize for his showing that the longer you let people go on un-employment, the longer they will remain un-employed. Then during after the 08 financial crisis, because he was a big fan of Obama, ran around claiming doubling the number of weeks of un-employment would be a good thing.
He just another insufferable partisan hack, who I'm sure spent years insulting and bad mouthing Case and anyone was else who didn't drink the Kool-Aid.
We need to give Krugman credit for openly acknowledging that he has been wrong. Economists so rarely do. Also, I sense that Oren will have several reasons to acknowledge error over the next few years, so I hope he is appropriately humble when the time comes. Meanwhile, I enjoy the fresh perspectives that Commonplace often brings. What I don't see is that Commonplace carries much weight with the real decision-makers of our current regime.
Oren is the economic guru of the new right for what it's worth. The young bloods of the admin are new right but Trump still goes with his investments being top priority, stocks and bonds.
Krugman was off by 40 years. Rusting was there before there was a name for it in the mid 70s in the north east.
I think China has a pretty good handle on things in that they seek to promote industries in China's best self interest. We only assist our corporations in making more money, which is good for me, but bad for the people up and down my street. Trade can't even be measured in dollars, a ton of wheat has almost no value added via labor, an iphone or even a nice piece of clothing has a lot of labor in it.
Then there is national security, which includes N-95 masks, and we should make 10% of every imported item here, no matter the cost. Notice China's strategic petroleum reserve isn't even close to empty?
We are getting our clocks cleaned .
Oh, I remember NAFTA. The Great Betrayal. It was clearly supported by majorities on both sides of the isle despite it being clear the sacrifice on the Free-Trade altar would be middle-class America. We fell for it. Big business made a killing by moving factories overseas. The factories here disappeared, town-after-town died, and we were left to live out our lives in blighted communities, plummeting tax-revenues, and crumbling infrastructure.
And here in the year 2026, it's getting worse. Catastrophic ideas like Socialism, Looting, and Redistribution are making a resurgence in the American mind, and it doesn't surprise me the DSA gets so much traction among today's younger voters.
Quite a few voted against it. All the big guys in both parties were for it, notable exceptions came from places with poor people or extremely conservative Republicans. Overall in the house Dems were like 150 against, 100 for it. Rs were 50 against it. Bill Clinton lobbied hard for it. Perot was right.
Yes true. Ross Perot was so right back in the day. Sucking sound south. He needed to add east too. WTO entry took it east.
The bankers took over the economy in the 1970's. They run the show now.
I live in the most manufacturing intensive state in the nation. In 2026, we produce more goods than we did in 1980, by a lot. A whole lot. But we employ far fewer people to do so. NAFTA is but one potential factor, and almost certainly not the most important one. I’m doubtful we’ll soon be outlawing automation and technological advancement, though MAGA apparently wishes we would.
Politicians are experts at exploiting the angst that a technological revolution produces. Simplistic blame is easy, and effective. Solutions are hard, and imperfect. The same economic trends, coupled with the same resulting political upheaval, are happening globally. As one example, it’s not a coincidence that Brexit occurred at the same time Don first appeared with his simplistic message regarding trade, brown people, and manufacturing employment. Throughout the western world, most of it not subject to NAFTA, the same trends prevail. Tellingly, throughout Don’s two terms, the same macro trends have marched on-we produce more, and manufacturing employment declines. Don will not reverse this. Be wary of aging, incoherent politicians promising simple solutions.
The majority on one side of the aisle (the Democrats) voted against. The majority on the other side (GOP) voted for. See: www.congress.gov
I'm 71 and retired thank God , I have been hollering about this since 1988 when I heard G H W Bushes vision for the global free trade economy , he said you can get a degree in advanced w - - - ing off or you can work s - - t jobs for the rest of your life , we will close your factories , eliminate decent jobs and destroy your small towns , it's a win win win ! Yeah it was for wall street , I can't imagine where trumpy came from .
🙄 i was expecting some real humiliating shit based on the title
weak
One line of discussion about AI that I don’t see discussed is that it represents the culmination of the neoliberalism paradigm.
It also represents the culmination of Enlightenment rationality - taking a knowledge claim held to be true and reasoning from there what must also be true logically and grammatically.
There are no theorems that provide a substitute for judgement. Consider, for example, Wittgenstein’s discussion of “following a rule”, mathematical or linguistic.
The Enlightenment hasn't culminated. We just went down another dead end trail by believing you could disconnect trade from mutual defense, rule of law, and shared values like not dumping heavy metals into the environment. Similar to how we once believed that having governments micromanage our industries was the best way to run an economy.
AI is just some more automation, which is in fact what most of the last three hundred years have been about. A steal plow reduced the amount of time it took a man to plow a field. A tractor made men even more productive. An AI powered drone tractor will boost productivity again. The jobs for building, repairing and operating those AI systems will pay even more then driving the tractor did. Which in turn paid even more then walking behind a steal plow did.
There is no individualism without community. The culture you live in provides you with a language and general points of view. The culture does not and should not prevent individuals from making life choices. But it most certainly informs them.
Ahhh that old nasty no one wants to acknowledge, "century of humiliation!" Traders' businesspeople China never wanted to do business with you back in the 1700-1800's and still today. They thought they were superior then and they still do. You big nosed hairy barbarians need to know your places, in the kowtow line waiting to be next.
Remember, they remember. For a long time. They have beat the free trade capitalists at their own game and will pump out as much fentanyl as required to do the job. Yes, I know. it sucks having this conversation, but it is true.
My thoughts are, hasn't everyone been humbled and humiliated over a life? Isn't being humble and having humility considered a good trait? Buddha and Confucius spoke highly of this? So, get over yourselves and move on.
Actually, we've created a massive 'tragedy of the commons'. The tragedy being that everybody winds up worse off then they would have been. We did this by disconnecting trade from mutual defense and shared values, like protecting the environment.
For us, that means we are going to have less money to spend on pensions and healthcare while we rebuild our industrial base. This is going to happen no matter what a bunch of spoiled rich economist have to say about. Either good paying middle class jobs come back to America or good luck getting enough votes to keep spending our money protecting a bunch of foreign ships, carrying foreign goods, through foreign waters, to foreign ports.
For China, Their going to spend a generation or two trying to clean up the environmental wastelands they have produced. Despite all the jargon, China dominates the rare earths because they have been willing to dump the toxic waste into their rivers that we refused to go along with. They didn't come to dominate it with really innovative methods that avoided the toxic waste, or innovative methods for disposing that waste. The long term effects are increasingly starting to hit.
You can add in that China is facing an even bigger, in fact massive, lost decade similar to what Japan went through after it's property bubble burst. The ride is going to get bumpy.
Seriously, was Krugman ever right about anything??? It makes me nauseous to remember all the absolute lies that he was a part of being a member of the NYT's opinion columnists who were (and still are ex. Kristof and rape dogs) ridiculous fabulists
He was very good with the real estate crash in 07-09. Screaming. I sold the house I'd been renting. Made a very modest amount. Never got into real estate again except to live in, and that's not investing.
Micheal he was keeping his job and selling books and stuff. He had to spout this stuff off or he would have been dumped. He made a good living with his schtick. He basically just did what he was told. And made a good living doing it.
Michael sorry for misspelling the name.
Also Lincoln:
“In all that the people can individually do as well for themselves, government ought not to interfere."
He is even lying about his own history. Here is Krugman in 1987:
These new models call into doubt the extent to which actual trade can be explained by comparative advantage; they also open the possibility that government intervention in trade via import restrictions, export subsidies, and so on may under some circumstances be in the national interest after all. To preview this paper's conclusion: free trade is not passe, but it is an idea that has irretrievably lost its innocence. Its status has shifted from optimum to reasonable rule of thumb. There is still a case for free trade as a good policy, and as a useful target in the practical world of politics, but it can never again be asserted as the policy that economic theory tells us is always right.
https://www.aeaweb.org/articles?id=10.1257/jep.1.2.131
Ontologically, it is true that history has not come to an end. Epistemologically, to the contrary, can you think of anyway to move beyond the complete mechanization of the process of rational reasoning?