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.

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.

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?

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.

"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.

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.

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.

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?

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!

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?

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.

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.

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...

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.

This is a bit of a loaded question. For example Harford's piece refers to "free trade" agreements. Why not just trade agreements? It's not entirely clear that they're "free trade". For example, is an agreement to put US manufacturing workers in competition w/ lower wage workers in the developing world while simultaneously strengthening IP protection for US software makers or expanding patent protection for drug firms truly a "free trade" agreement?

For more on this type of argument see Dean Baker's _The Conservative Nanny State_.

Now, if trade agreements applied to everyone equally, I think there would be less of an argument for compensating the losers. But if I'm reading Baker right, they don't - the trade deals are biased.

So what's the answer? Well, if there's a consistent bias in the development of trade deals then progressive taxation may be ok. Or, alternatively, make it easier for doctors, lawyers, economists, etc. from the developing world to compete w/ those already here.

I don't accept the idea that any one person has the right to keep any one job forever. I don't believe it's the government's role to keep certain people in certain jobs. Nor do I believe that Americans deserve jobs more than foreigners. Actually, I think the next best option is usually better for the American than the foreigner(s) who "takes" the job.
I see it as tribalism/nationalism, which is not necessarily invalid or immoral, just not sentiments I share. It would not bother me if every single car were made outside the United States. I would be thrilled for more Mexicans, Chinese, and Indians to have better jobs than they currently do.
The idea of compensating "losers" in order to win support for free trade is clever. If anything, I'd rather see a straight cash payment or scholarship than government-provided training.

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.

Well if you demanded I give up my job now for the long-term greater good of mankind, I would ignore you. However, in the past, when my clients stopped signing contracts with me, I start looking for new clients. Which has meant changing the skills I sell. I imagine that if the same thing happens again in the future I will do the same thing. I don't feel furious at the client, because I think that feeling furious just makes me worse.

Let us imagine a different situation. I have very few ideas about who you are, and what you do. But shall we imagine you are a wheat farmer in Iowa? How would you feel if the US government suddenly banned you from selling wheat to any non-Iowan customer? Or say that the Iowan government suddenly banned you from buying tractors from outside Iowa, and you had to suddenly settle for whatever was made by Iowians?

Mightn't you feel a bit miffed?

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.

I have never understood the theory behind banning trade. How does your theory work? How does the US government stopping US citizens from buying products from foreigners meant to make US citizens better off? It raises the costs for US citizens who buy stuff, and it means that the US citizens who sell stuff to foreigners make less money. You protect some jobs at the costs of others.

And if there is some mysterious process by which restricting trade works, why not restrict it further? Why not ban Iowan citizens from buying products from outside their state? Why not ban people in Des Moines from buying products from outside their city? Why not ban everyone from buying products outside their family at all?

Why do you think banning trade makes people better off?

"why do people lose their jobs"?
I would have to agree with Tim Hartford when he says that people lose their jobs all the time for reasons that have nothing to do with foreign trade. I would say that in most cases there is a lack of institutional as well as employees values such as; integrity, job development, business ethics, and morals.

Employers and employees need to have a stronger commitment for their jobs.

thank you for this excelent article

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