Strange things are happening in the world these days. Rafa and Roger are about to contest an Australian Open final, causing me to check my calendar; England thumped India in a Twenty20, causing me to dig a deep hole in the garden for signs that hell has frozen over; this Sixers are awesome while the Cavs suddenly suck. What the heck is going on? Increasingly, I’m starting to wonder whether we actually are all just in a big computer simulation, and the computer’s running out of RAM. If these links are all just repeats, I blame the RAM. That’s my new mantra: blame the RAM.
1. We’re about a week into Trumperica now, and what have we learnt? And importantly, what does it look like he’s learnt? Let’s start with Mexico. All through the election, his promise to make Mexico pay for his wall seemed outlandish – how could he do this without significantly damaging the US economy? His first idea, quickly rowed back on, was a tax on Mexican imports – a tariff that would both hit American consumers and American producers hard. But he could hurt Mexico in other ways, too even if they wouldn’t raise much money – Mexico’s economic fortunes are tied to the US by an umbilical cord made up of both trade and remittances. In a way it doesn’t matter whether or not he actually does get the money for the wall this way – politically, he may only need to sell it like that. Similarly, the fact that net jobs created are a tiny proportion of gross jobs created and destroyed in a month probably won’t stop someone, at some point, just citing the stat that looks best. I’ll come back to this point, so bear with me.
2. But in the interests of questioning my own prior convictions – is there something valid to Trump’s instinctive hatred of trade deals? Dani Rodrik has always been more circumspect than most economists in his approach here, and his analysis of NAFTA is required reading for everyone who thinks that free trade is the obvious answer. I accept his points here, but they beg further questions: if sections of the economy need protections in order to survive, in the answer to offer these protections up and create rents for exploitation? And if so for how long? And do we do it for all sectors or just some? Or do we phase them out slowly and really work at remodelling the economy? I lean towards the last, as do most economists, but I’m realistic enough to know that the average 45 year old isn’t just going to reskill and become a computer engineer. There are real costs, and we need a proper plan for dealing with them.
3. Relatedly, Rodrik has been busy this month, with a further paper on structural transformation here. Interestingly, his co-authors use a separate paper on which Rodrik is not co-author to refute his argument of premature de-industrialisation.
4. Recently, I’ve seen a few people asking for evidence of a prior belief they hold (“I think poverty is rising because of neoliberalism, can someone send me proof of this?”), rather than asking a neutral question and seeing what the evidence says (“what’s the best evidence about recent trends in poverty and their causes?”). It’s worrying if this is creeping into actual calls for research proposals though – even if it is only in an advocacy organisation or two for now.
5. I mentioned the passing of Thomas Schelling in a recent links, focusing on his work on nuclear non-proliferation. Tim Harford considers the insights from his work for Brexit negotiations, concluding that they resemble a game of chicken with similar possible outcomes.
6. This might have been my favourite article of the week – a book review that digs into the phenomenon of India’s criminal-politicians, suggesting that in the absence of a functioning state, it becomes a stable and rational equilibrium for voters to prefer crooks to the honest men, as it increases their chances of getting services delivered. Meanwhile it also removes the incentive to improve state functioning on the part of the criminal-politicians as their viability depends on their role as deal-makers, and thus in turn on the absence of a rule-based system.
7. I promised to return to the issue of Trump’s relationship with data (or, more baldly, the truth). Via Tim Harford, I came across this article suggesting that the deep psychology of lying may mean that his approach is not just a good strategy, it will gradually win us all over, even the fact-checkers among us. I don’t buy it, not really. It misses the point that there are very different kinds of untruth and very different ways we respond to them. There’s the vague and difficult to verify ones (“This plan will create millions of jobs, jobs we’ve been losing”) and the concrete and relatable ones (“you’re better off today than you were four years ago”). At the moment, we’re still in the realm of the first kind; but soon, when policies are supposed to turn into reality, the second kind will come into play. Ambiguity will delay realisation; but ambiguity is unlikely to last for ever, or even for very long.
8. Meanwhile – there’s always satire: “Cake shall henceforth be known as ‘alternative celery.’”: a poem of alternative facts.
Have a great weekend, everyone!