Economists on trade deals

This comes from Greg Mankaw's blog:

The new IGM Panel poll of prominent economists asks about this proposition:

An important reason why many workers in Michigan and Ohio have lost jobs in recent years is because US presidential administrations over the past 30 years have not been tough enough in trade negotiations.

Only 5 percent agree, while 64 percent disagree. (The rest were uncertain or did not answer.) A previous poll asked about this statement:

Past major trade deals have benefited most Americans.

On this one, 83 percent agreed, and zero percent disagreed.

With regard to the first poll mentioned, David Cutler, who "agreed" with the statement made an interesting comment,

The phrasing implies that any reduction in jobs is bad. Some shifts in employment are valuable (e.g., fewer sweatshop jobs in the US).

So there may be good even in the bad.

When the responses to this poll are weighted by each expert's confidence, those who "agree" falls to 3%. In both weighted and unweighted responses 0% "strongly agree". The weighted "disagrees" is 86%. So those who disagree are confident in their position.

So the vast majority of economists see advantages in trade deals, even if non-economists don't.

Do politicians affect economic outcomes?

For the US at least the answer, in one sense, is yes: the US economy has performed better under Democratic presidents than Republican ones.

But why?

A new paper in the American Economic Review (Vol. 106, Issue 4 -- April 2016 ) looks at this question.

Presidents and the US Economy: An Econometric Exploration
Alan S. Blinder and Mark W. Watson

The US economy has performed better when the president of the United States is a Democrat rather than a Republican, almost regardless of how one measures performance. For many measures, including real GDP growth (our focus), the performance gap is large and significant. This paper asks why. The answer is not found in technical time series matters nor in systematically more expansionary monetary or fiscal policy under Democrats. Rather, it appears that the Democratic edge stems mainly from more benign oil shocks, superior total factor productivity (TFP) performance, a more favorable international environment, and perhaps more optimistic consumer expectations about the near-term future. (JEL D72, E23, E32, E65, N12, N42)

When you look at the things that drive the Democratic advantage - benign oil shocks, superior total factor productivity (TFP) performance, a more favorable international environment and more optimistic consumer expectations - apart from may be the more optimistic consumer expectations, it is not obvious how the current term president could affect the other drives of economic performance.

So in this sense the answer to the question is no. It looks more like luck than good management on the part of politicians that drives economic success.

Israel Kirzner on the history and importance of the Austrian Theory of the Market Process

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