As soon as I saw Tyler’s latest post on “Why the Theory of Comparative Advantage is Overrated,” I asked myself, “Overrated by whom?” The theory clearly isn’t overrated by the 95%+ of American adults who have no idea what the theory even is. It’s not overrated by the politicians or journalists who think and talk in terms of zero-sum folk mercantilism. Nor is it overrated by the bulk of economists who totally ignore its single most important application: immigration. So what reference group does Tyler really has in mind?
I’ve asked him related questions before. For example, when he says, “We know X,” I’ve asked him, “Who exactly knows X?” His initial answer was along the lines of, “Daily readers of the New York Times,” but that’s absurd. Millions read the NYT. Most of them are normal humans who quickly forget what they read. And since stories above the human interest level require heavy background knowledge to understand, readers rarely even grasp stories well enough to forget them.
A more accurate answer might be, “A daily reader of the New York Times with a photographic memory and the background knowledge to understand all the stories.” But not only is this standard comically high; it still defines Tyler’s imagined reference group too broadly. Yes, to comprehend every story in the NYT, you probably need passing familiar with the theory of comparative advantage. But this hardly makes you likely to seriously reflect on the theory, much less overate it.
“Academic economists” and “public policy wonks” are also candidate reference groups. But Tyler knows as well as I do that both of these groups have massive blind spots. Most academic economists fails to apply the lessons of comparative advantage to immigration. Most policy wonks are too pragmatic to appeal to grand theories of trade. So neither of these groups works either.
Who then really is Tyler’s reference group? “The GMU lunch crowd” wouldn’t be a bad answer. But the best answer, in my view, is “younger versions of Tyler himself.” When Tyler says, “We overrate X,” what he really means is “I used to overrate X. Here’s how I went wrong.” Once you know about Tyler’s dramatic and continuing intellectual evolution, it’s hard to interpret him any other way.
There’s nothing intrinsically wrong with this navel-gazing standard. But using “we” interchangeably with “younger versions of me” is pedagogically extraordinarily confusing, especially when younger versions of you were, like all of Tyler’s avatars, deeply unconventional thinkers. Younger versions of Tyler might have overrated comparative advantage. But does Tyler really think that the typical reader of any audience he’s ever addressed overrated the theory? Inquiring minds want to know.
READER COMMENTS
Leigh Caldwell
Sep 1 2013 at 9:45pm
Maybe he means “Marginal Revolution readers”?
Bob McGrew
Sep 1 2013 at 11:05pm
I want to hear about Tyler’s dramatic and continuing intellectual evolution.
Maybe I’m leaving this comment on the wrong blog. 🙂
Jacob A. Geller
Sep 2 2013 at 12:03am
I think his reference group is not any group of people, but introductory economics textbooks.
DJ102010
Sep 2 2013 at 12:14am
My guess would be “readers of pop-econ books and blogs,” or maybe “authors of pop-econ books and blogs.”
I view Tyler as (and I mean this in the best possible way) as an apologist for the status quo.
That is, when I learn about some existing policy that is at odds with economic principles I think: “Scrap that policy!” I think Bryan Caplan writing at EconLog is the same, as is Steve Landsburg writing in his books, as are others…
Tyler, however, thinks something like “Hmm. Maybe there’s more to that policy than a superficial analysis might suggest. I would prefer a different policy, but maybe the only way to get that would be by incrementally changing the existing policy. We mustn’t forget path dependence and multiple equilibria.”
I cheer for the Bryan Caplans of the world (“open the borders!”), but I worry that the Tyler Cowens of the world (“gradually liberalize immigration policies, keeping in mind sometimes irrational backlashes might cause setbacks…” ) are right.
Carl
Sep 2 2013 at 6:26am
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Handle
Sep 2 2013 at 9:17am
I think there’s the making of a profound insight here. I think a lot of publicly-pontification academics use that structure of conversation ‘We overrate X’ instead of ‘I overrated X, along with most other people, but I’ve now changed my mind, so the rest of ‘we’ is wrong.’
Steve Roth
Sep 2 2013 at 12:17pm
“stories above the human interest level require heavy background knowledge to understand, readers rarely even grasp stories well enough to forget them”
But we still believe in “rational shoppers,” who are not systematically biased like voters are?
John Thacker
Sep 2 2013 at 1:25pm
Perfectly? No, not at all. But we believe that people are closer to rational when shopping than when voting, or when making decisions for other people.
People engaging in economic transactions may be biased against foreigners, for example. But it’s nothing compared to the bias against foreigners that gets enshrined into law when people vote or make law.
MikeP
Sep 2 2013 at 4:57pm
But we believe that people are closer to rational when shopping than when voting, or when making decisions for other people.
We also believe that the decisions people make while shopping are much more multidimensional and therefore harms of individual bad choices are far more likely to wash out.
Not everybody bought a Hummer. But the choice at the ballot box is between one bag of terrible policies called the Republican platform and another bag of terrible policies called the Democratic platform. Voters don’t get to pick and choose from that menu.
Hazel Meade
Sep 2 2013 at 5:56pm
To be fair to Cowen, if you read his post, his point is that there are EVEN BETTER reasons to favor free trade, than just the standard comparative advantage story. He thinks those reasons are given short shrift because every just lays out comparative advantage and leaves it at that.
At least that’s what I got from reading his post.
KingHaris
Sep 5 2013 at 7:03pm
But we still believe in “rational shoppers,” who are not systematically biased like voters are?
Yes, ultimately. You pay a price for being an irrational shopper (literally). You pay no price for being an irrational voter.
darf ferrara
Sep 9 2013 at 9:28am
I just listened to the MRUniversity podcast on the great economists. Comparative advantage is described as one of the most important ideas in economics in the portion on Robert Torrens. I take it that the Tylers reference group is Tyrone.
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