Perspectives on Geopolitics, History, and Political Economy

Excerpt: What Economists Learned Long After Everyone Else in 2016

Excerpt from The American Prospect

TORONTO-JANUARY 31: Protesters marching in a rally to protest the proposed TPP trade agreement and NAFTA Agreement on January 31, 2014 in Toronto, Canada. = Editorial Credit: arindambanerjee / Shutterstock.com

By Harold Meyerson

Excerpt from the American Prospect

This week, Bloomberg’s Noah Smith published a list of “ten excellent economics books and papers” that he read in 2016. Number three on his list was the now celebrated paper, “The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade,” by economists David Autor, David Dorn and Gordon Hanson. Here’s Smith’s summary of the work and its consequences:

This is the paper that shook the world of economics. Looking at local data, Autor et al. found that import competition from China was devastating for American manufacturing workers. People who lost their jobs to the China Shock didn’t find new good jobs—instead, they took big permanent pay cuts or went on welfare. The authors also claim that the China Shock was so big that it reduced overall U.S. employment. This paper has thrown a huge wrench into the free-trade consensus among economists.

Smith’s account of the paper’s effect is absolutely right: Economists’ astonishment and dismay at Autor & Company’s revelations were palpable and widespread. Which raises a question many of us have been raising for years: Why have mainstream economists been the last people to understand the consequences of the policies they advocate?

Read the full article on The American Prospect