Monday, July 30, 2007

Reading Challenge V

Today's selection: How To Save Globalization From Its Cheerleaders

Commentary: Yes, we again delve into Dr. Rodrik's works, but only because I felt the need to explore political economy, and I may as well stick with growth.

I agree with his thesis that free trade is no longer a unified policy space, to reorient his terminology. The mere fact that a growing legion of people have come to believe that globalization is a sticky subject constitutes strong evidence that it may well be such.

Basically, I think the point is being made that we're getting down to diminishing marginal returns. Accepting that there is a cost to globalization, regardless of how minute (and I am not saying the cost is minute), eventually there must reach a point where the costs and benefits are clashing for supremacy.

Personally, it feels like the world is fairly free for trade right now. I don't feel constrained in my ability to obtain Japanese entertainment, Chilean food, or Russian music. While a more scientific method of judging the extent of trade barriers may not exist, the discussion is being motivated in large part by the feelings of individuals, evidenced at the repeated WTO protests. (I do remain convinced that many people attending such riots are there for the social benefits, though, much as concerts serve as social reinforcement for a different clique.)

I don't think a serious economist exists that wishes for no trade as opposed to the status quo. Most economists, myself included, probably wish for a first-best world where trade occurred as it did in introductory textbooks. Rodrik enjoys hammering at the point that no such world exists.

I am, as always, perpetually cheered by the fact such a discussion takes place. Literature that reacts to the data and not the dogma is in no small part the reason economics can cling to the label of being a science.
Is there some action a government of India could take that would lead the Indian economy to grow like Indonesia's or Egypt's? If so, what exactly? If not, what is it about 'the nature of India' that makes it so? The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them it is hard to think of anything else.

Too true, Dr. Lucas.

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