Monday, January 9, 2017

Leaders vs followers?

The Jan 9 Wall Street Journal had this nice graph, accompanying an article by Josh Zumbrun, "Top Economists Grapple with Public Disdain for Initiatives they Championed"

The question is this: Should we understand politicians as assembling coalitions of voters with fixed policy preferences? Or should we instead regard politicians as leaders, who give voice to general dissatisfaction, and their followers picking up ideas?

Most political analysis takes the former view. People are mad about China, the TPP, immigrants, or whatever, and Trump comes along, listens, and represents these preferences, and wins. Easy models of political preference put preexisting policy views on a line, and then think about where leaders choose to place themselves.

The article echoed the common view too
Surveys from the Pew Research Center have documented dwindling support for free trade. In 2014, 60% of Democratic voters and 55% of Republican voters supported such trade agreements. In an October survey, however, support among Democrats had fallen to 56% and support among Republicans had nose-dived to 24%.
I'm coming to a different view. Yes, people are unhappy. But the average American is busy with a real life, and doesn't think a whole lot about cause and effect in public policy. How many have read NAFTA or the TPP, or have any idea what's inside?  How many have thought about automation vs. regulation vs. trade as the source of industrial decline?

It seems to me the ideas come from the leader, giving voice to their voter's frustrations. Policy views then become general signals of team allegiance. Witness how many Trump supporters, interviewed, supported him despite not because of policy stances.

And witness the graph. How could it possibly be that in two years, opinions on the value of free trade among Republicans dropped by half, while virtually unchanged among Democrats? Surely, this is not a change of view independent of candidates, that Mr. Trump was just quicker to recognize. Surely, this represents the opposite -- candidates, especially Mr. Trump but also many of the others, denounce trade, and followers follow.

The good news is that ideas held lightly and as a badge of support can more easily change.   And other leaders can channel the same discontents to more profitable analysis of our country's problems.

26 comments:

  1. Maybe now that leaders are talking about it, people are re-evaluating their beliefs. So it's a recognition of a new reality, not a lightly held belief.
    Comparative advantage is a great theory, but is misapplied to China. They are large enough to outsource all our jobs at wages below our minimum wage, not just the ones they are comparatively better at. When wages are factored in China has an absolute advantage over all our jobs. Shipping boatloads of dollars for cheap products is not working to balance the exchange rate, like theory would indicate. Obviously something else is happening. Maybe currency manipulation? db.

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    1. "Obviously something else is happening."

      Probably the fifty percent of GDP savings rate in China.

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  2. "The good news is that ideas held lightly and as a badge of support can more easily change."

    I would have no problems if all of Trump's "ideas" were held lightly with no real commitment to anything. I would be quite happy if Trump vetoed everything that came across his desk until Congress could generate a 2 / 3rds majority.

    But since this topic is about global trade - let me put it this way:

    Most people would rightfully agree that free trade OF GOODS is a great thing. Problems arise when one country is borrowing money from another to buy it's goods (See Portugal, Italy, Greece, Spain, and the United States). No country has ever successfully borrowed and consumed it's way to prosperity.

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  3. Doc at the Radar StationJanuary 10, 2017 at 6:26 AM

    >The question is this: Should we understand politicians as assembling coalitions of voters with fixed policy preferences? Or should we instead regard politicians as leaders, who give voice to general dissatisfaction, and their followers picking up ideas?

    It's actually both, but you are very spot on in your second assertion here. I remember in the 2004 election, the high-schooled on the shop floor of the factory I worked at were primary concerned with gay marriage and that's why they were voting for Bush. But, if you asked them questions about "involvement in the global economy" you would see something like the responses in the data you post above. However, if you were to phrase the question "should we produce everything that we need here", you would see the percentages a lot higher. So, it's still on their mind, but you need someone to articulate that, make it concrete instead of abstract, and that's what Trump did this time around.

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  4. Trump might be ahead of the rest of us on the subject of trade. American firms didn't "lose" the trade war to low-cost China firms, American firms chose to shift production to low-cost China firms. But that was yesterday. Today, China firms are producing goods for China firms to compete with goods produced for American firms (including goods produced in China for American firms). American firms, supporters of trade, will soon oppose trade when the imports really are imports, goods produced in China for China firms rather than for American firms. We are entering an entirely new phase of trade, one in which politicians opposed to trade will be aligned with American firms opposed to trade. Cochrane is correct that "views held lightly" are easily subject to change; but views based on declining profits can turn on a dime.

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  5. I entirely agree with the basic point. It has always seemed to me that from a strictly evolutionary perspective, ideas must matter, or we wouldn’t have them. (Though the alternative view is that ideas are epiphenomena.) But I’m not sure it’s right to see the key ideas as originating with politicians, or at least not primarily. Celebrity figures, including politicians, likely have a disproportionate impact on current ideas, but other proximate figures are also important. I suspect that a university professor that a person actually took a class from has more impact than a more famous but more distant professor in the same field. If you haven’t read it, Joseph Henrich, The Secret of Our Success, has a great discussion of cultural transmission that combines anthropology, evolution, and economics.

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  6. Trump and Sanders both Blamed TPP, China, NAFTA and Trade agreements for the decline in US manufacturing workers.
    Do you think a focus on scapegoating trade to build political support has an effect?
    GM left Flint and Michael Moore made Roger and Me years before NAFTA was passed and NAFTA gets the blame for Flint?
    We now manufacture more goods with fewer workers than we did several decades ago.
    We are watching the automation of manufacturing meaning less mfg employment.
    Just as a smaller percentage of people and fewer people farm today than in 1900, a smaller percentage of people will work in manufacturing in the future.
    Much of middle management has been eliminated.
    The new jobs are in the service sector. The old workforce is not prepared for high end service sector jobs and the low end has never had the benefits of unionization to pay a living wage. The safety net is not prepared for the day when people no longer get insurance from employers

    People are distracted by the scapegoat of trade and trying to fix the wrong problem instead of addressing the need to prepare for the economic transformation that is displacing the workforce.
    - jonny bakho

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  7. I wonder if there's a third answer here: leaders assemble/represent coalitions of like-minded people, but then get to PRIORITIZE the set of already existing preferences held by those coalitions.

    Because the typical voter can only focus on so many issues at once (as you point out, most people are busy with real life), moving a low priority policy issue to a top priority could look similar to people changing their minds in polling data. So what Trump really did was convince people that trade policy matters even more than gun policy, abortion policy, tax policy, etc.

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  8. It seems to me that the economics profession has a big share of blame in the disdain that the public feels. I think the leadership of the profession (those in Ivy League and Ivy-Leaguish departments) should do a much better job in defending what economics stands for: the emphasis on trade-offs, opportunity costs, incentives, Harberger triangles and inefficiencies of policies, moral hazard, time consistency/inconsistency of policies and its consequences, and so on.
    But they don't. The leadership in Princeton, MIT, Harvard and other schools seem to forget all this. I was some AEA meetings once in 2010 (I think it was, in Chicago as well at the time) and attended one of the sessions on the financial crisis and the bailouts by the feds. Luminaries from MIT, Princeton etc were at the seminar. Not once - I repeat, not once, when discussing bailouts, was the expression "moral hazard" uttered. I came out wondering: what do these luminaries teach their students?

    For me, the soundest advice came from Arnold Harberger, who is one of my hero economists. He gave a speech once, about 30 years ago, at the Catholic University of Chile, when he was granted the Doctor Honoris Causa by that institution. The title of his speech was: "The Economist and the Real World".
    For me, this speech is fantastic. I think there are print version around
    (https://books.google.com/books/about/The_economist_and_the_real_world.html?id=36uRAAAAIAAJ) In this speech, Harberger emphasizes again and again, if it is not the economist who stresses concepts like opportunity costs, trade-offs, inefficiencies, moral hazard, etc, *who* will do it? The Poli-Sci guy? no; the lawyers? no; the sociologists? no; the historians? no.
    Only the economists have the framework to point all of this out.
    And Harberger is right.

    But, it seems to me that the luminaries, the big shots, the Bates Clark Medal winners, the leaders in Ivy League and Ivy-Leaguish schools have (with some highly honorable exceptions) largely forgotten this.

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  9. Prof. Cochrane - free trade is beneficial in all cases IFF it takes place between 2 countries at equal levels of development, because choice - in goods, services, capital, and yes, even people - is a net advantage. Back when Krugman was an economist he proved it and got a Nobel for the proof (admittedly his proof omits the humans). The more unequal the nations engaging in trade the worse the outcome, for all involved.

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  10. PS the concept of "free trade" radically changes when you add the humans - specifically unqualified migrants - to goods, services, and capital. Perhaps that's the cause for the shift you observe, and not any "lightly held opinions". The data change, opinions change until and unless the data change again.

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  11. Cochrane's view on the role of "intellectuals" seems very Hayekian. Also, not many possess strong convictions about politics or economics. So, as long as the rhetoric is accessible and entertaining, voters will be easily swayed.

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  12. The question as asked seems a little inexact. "Percent who say U.S. involvement in the global economy is a good thing or bad thing". What it doesn't address is whether it they mean a good thing or bad thing for the world or just the U.S. I would say it is very good for the less developed portions of the world and I am willing to sacrifice some for their sake--just like a redistribution of wealth within the U.S. How did you see the meaning?

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  13. Donald Trump has said that NAFTA is unfair and the worst trade agreement ever negotiated. I don't think he has ever said in what way he thinks the agreement is unfair.

    Republican voters seem to forget that NAFTA was a Republican initiative negotiated by a Republican President.

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    1. And it also led to a splintering in the Republican vote for President in 1992. Ross Perot rode opposition to NAFTA to garner 18% of the popular vote.

      If you are curious, here is the Congressional vote on NAFTA:

      House of Representative:
      Republicans - 132 In Favor, 35 Against
      Democrats - 102 in Favor, 156 Against

      Senate:
      Republicans - 34 in Favor, 12 Against
      Democrats - 27 in Favor, 26 Against

      http://www.dailykos.com/story/2014/1/1/1255736/-NAFTA-at-20-An-Unhappy-Birthday-and-a-Look-at-the-Roll-Call-Votes-on-Free-Trade-Deals

      7 of the NAY votes are still in the Senate: 6 D, 1 R.
      9 of the YEA votes are still in the Senate: 6 R, 3 D.
      8 former Representatives who voted NAY are now in the Senate: 5 D, 2 R, 1 I.
      7 former Representatives who voted YEA are now in the Senate: 5 D, 2 R.
      30 NAFTA supporters are still in the House: 17 R, 13 D.
      40 NAFTA opponents are still in the House: 8 Republicans and 32 Democrats

      Of course this article was written 3 years ago, and so the numbers have changed. But consider that of the Congressmen and Congresswomen that voted for / against NAFTA, the Nays outweigh the Yays - 55 to 46.

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  14. Layman here. So apologies for my display of ignorance. (I come here to try to correct that.)
    I have never read the details of any trade agreement, be it bi-lateral or multi-party. What, typically, do they include besides, "We'll send you stuff, and you can send us stuff"?
    I perhaps could see including something like, "If one of our companies makes unauthorized use of the proprietary / confidential information of one of your companies, your company can sue in our courts." Or some such.
    What else is typically included?
    The reason I ask is that my common sense tells me that idealized "free trade" needs no agreement. So why do we have them, except to put restrictions on trade that otherwise would be "free"?

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    1. ColoComment,

      Most free trade agreements are "promises" to not implement tariffs.

      https://en.wikipedia.org/wiki/North_American_Free_Trade_Agreement

      "The implementation of NAFTA on January 1, 1994 brought the immediate elimination of tariffs on more than one-half of Mexico's exports to the U.S. and more than one-third of U.S. exports to Mexico. Within 10 years of the implementation of the agreement, all U.S.-Mexico tariffs would be eliminated except for some U.S. agricultural exports to Mexico that were to be phased out within 15 years."

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    2. It is also alleged that trade agreements include provisions invalidating any laws that protect people, or the environment they live in, if those laws diminish the profit of a corporation doing trade.
      --E5

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  15. ColoComment

    Here is the text of NAFTA: https://www.nafta-sec-alena.org/Home/Legal-Texts/North-American-Free-Trade-Agreement

    You can look at the table of contents.

    "national treatment" is a big issue - that a country will not discriminate against the businesses of the other country.

    The Trans Pacific Partnership would have included terms where all the parties basically agreed to adopt the American intellectual property rules.

    Trump has said "NAFTA is the worst trade deal maybe ever signed anywhere, but certainly ever signed in this country,"

    I don't think he has told us in what way he considers the agreement to be "unfair" or what changes he wants to negotiate to it.

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  16. This is very relevant:
    http://onlinelibrary.wiley.com/doi/10.1111/ajps.12243/abstract

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  17. "But the average American is busy with a real life, and doesn't think a whole lot about cause and effect in public policy."

    Yes, I agree. Few of us have the time, interest, or ability to become well informed about public policy. In fact it is preferable, for everybody's well being, that we each get on with what we are individually good at and trust others to do the same. Including trust those whose business is optimising public policy. Comparative advantage is applicable to individuals within one economy. Division of labour and all that.
    The electoral system is supposed to allow that the most trustworthy, and relevantly competent, people are selected to serve the public in the realm of public policy. Public office is a public trust.

    Problems arise when that trust is abused. Or when the selection process is based on discourse that has little or no relationship to practical public policy. Or when the selection process is largely governed by the amount of money a candidate is able to spend on scientifically constructed advertising.
    Don't we have all of the above? In spades?
    --E5

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  18. Repudiating Economics..... or repudiating economists?
    There is a perception that some, or even many, economists are in the business of writing justifications for immense concentration of wealth and/or income. This may be a significant factor in why people's opinion of economic prognostications is fickle.
    --E5

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