Paradoxes and Puzzles in Our Globalized World

We live in a world of paradoxes and puzzles.Of course it was always so, but now more than ever in history we are both well informed and confused.The collapse of communism and the triumph of "globalization" were supposed to put us all on the same page; instead, near-universal literacy has us reading from a thousand disconnected pages.Conventional wisdom among some has it that the twin triumphs of free markets and free trade have universalized political and personal philosophies.Nowhere is this belief more prevalent than among professional economists.Indeed, since the collapse of communism and the near-hegemony of Anglo-American economics, one of the joys of practicing the dismal science has become traveling to corners of the newly-capitalist world and meeting like-minded academics who not only speak good English but were trained from the same textbooks.In recent years I have experienced such joys in places like Kiev and Karlsbad, Sofia and Skopje, Prishtina and Phnom Phen, Beijing and Bucharest: places that one or two decades ago were xenophobic bastions of communism, despotism or both. 1 I am extremely grateful to Vivek Dehejia for conceiving and creating the Festschrift at Carleton in my honor with his usual meticulous flair.Steven Davis provided not only a multitude of perceptive written comments but also spent a rainy afternoon discussing them with me in a Montreal coffee shop. 1 Economic theory and evidence offers the core, coherent rationalization of what's good about capitalism and globalization: free markets and free trade.Everyone who purports to understand the modern world should understand that core message.Its logic is unassailable.The prima facie benefits from free markets and free trade derive from the premise of gains from trade.When one person voluntarily sells to a second person, who voluntarily buys from the first, both must be better off: otherwise they wouldn't do it.Hence the premise of gains from voluntary trade is virtually tautological.The premise of mutual gains from free international trade is an extension of this tautology.Yet economists alienate as many intelligent people as they convince, probably more.The reasons are multifold, but have much to do with economists' arrogance and imperialism.Many economists, not the best of the breed but maybe the bulk of the breed, leave non-economists with the impression they're simply stupid if they don't subscribe to a set of "facts", and if they don't subscribe to a political and even personal philosophy that supposedly derives from the narrow logic of gains from free trade. Let me offer a fictional example of the arrogance and imperialism that second-rate economists bring to the table: often quite literally to the table. Anyone who has spent much time socially with people in our profession knows how vociferous and venomous dinner table conversation can become. An economist at the table, after a few drinks, offers the following comment, hoping to draw dissent from his non-economist dinner companions: "When two people voluntarily trade with each other, both are better off." He is confident that he can defend this near-tautology and tout his erudition to all present. But soon the dinner-table conversation becomes twisted. The committed economist, after a more few drinks, vouchsafes to the ravishing artiste on his left: "Well of course gains from free trade means that government should never regulate trade". "Ok", she agrees, mostly because she's bored and wants to change the subject. "Yes" he goes on, "We must vote the [expletive deleted] Silly Socialist Party out of office because they're killing business." L'artiste is now not so sure she still agrees since the SSP is funding her gigantic city sculpture (costing tax-payers money and also* This is true except for brief periods, such as the late 1980s, when the U.S. dollar was unusually low relative to other major currencies.The only persistent exception is the small country of Luxembourg, which is populated heavily by well-paid bankers and bureaucrats.

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