Thursday, February 05, 2004


Daniel Drezner has a nice post about the rhetorical disadvantages faced by free traders (like me) in the growing debate over outsourcing. He notes that it's much easier for the protectionists to present anecdotal evidence about specific people being tangibly (and indisputably) harmed by offshoring than it is for the free traders to counter with similar stories about the corresponding (and equally indisputable) net gains to the economy as a whole:
It is easy to point to large multinational corporations laying off American workers because of offshore outsourcing -- cue IBM. However, the jobs that are either saved or created from outsourcing seem less impressive. In the case of jobs created, it's because a healthy share of new hiring takes place among smaller firms, the anecdotes of job creation seem much less convincing -- even though there may be more examples of the latter than the former.

In the case of jobs saved, the difficulty is that such statements require counterfactual reasoning -- "If outsourcing had not occurred, then a greater number of jobs would have been lost." Counterfactuals are extremely difficult to demonstrate beyond a reasonable doubt.

So, in the debates over trade and unemployment, protectionists have juicy media stories, while those who favor an open economy are often left sputtering.
A related problem is that the Ricardian case for free trade is counterintuitive--not horribly so, but just enough that most people never think it through. Here's an excellent summary of the argument--in America's dumbest newspaper, no less! Perhaps there's hope.... (Hat tip to Tyler Cowen at Marginal Revolution.)


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