Monday, March 08, 2004

Footnote on "A Modest Suggestion"

Recently, I called on Krugman to use his economic nous for the public good by laying out the case for free trade. Instead, he supported Kerry's protectionism policy. Fortunately, reader RV sends in a link from pre-nonsense Krugman where he lays out the limits of macoeconomics.
Take, for example, the debate about the effects of the North American Free Trade Agreement. Although most of the public debate over that agreement focused on alleged job losses or gains (Ross Perot's "great sucking sound" vs. the administration's claim that NAFTA would create hundreds of thousands of jobs), most economists believed that the net effect on employment would be zero. This is basically because the overall number of jobs in the United States is determined by Fed Chairman Alan Greenspan, who is always trying to get the economy as close to full employment as he can without creating inflation. So for serious economists the real questions about NAFTA involved microeconomic issues such as efficiency and income distribution--and efficiency concerns, at any rate, offered a strong case in favor of free trade.


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