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“In Economics Departments, a Growing Will to Debate Fundamental Assumptions” | 03 september 2007 |
In an article published in the New York Times 1on July 11, journalist Patricia Cohen highlighted the emergence of a growing number of anti-establishment economists who criticize the laissez-faire paradigm of international trade. These economists question the relevance of the basic hypotheses that have been used in building the economic models that assess the effects of free trade. Their main criticism is that one cannot even question whether or not free trade is the best market structure, since the liberal ideology accepts no form of dissent. The few who do venture criticism are labeled as “heterodox pariahs” by their peers. It can no longer be said, however, that the consensus on the assumed benefits of free trade is as unanimous as it was thirty years ago. Leading figures such as Dani Rodrik, 2 , Joseph Stiglitz 3 , Georges A. Akerlof 4 and Lawrence H. Summers 5 remind us that the undeniable benefits of increased trade must not overshadow the downsides of globalization. These economists have demonstrated the damaging effects of unregulated free trade and emphasize that traditional cost/benefit analyses are limited in their ability to account for collective costs. These ideas, however, are still too underrepresented in academia to wield any real influence in the great political decision-making arenas such as Washington, D.C.
In a response to Ms. Cohen’s article sent to the Editor of the New York Times and published here in full, Bertrand Munier, Chief Economist at WoAgri, criticizes the excessive simplification of the models used today by the World Trade Organization and other international institutions and speaks of the dangers in using such models to define the agricultural trade policies of the future.
Dr. Munier’s team of economists at WoAgri is currently working to generate a realistic economic model that goes beyond the classic doctrine of pure and perfect competition and favors theories that, while remaining orthodox, are more properly suited to the unique characteristics of the agricultural sector.
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Dear Editor ,
Patricia Cohen’s article (In Economics Departments, a Growing Will to Debate Fundamental Assumptions, New York Times, July 11) is fully relevant, at least, in my view, to the way economic theory is ‘practiced’ in international institutions and the policies they recommend. If we take a look at the different models usually called in support of agricultural policies that WTO, for instance, would like to be ‘practiced’ around the world, we basically find a refined and extended (to general equilibrium) remake of economics 101, except for the conclusions of the lecture, which usually imply that in practice the oversimplified world of this first course is largely irrelevant. This is no pedagogical blunder from the teachers of economics 101, at least not necessarily, but it is distressing that advanced practitioners of economic policy can use the underlying principles of pure competition on (almost) perfect markets as a basis for their modelling of world’s agricultural activity: one can thus ignore risk, nations, duality in traditional sectors (in particular agriculture) in LDC’s, technological innovations, most interactions between environment and agriculture and a few other “details” of the world in which we happen to live. Under such “hypotheses”, it is possible to come out with the conclusion that “free markets” would cause an increase in world welfare of more than half a trillion dollars (World Bank, 1995, the figure having been reduced since then to less than 50 billion dollars, which shows how “robust” such conclusions are!). What is more, these ‘practitioners’ claim that the welfare increase would accrue to the poorest among the poors. However, the irony is that the models we evoke here feature only one ‘representative’ consumer by country or zone: How we can tell from such models that welfare will go to the poors remains a puzzle that looks like Ptolemeus’ view of the earth being a circle, just a wrong conjecture!
A more realistic modelling could show opposite effects on income distributions of these very policies, and this over very long periods. To be sure, in a century or so, the invoked conclusions might follow from WTO policies. But, as Lord Keynes, the famous English economist, once put it, “in the long run, we are all dead”. Meanwhile, we will have produced millions and millions of additional poors, leaving their traditional productions to grow drug for survival or, alternatively, leaving their land to agglomerate in slums around the big cities in many (not all) LDC’s. How many drug growers, how many terrorists, etc. will emerge from such policies? The models won’t tell.
WoAgri (World Organization for Agriculture) is a private and independent organization which wants to tackle this kind of issues and produce sometimes in 2008, with the help of economists and sponsors from all around the world, a more “realistic” model. ‘Realism’, in our view, doesn’t mean necessarily diving into heterodoxy, but at least striking a more balanced compromise between the complexity of the world and the desirable simplicity of a model, making thus a more careful and responsible use of economic theory. As great American economists in the Rooseveltian era used to think, agriculture is a specific enough sector of economic activity as to call for such a careful and ‘realistic’ modelling. International policy to be pursued in the general interest could then look quite different from WTO’s present ‘practice’.
Pr. Bertrand Munier
Chief Economist at WoAgri, Paris
| 1 In Economics Departments, a Growing Will to Debate Fundamental Assumptions, par Patricia Cohen, New York Times, 11 juillet 2007, www.nytimes.com
2 Economics professor at Harvard’s John F. Kennedy School of Government. See the article “The False Promise of Financial Liberalization” published on March 19, 2007 in Analyses and Comments.
3 Nobel Laureate in Economics (2001), former Chief Economist of the World Bank. See the article “The Tyranny of King Cotton” published November 27, 2006 in Analyses and Comments.
4 With J. Stiglitz, winner of the Nobel Prize in Economics (2001) for the duo’s work on markets with asymmetric information.
5 Former President of Harvard University and former Chief Economist of the World Bank, U.S. Treasury Secretary from 1999 to 2001.
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Advocating for
agricultural market
regulation and global
food governance | |
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