Blinder, Once Again, On "Free" Trade

Alan Blinder has an op-ed in the Washington Post, and a lot of blogs are commenting. Brad DeLong merely echoes out Blinder's essay. Mark Thoma echoes some questions knzn has for Blinder. I've already pointed out an earlier Blinder comment on Globalization.

In related news, Max Sawicky doesn't appreciate Lou Dobb's support. Dani Rodrik has also been asking some questions about globalization in a dialog with, for example, Tyler Cowen. Ezra Klein has figured out that many economists ostracise those who deviate on free trade, whether they have anything serious to say or not.

Let me consider a couple of paragraphs in Blinder's essay:

"We economists assure folks that things will be all right in the end. Both Americans and Indians will be better off. I think that's right. The basic principles of free trade that Adam Smith and David Ricardo taught us two centuries ago remain valid today: Just like people, nations benefit by specializing in the tasks they do best and trading with other nations for the rest. There's nothing new here theoretically.

But I would argue that there's something new about the coming transition to service offshoring. Those two powerful forces mentioned earlier - technological advancement and the rise of China and India - suggest that this particular transition will be large, lengthy and painful." -- Alan Blinder

Notice the lengthly (dis-equilibrium) transition between two end states. Blinder's analysis is not set in an Arrow-Debreu model of intertemporal equilibrium, which some assure us is not vulnerable to a Cambridge capital critique. Rather, it seems to be set in the exploded Heckscher-Ohlin-Samuelson model, which is logically invalid if production uses capital goods [and the rate of interest is positive - I added this clause in an update]. Where else can you find an acknowlegement that, where Blinder accepts the orthodoxy, he gets his sums wrong?