Economist vs. Economist

A bit of a spat has broken out between Paul Krugman, who claims that Chinese imports have exacerbated American inequality in recent years, and Brad DeLong, who finds Krugman’s claims baseless. Given as both Krugman and DeLong are hugely respected and immensely qualified experts on the subject, and I am, er, not, I won’t pretend to know who’s right (though it does seem like Krugman is claiming that a massive shift in the origins of inequality has occurred over the past few years, which seems suspect). But I will say that Krugman and DeLong don’t appear to disagree on matters of public policy. Regardless of which one of them is correct, it still makes sense to continue to tear down tariffs and other trade barriers; making the pie higher and all that. Krugman’s view, if correct, would simply imply that we should follow the Scandinavian model and, while preserving open trade, expand redistributive policies by hiking up high-income tax rates and expanding the welfare state, so as to benefit from the economic growth that inevitably comes from trade while mitigating the inequality exacerbating effects that trade (in Krugman’s view) has. Given as Brad DeLong is a big, big fan of this model, endorsing Barney Frank’s “grand bargain” of trade liberalization paired with social democracy, it seems to me that this debate is mostly one of economic analysis, not political significance. Not that there’s anything wrong with that.

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