At War With Data

When Rdan reorganized the AB site, the blogroll was broken up into categories. If you want to know why we’ve classified Cafe Hayek under the “at war with data” category, read this post and the comments. (Don’t forget the comments!)

Essentially, we are told that:

I was asked the other day by a reporter if NAFTA had been a good thing or a bad thing for America. I said that both the proponents and opponents of NAFTA had no legitimate, unassailable or even suggestive, statistical evidence on their side. I said it was absurd to think that in a $14 trillion economy, you could tease out the impact of increased trade with Mexico and Canada and disentangle it from the thousands of other changes going on.

I suggested that anyone who provided an empirical case for or against the agreement was essentially being dishonest–using statistics selectively to make the case for a pre-existing world-view.

The reporter found this viewpoint unacceptable. Surely, he said, economics can help us answer the question of whether NAFTA has been good for America or bad. Or at least good or bad, for say Ohio.

I said no, there was no empirical evidence that would be decisive. It isn’t just that it’s hard to measure the net impact precisely. I argued that it can’t be measured.

He refused to accept this answer. Surely I could answer the question of NAFTA’s worth. I was just ducking the question.

I said, no, I wasn’t ducking the question. I was answering the question. He just didn’t like my answer.

There appears to be no relationship between the number of jobs in America (or in Ohio for that matter) and the trade deficit or increased productivity.

But the opponents of technology or trade could argue that the failure to observe a negative correlation between jobs and technology or jobs and trade deficits is spurious. True, the number of jobs in America has grown while technology has gotten better and better. But if we hadn’t had technology we’d have even more jobs. So we have to control for the other factors that might have made jobs increase rather than decrease.

That’s very hard to do. I’d settle for hearing a list of the factors that might plausibly be offsetting the alleged effects of trade and technology. In the absence of that list, I’m pretty comfortable arguing that trade deficits and technology have little effect on the total number of jobs (rather than the number of jobs in particular industries). And the reason I feel that way is partly because of the total number of jobs rising but mainly, I suspect, because I have a belief about how the world works.

I use the word “belief” which might lead some to dismiss my views as simply a matter of ideology. But my faith in my view of how the world works has empirical support for its tenets. It’s not just a fantasy or a dogma or convenient. I just don’t have holistic empirical evidence on trade having no impact on the number of jobs.

My view of the world is that when we widen the ability of our fellow citizens and ourselves to trade with people other than just our own kind or nationality or religion or color, that that in turn allows trade to take place more productively. That in turn creates wealth, a higher standard of living. And that in turn creates new opportunities for employment that come along and replace the old.

This view of the world is supported by logic and lots of empirical evidence. But again, it’s not the empirical evidence of an overarching kind that let’s me evaluate one corner of increased specialization, say the overall impact of NAFTA.

I happen to believe that NAFTA was a good thing for the US (and for Mexico and for Canada) overall. That isn’t to say I don’t its had some big negative impacts as well, and that those impacts have been borne disproportionately by some groups.

That said, despite having an opinion, I haven’t made an attempt to actually measure its impact, which may explain why I haven’t written a post about it. One has limits to time and resources, and right now I’m doing other things.

But, here’s the thing: I believe with a bit of time and a bit of data I could come up with something of a measure of its effects, positive and negative. And I don’t believe I’m unique in that regard – if I can do it, so can a bunch of other people. Now, whether other people choose to do it or not, I don’t know, but to insist the effects of making a change to something (i.e., terms of trade) for which reams of data is available is unknowable seems ludicrous to me. I believe in what I believe either because measurement tells me it is true, or because it is similar to something else that measurement has told me is true. And if I believe something, and I measure it, and the measurement contradicts my belief.. well, I might measure again, and again, but by then the measurement will no longer contradict my belief because my belief will have changed to match the measurement.

One thing I’ve noticed about the Austrian school… they keep talking about empirical evidence for things like this and that on a large scale, as does Russ Roberts in the piece to which I linked, but they don’t really seem to present much of that purported evidence for anything.

FWIW, the comments to the post are also great. Here’s the first one by someone called Sam Grove:

That sounds about right.

And libertarians are thought to be simplistic when we can’t produce such evidence. Inquiring minds want to know exactly what’s going on. How else will the politicians and bureaucrats know how to perfect policies?

Most of them are like this. My favorite is this gem by someone called Jacob:

Russell, brilliant post.

This post seems to me to display how economics cannot possibly rely upon ’empirical evidence’ to create theory. How can one economist think that the New Deal was the best thing ever for the economy while another think it was the worst? Everyone can drum up a few statistics to support their case.

It is the theory that tells you what statistics to look at. There cannot possibly be an empirical basis for any economic theory.

Everything about this is wrong to me. All economic theory derives at some point from theory. What exactly does this guy think Adam Smith was doing when he wrote Wealth of Nations, describing the world around him as best he could or describing a fevered dreamscape?