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Comment by barry-cotter | Hacker News Reader

Read a macroeconomics textbook written more recently than the 1970’s and it will call the infant industry argument theoretically plausible and reference Krugman’s paper on industry clusters. It will spend far more time on the globally optimal and not strategically effected strategy, free trade. We know protectionism can theoretically work. It can also be a massive failure, like in all of post-colonial South Asia and Africa. The only countries that made protectionism work were South Korea, Japan and Taiwan.

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The point is that a fully open economy is not necessarily the optimal strategy for a developing country.

Of course this is just one aspect of development and there is no silver bullet. Those who succeeded used protectionism and controlled opening of their economy as part of a broader strategy, governance, and culture.

There has been a big push to normalize the idea that "macroeconomists have figured out x and y". However, macroeconomists aren't scientists, and their messes like the Reinhardt-Rogoff affair should make everyone skeptical that they can claim they "know" anything with any degree of certainty.

I first encountered this when economists kept attacking rent control saying it destroyed cities, while Montreal remained the best place to live in all of North America.

Then I found this interesting essay about economists finally getting to try out an experiment about sweatshops in Africa, and concluding "Everything We Knew About Sweatshops Was Wrong":

> https://www.nytimes.com/2017/04/27/opinion/do-sweatshops-lif... > > In the 1990s, Americans learned more about the appalling conditions at the factories where our sneakers and T-shirts were made, and opposition to sweatshops surged. But some economists pushed back. For them, the wages and conditions in sweatshops might be appalling, but they are an improvement on people’s less visible rural poverty. > >As the economist Joan Robinson said, “The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all.” > >Textbook economics offers two reasons factory jobs can be “an escalator out of poverty.” First, a booming industrial sector should raise wages over time. Second, boom or not, factory jobs might be better than the alternatives: Unlike agriculture or informal market selling, these factories pay a steady wage, and if workers gained skills valued by the market, they might earn higher wages. Factories may also have incentives to pay more than agricultural or informal market work to persuade workers to stay and be productive. > >Expecting to prove the experts right, we went to Ethiopia and — working with the Innovations for Poverty Action and the Ethiopian Development Research Institute — performed the first randomized trial of industrial employment on workers. Little did we anticipate that everything we believed would turn out to be wrong.

Never blindly trust an "economics textbook" lol. When you disagree with them, economists say "read a textbook", and when you point out the models are bad, they pivot to "it's just a textbook, real models are much more complex than that" (they tend not to be).

There are huge amounts macroeconomists don’t know but if they’re not scientists neither are epidemiologists or nutritionists. Experiments are impossible or necessarily tiny and of low quality in all those fields.

Macroeconomics is not a healthy field making rapid progress. David D. Friedman’s verdict on it is that we know very little is true but we know plenty that isn’t. If you want to see someone really ripping into macro read Paul Romer’s The Trouble With Macroeconomics[1]. All that said I know what happens when you contract the money supply; you get a recession. Print lots of money; you’ll get inflation. Decrease inflation; your currency will appreciate. There’s plenty more like that. Purchasing power parity works as a theory of exchange rate formation over the long run and nothing does over the short run. Macroeconomists know plenty.

Regarding theory and replication, on rent control I see Montreal and raise you Mumbai[2]. If the rent controlled price is near the market price the damage will be pretty mild. If you haven’t allowed rents to rise since the 1960’s things will be worse. On replication, more than three quarters of cancer biology papers don’t replicate so the fact that some economics papers get retracted doesn’t disturb me too greatly[3]. If you’re doing science sometimes you find out you were wrong or that you made a mistake.

[1]https://paulromer.net/the-trouble-with-macro/

[2]https://www.youtube.com/watch?v=2fh4tPWYeks

https://www.livemint.com/Opinion/2sEX5MD7aW1whVkxFllNCL/Rent...

https://marginalrevolution.com/marginalrevolution/2017/04/tw...

[3]https://www.theatlantic.com/science/archive/2017/01/what-pro...

> In 2011, Bayer Healthcare said that its in-house scientists could only validate 25 percent of basic studies in cancer and other conditions. (Drug companies routinely do such checks so they can use the information in those studies as a starting point for developing new drugs.) A year later, Glenn Begley and Lee Ellis from Amgen said that the firm could only confirm the findings in 6 out of 53 landmark cancer papers—just 11 percent. Perhaps, they wrote, that might explain why “our ability to translate cancer research to clinical success has been remarkably low.”

This isn't really how this works though. You don't get to elevate economics by tearing into other fields, all you do is drag them down (fine by me).

You invoked "economics textbooks" like some kind of conversation-ender, and I showcased several things economists treat as hard natural law that end up being, at best, oddly amiss in key cases:

- Rent control (Montreal has it, best city in North America)

- Free trade (China doesn't do it, most reduction of poverty world-wide)

- Sweatshops are desired (Except in a controlled experiment where they are not imposed, they are rejected)

- Debt is bad (Incredibly damaging pro-austerity garbage study boosted in spite its flaws)

Feel free to make each subsequent case on its own merits and evidence as you understand it, but please don't point at economists and act like they possess an authority that they do not.

And preponderance of studies doesn't eclipse a key result. Montreal routinely ranks as the best city on the continent, so even if something "works in most places", it doesn't mean it's something you should pursue when you're trying to be the best, or when you're trying to do well by yourself and not trying to be the best. You surely know about the economics "Theory of the Second Best"?

https://en.wikipedia.org/wiki/Theory_of_the_second_best

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