Friday, December 28, 2007

Krugman on Trade

Together with Larry Summers and Doug Elmendorf, I have recently become an editor of the Brookings Papers on Economic Activity. Our first conference will be held in the spring of 2008, and we have a blockbuster lineup. One of the papers is by Paul Krugman, who will be writing about trade and inequality. I was delighted to get Paul thinking about economics again, hoping the project might distract him from his compulsion to tell the world how much he hates Republicans. (In case you missed it, the answer is, A LOT.)

In today's Times, Paul gives us a hint about what his paper will be about. The column is well worth reading. He suggests that trade makes the United States richer overall but reduces the incomes of a majority of workers. In essence, he is saying that the gains from trade are concentrated at the top of the income distribution. That is certainly a theoretical possibility. The Times column, however, leaves that conclusion more as an assertion than as an established fact. Presumably, the Brookings Paper will give the numbers to back up the claim.

It seems to me that Paul is still struggling with the implications of this view. He concludes the column by saying, twice, that he is not a protectionist, but he also says that we should respect "those who are worried about trade." But what if those who are worried about trade are protectionists? Should we still respect them?