Nick Schulz interviews Tim Harford, The Undercover Economist, who explains that “if you would like to be rich and have nothing change, then you will be disappointed”:
I start by looking at the medieval city of Bruges which was the richest city in Northwestern Europe, in the 13th, 14th, 15th centuries. And it was rich because of trade. People shipped goods from all over Europe. They were traded in Bruges. Bruges was the sight of the first stock exchange.Tall ships sailed up and down the river’s (wind). And then one day the river Zwin started to silt up. And Bruges was cut off from the world economy and just didn’t change for 500 years. So this to the metaphor of what happens if the anti-globalizers get their wish. What happens if the protectionists get their wish? The river silts up. And basically all the trade moves to Antwerp.
Bruges is now bustling only because of tourists who come to see what a presently preserved 15th century city looks like. And they admire this beautiful architecture that these guys who were once incredibly wealthy, what did they put up? And now in Bruges basically you can get very nice chocolates and beer there. And it is a beautiful place. But it is just tourists sites.
So I say you can be rich like Bruges in the 13th to 15th centuries, or you can have nothing changed like Bruges from the 16th through the 20th centuries. But you know you can’t be rich and have nothing change. Because economic change is dynamic.
The takeaway message:
The way I like to think about the impact of trade — you can point to a town where people are people are put out of work because what they did has now been shipped off to China. And the suffering is very real. But so was the suffering of secretaries who typed when they were all put out of business by Microsoft Word. We don’t look back and say, if only Word Perfect had never been invented. All those girls would still be down in the typing pool typing away. They would still have those jobs.Those jobs have been lost. Well yes those jobs have been lost. But we don’t mourn the passing of those jobs even though the day when they got their unemployment slips was a painful day for them. And some people maybe never recovered. But a lot of people would have retrained, got better jobs. And certainly as a whole America was better off from not having erected high barriers against Microsoft.
A new technology is actually just the same as a new trade. China might just as well be some futuristic factory just off the coast of California for all its economic effects. We just ship all our stuff off the coast of California. It goes into the factory that is just floating outside Los Angeles. And all this great stuff comes back. For the economic effects on the United States, it makes no difference.
So we shouldn’t be afraid of trade any more than we are afraid of technology. It has real effect. It does hurt people. But overall the effects are very positive.
Tim Harford also looks at economic development and the effectiveness of foreign aid, because, frankly, we don’t know which aid agencies are doing a good job:
What about randomized trials? You could — say you want to improve school performance in Kenya. Well, you could give out textbooks to half the schools. And measure the results. This is the half that got the textbooks and the half that didn’t.One charity actually did this as a randomized control trial the same way that you would evaluate a new pharmaceutical product. And they found textbooks didn’t really help. So they tried again. They said OK, we’re going to supply teachers with flip charts, whiteboards, and marker pens. That didn’t work either. They tried something else. They said OK, we’re going to give the kids de-worming tablets so that the tapeworm that infects a lot of these kids is going to be killed. The kids are going to be better nourished. They will be able to better concentrate in schools. Now that worked. That worked big time.
And to me those two failures of the textbooks and the flipcharts, they were tremendously successful failures. Because we learned something.