Sunday, April 23, 2017

"...beware the punditry, no matter how well-degreed they are, or well-spoken, or well-coiffed."

Did China Eat America’s Jobs? - Freakonomics: "Look at all those downstream effects from China’s manufacturing growth that David Autor identifies in the U.S.: job loss; wage depression; higher welfare spending. In another research paper, he and his colleagues found yet another downside. Many economists had suspected that greater competition with China would create incentives for American companies to invest more in research and development and become more innovative. But it hasn’t worked out that way. Instead, Autor and his colleagues found, Chinese competition has lowered profit margins for American manufacturers, leaving less money for R&D and resulting in less innovation. 

DUBNER: People like you – meaning economists, not like you David Autor necessarily – you know have been telling us for several decades now that globalization would be largely a win-win. I’m not so naive as to think that there are no losers. I get that. But that overall, we Americans should kind of sit back and relax, that it would be good for the median U.S. resident. So I don’t feel that way anymore and tell me if I’m wrong to not feel that way. And additionally if I’m wrong maybe to blame you and your cohort a little bit. 

AUTOR: I think if we had realized how traumatic the pace of change would have been, we would have at a minimum had much better policies in place to assist workers in communities that suffered these very severe and immediate consequences...

DUBNER: So David I know you’ve said that economics wasn’t entirely wrong on this prediction that global trade would kind of work out okay. But I do think a lot of people would disagree. Obviously it’s a matter of degrees. So if that’s my view and I think that you know many or most economists were wrong on something as basic and important as this, why should we ever listen to what you wonderfully educated egghead economists have to say when it comes to something as important and broad as macroeconomic issues that will affect my actual life? You can predict all you want about currency stories abroad, etc. But if it’s my life, my livelihood, my job, my family, and my ability to provide for them, you guys are supposed to be the nonpartisan, smart, apolitical cohort out there. And I trusted you and now I’m sorry I did. Because if I hadn’t, I might have changed course 15 or 20 years ago. And while I might well I might not be in great shape I’d certainly be in better shape than I am now...

This program has gone on and on about the folly of prediction. In fact, there’s a Freakonomics Radio episode from years ago called “The Folly of Prediction.” We talked about how one of the most common explanations of smart people, when their predictions turn out to be inaccurate was that “Well, we did the best we could considering the information we had at the time. If we’d had better information, we could have made a better prediction.” But you know what? If you had better information at the time, you wouldn’t have to make a prediction; the future would be obvious. But that’s the thing about the future – it’s rarely obvious. Which leaves a lot of room for all kinds of people to make all kinds of predictions that may or may not come true.

I’m not calling out David Autor here – again, I really appreciate his transparency and his doggedness. But the story of Chinese manufacturing and American labor is yet another reminder of how humble we should all be when we make a prediction, and how cautious we should all be when we hear one. Think about this: if the vast, vast majority of political pundits and TV journalists and even the most revered analytics geeks got the 2016 presidential election so wrong – and that’s a simple, binary choice, the Blue Team versus the Red Team – then how much harder is it to predict the downstream consequences as something as vast and broad as a global labor upheaval? I don’t mean to get all preachy on you; that’s not the Freakonomics way. But I will say this: beware the punditry, no matter how well-degreed they are, or well-spoken, or well-coiffed. Don’t assume they can know the future any better than you do; and don’t assume you’re such a genius either."

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