Corporate & Securities Law

Is Austan Goolsbee Overrated?

Not as an economist of course! There is no doubt that Goolsbee is one of the world’s premier economists. But another brilliant economist, Jagdish Bhagwati, argues that voters should (HT: Mankiw) favor Barack Obama’s free trade credentials over Hillary Clinton’s based, at least partially, on Austan Goolsbee’s credentials as an advocate of free trade and as an economist. This argument begs a number of interesting questions: how important are economic advisers anyway? More specifically, is Bhagwati right that free traders should feel more comfortable with Obama than Clinton because of the formers choice of advisers? And how much weight should we assign this choice relative to say, voting patterns?

As a general matter, I think it is perfectly appropriate to give credit to the principal for the quality of the agents he or she is able to attract. And I’m tempted by the notion that an economist could actually constrain some of the protectionist rhetoric coming from a few of the candidates these days from amounting to policy. In fact, I was more optimistic about Goolsbee’s potential free trade influence on Obama several months ago. But I’m starting to doubt that there is any reason to be optimistic with statements like this out of the Obama camp (or this one) which suggest to me that Goolsbee has not had significant influence (though I may be wrong about that):

It’s a game where trade deals like NAFTA ship jobs overseas and force parents to compete with their teenagers to work for minimum wage at Wal-Mart.

Of course, one I suppose one can interpret the evidence in a more negative light. Perhaps without Goolsbee, Obama’s anti-trade rhetoric would be much worse. Perhaps the primary value of a prominent free trade advisor for a candidate with an anti-trade record and platform is to provide some assurance against extreme protectionism. But I don’t think that is Bhagwati’s argument. As an aside, I also believe most of the buzz about the link between behavioral economics and Obama’s economic policies is largely a mischaracterization.

I’m certain that economic advisers like Goolsbee, Mankiw, and other economists in simimlar roles provide significant and valuable services to their candidates. There is also little doubt that economic advisers can play a valuable role in helping to form sound economic policy once a candidate is in office. I don’t want to be misunderstood as saying that economic advisers in general, or Goolsbee in particular, are not valuable. What I am saying is that I don’t think Bhagwati’s argument that we should consider high quality economic advisers as a free trade credential is persuasive. In the case of Goolsbee-Obama, I find the link particularly weak given the strong protectionist talk from Obama in recent weeks. Though I hope I’m wrong, I’m significantly discounting the possibility that Goolsbee is exhibiting much of a constraining effect on Obama or that his presence should be relevant to the free trade credentials of the candidates.

Voting records, as opposed to speeches and selection of advisers, are a bit more informative. Luke Froeb, who is another excellent economist supporting a candidate (Luke is an Economic Policy Adviser for the McCain campaign), reports that McCain voted against trade barriers 88% of the time as opposed to Obama’s 36% and Clinton’s 31%.

Full post as published by Truth on the Market on March 03, 2008 (boomark / email).