Can we all agree on these?
- Trade policy works through its effect on the relative prices of goods, not through the price level.
- Depending on what side of the change in relative prices they find themselves, any specific group of consumers or producers can be made worse off by a move to free trade.
- A corollary: there is no guarantee that free trade raises real wages.
- The Carlos Diaz-Alejandro rule: For almost any particular conclusion you want to arrive at, there is some economic model that will take you there.
- Throw in some scale economies (dynamic or otherwise), and then just about anything can happen (including free trade making some countries worse off).
- The positive spin: This does not diminish the value of economic modeling; it simply means we have to be more careful with generalizations and be more explicit about the assumptions that lie behind our reasoning.
- Bottom line: It is possible to have an illuminating (sometimes), intelligent (mostly), and entertaining (almost always) economic debate in the blogosphere.