Be Careful to Not Misuse the Economic Estimates of the Costs and Benefits of Trade Agreements

Cato Senior Fellow Dan Pearson is the author of today’s Cato Online Forum essay, which explains the value and limitations of the International Trade Commission’s economic assessments of trade agreements.  Too often, parties opposed to trade liberalization misappropriate the estimates in ways that raise doubts about the integrity of the models. Dan’s conclusion: 

Supporters of trade liberalization should be prepared to counter those who would misinterpret the economic analysis of trade agreements in order to advance anti-trade arguments.  Yes, trade liberalization will produce both winners and losers.  But credible analysis clearly indicates that making markets more open and competitive will lead to improved resource allocation, expanded international trade, greater economic growth, and higher consumer welfare.  Those objectives are genuinely worth pursuing. 

The essay is offered in conjunction with a TTIP conference being held at the Cato Institute on Monday, October 12. Read it. Provide comments. And please sign up to attend the conference.

What Is Russia’s Intervention in Syria All About?

There’s been a lot of speculation in the press recently about Russia’s motives for its military intervention in Syria, and many are quick to attribute the intervention to a desire to – metaphorically speaking - poke America in the eye. Surrounding this speculation are images of Vladimir Putin as a strategic genius, playing geopolitical chess at the grandmaster level.

Nothing could be further from the truth.  It’s certainly convenient for Putin to make the United States look bad in any way he can. But there are a variety of other reasons for Russia’s involvement in Syria. And though Putin may briefly look like he is in control of the situation in Syria, the intervention is likely to end badly for him.

It’s notable that while many reports are portraying the Russian intervention in terms of U.S.-Russian relations, and intimating that Russia is in some way ‘winning’, Russia specialists are more likely to point to other factors, and to view the intervention as ill-fated.

Politico recently published a compilation of interviews with 14 Russia specialists on Putin’s goals in Syria. All but one pointed to a couple of key factors to explain Russian intervention: 1) Russian domestic concerns; 2) a desire for diplomatic gain; or 3) a desire to prevent other authoritarian regimes from falling. More tellingly, the vast majority also expressed the opinion that Russia’s actions are reckless, and will end badly.  

The first of these motivations – domestic political concerns – is likely the key reason for Russia’s intervention in Syria. It’s an excellent opportunity for Vladimir Putin to distract domestic attention from his ongoing failings in Ukraine, and to present an image of Russia as a great power.

Kirchner Locks in Her Model in Argentina

One of the most controversial and radical moves implemented during the populist rule of Cristina Fernández de Kirchner in Argentina was the nationalization of private pension funds in 2008.

Not only did the government seize $29.3 billion in pension savings but, since the private pension funds owned stock in a multitude of companies, the government also seized that stock and used it to appoint cronies to their boards. This significantly increased the government’s control over the private sector.

Even though none of the opposition candidates has proposed peddling back the nationalization of the pension funds, the Kirchner administration is taking no chances. This week the government enacted a law that makes it extremely difficult for future administrations to sell the stock: from now on it will require a two-thirds majority vote in both chambers of Congress. Since kirchnerismo will likely remain a significant political force in Congress in the foreseeable future, it will enjoy a veto power over any future sale of the stock regardless of who wins the presidential election in late October.

Tellingly, the Argentine government has also drafted legislation that would limit the extraordinary executive powers that the presidency has accumulated since the Kirchner couple came to power in 2003 (Cristina was preceded by her husband Nestor). But don’t count on Cristina discovering her inner Montesquieu. The Kirchner administration has signaled that the bill would be approved only if an opposition candidate wins the election.

Thus, even though Cristina might have only few more months in power, much of her economic model will live on.

Japan’s Vanishing Pacifism?

Last month, the upper house of Japan’s parliament approved legislation that shifted Japan’s defense policy away from traditional self-defense towards collective self-defense. The new law enables the Japan Self-Defense Forces (JSDF) to come to the aid of allies in the event of armed conflict. It is the latest in a series of measures that represent Prime Minister Abe’s drive to increase Japan’s military power and burnish its status as a great power in East Asia.

Without a military capable of deploying abroad, Japan was seen as a kind of abnormal country, a second tier global player, despite its first-tier economy. In the wake of the recent legislation, it is tempting to believe that Japan will begin to exercise more power in its region. One optimistic commentator hopes by opening the door to collective defense, the JSDF might be used to shape and preserve international order. Taking a more aggressive and fearful tone, Chinese commentators warn against the resurrection of Japan’s old war machine and lambast Abe as a hawkish historical revisionist who wants to destabilize East Asia.

Such rhetoric about Japan’s growing military power paints a picture of a very strong country capable of exerting its will upon its neighborhood and beyond. Adherents to what I call the vanishing pacifism argument focus on how Japan’s military could play a more active role beyond its borders, but their assessments ignore or downplay the myriad challenges and potential roadblocks that are likely to prevent Japan from becoming a serious regional military power.

Most notably, the Japanese public remains opposed to an expanded overseas role for the JSDF. Shortly before the legislation was adopted, a poll showed that 54 percent of voters opposed it. Abe’s forceful support of the legislation has caused a nose-dive in his popularity, dropping his approval ratings to the lowest level since he became prime minister in late 2012. Abe had to expend considerable political capital on this controversial legislation. Public opposition could limit what the JSDF does in the field and make the use of military force unappealing as Abe tries to shore up popular support for his domestic policy agenda.

The Dramatic Decline in World Poverty

This week the World Bank released new data on world poverty, and projects it to fall to a record low of 9.6 percent in 2015. The graph below shows the dramatic decline of global poverty over the past few decades.



Using updated methodology, the World Bank recalculated poverty figures back to 1990. The new data track closely with previous Bank figures, which I use in the graph to show the fall in poverty since the early 1980s when 43 percent of the world’s population was extremely poor. The record on poverty reduction is consistent with the unprecedented progress that humanity has made around the world in the whole range of indicators of well-being, and which researchers and others can explore at

The drop in poverty also coincides with a significant increase in global economic freedom, beginning with China’s reforms some 35 years ago and the globalization that followed the collapse of central planning in the late 1980s and early 1990s. As we celebrate this achievement and strive for further progress, we should not lose sight of the central role that voluntary exchange, freedom of choice, competition and protection of property play in ending privation.


Police Misconduct — The Worst Case in September

Over at Cato’s Police Misconduct website, we have identified the worst case for the month of September.  This one goes to the Chicago Police Department, and, in particular, to the officers responsible for arresting George Roberts.

Here’s the background: CBS Chicago reports on a lawsuit filed by Roberts against the City of Chicago.  According to Roberts, he was falsely arrested and roughed up by the police following a traffic stop.  Roberts says the abuse of power began once the officers discovered that he worked for the Independent Police Review Authority, which investigates police misconduct.  Mysteriously, several police cameras were shut down, contrary to department policy.  Here is an excerpt from the news story:

Roberts said he was initially stopped for a minor traffic violation, but was then pushed in the back by one of the officers and forced to the ground. He said in the lawsuit that an officer shouted, “Don’t make me [expletive] shoot you.”

But “when the (officers) turned off the dash camera, things got worse,” his attorneys write in the lawsuit.

Roberts, who was handcuffed and placed in the back of a police vehicle, complained that the handcuffs were too tight, according to the lawsuit. The 6-foot-3, 315 pound man says that, instead, it would have have been appropriate for officers to use multiple handcuffs strung together for someone of his size.

He says in the lawsuit that one of the officers responded to his complaints: “What are you going to tell me next, you can’t breathe?” — an apparent reference to Eric Garner, a New York City man who died in 2014 as a result of a police choke hold.

Roberts also says he was told “that’s your fault,” when he pointed out that his weight made the single set of handcuffs painful.

Read the whole thing.  Roberts was suspended from his job while criminal charges were pending, but after his acquittal, he was able to return to work.  The Chicago Police Department had no comment on Roberts’ acquittal or his lawsuit.


Whole Milk and Humility

Dr. Melik: This morning for breakfast he requested something called “wheat germ, organic honey and tiger’s milk.”

Dr. Aragon: [chuckling] Oh, yes. Those are the charmed substances that some years ago were thought to contain life-preserving properties.

Dr. Melik: You mean there was no deep fat? No steak or cream pies or… hot fudge?

Dr. Aragon: Those were thought to be unhealthy… precisely the opposite of what we now know to be true.

Science hasn’t yet advanced as far as Woody Allen imagined in the movie Sleeper. But the Washington Post does report on its front page today, as the House Agriculture Committee holds a hearing on the government’s official Dietary Guidelines, that decades of government warnings about whole milk may have been in error. 

In fact, research published in recent years indicates that the opposite might be true: millions might have been better off had they stuck with whole milk.

Scientists who tallied diet and health records for several thousand patients over ten years found, for example, that contrary to the government advice, people who consumed more milk fat had lower incidence of heart disease.

By warning people against full-fat dairy foods, the U.S. is “losing a huge opportunity for the prevention of disease,” said Marcia Otto, an assistant professor of epidemiology at the University of Texas, and the lead author of large studies published in 2012 and 2013, which were funded by government and academic institutions, not the industry. “What we have learned over the last decade is that certain foods that are high in fat seem to be beneficial.”

The Post’s Peter Whoriskey notes that some scientists objected early on that a thin body of research was being turned into dogma:

“The vibrant certainty of scientists claiming to be authorities on these matters is disturbing,” George V. Mann, a biochemist at Vanderbilt’s med school wrote in the New England Journal of Medicine [in 1977].

Ambitious scientists and food companies, he said, had “transformed [a] fragile hypothesis into treatment dogma.”

And not just dogma but also government pressure, official Dietary Guidelines, food labeling regulations, government support for particular lines of research, bans on whole milk in school lunches, taxes and regulations to crack down on saturated fats and then on trans fats and salt. Earlier today Walter Olson noted numerous past examples of bad government advice on nutrition.

It’s understandable that some scientific studies turn out to be wrong. Science is a process of trial and error, hypothesis and testing. Some studies are bad, some turn out to have missed complicating factors, some just point in the wrong direction. I have no criticism of scientists’ efforts to find evidence about good nutrition and to report what they (think they) have learned. My concern is that we not use government coercion to tip the scales either in research or in actual bans and mandates and Official Science. Let scientists conduct research, let other scientists examine it, let journalists report it, let doctors give us advice. But let’s keep nutrition – and much else – in the realm of persuasion, not force. First, because it’s wrong to use force against peaceful people, and second, because we might be wrong.

This last point reflects the humility that is an essential part of the libertarian worldview. As I wrote in The Libertarian Mind:

Libertarians are sometimes criticized for being too “extreme,” for having a “dogmatic” view of the role of government. In fact, their firm commitment to the full protection of individual rights and a strictly limited government reflects their fundamental humility. One reason to oppose the establishment of religion or any other morality is that we recognize the very real possibility that our own views may be wrong. Libertarians support a free market and widely dispersed property ownership because they know that the odds of a monopolist finding a great new advance for civilization are slim. Hayek stressed the crucial significance of human ignorance throughout his work. In The Constitution of Liberty, he wrote, “The case for individual freedom rests chiefly on the recognition of the inevitable ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depends…. Liberty is essential in order to leave room for the unforeseeable and unpredictable.” The nineteenth-century American libertarian Lillian Harman, rejecting state control of marriage and family, wrote in Liberty in 1895, “If I should be able to bring the entire world to live exactly as I live at present, what would that avail me in ten years, when as I hope, I shall have a broader knowledge of life, and my life therefore probably changed?” Ignorance, humility, toleration—not exactly a ringing battle cry, but an important argument for limiting the role of coercion in society.

Today’s scientific hypotheses may be wrong. Better, then, not to make them law.