Doug Irwin: evaluation

Transcript context

…Here’s a question that’s a complete softball, so easy, I can’t believe I’m asking you. How strong is the connection between free trade and world peace? [laughs] This is something I’ve actually wanted to investigate in more detail. Certainly, my gut reaction — and I think there’s a lot of evidence for it — is they are related. Certainly, when you read the memoirs of statesmen of the mid-20th century, they definitely saw that, Cordell Hull being the leading example, who’s the US secretary of state from 1933 until 1944 or ’45. And he wasn’t alone. A lot of economists, Jacob Viner and others, also saw that connection because when you had either trade protectionism or imperialism closing off markets, it led to the scramble for Africa or something like that. Instead of trading these resources freely, you had territorial acquisition as being the counterbalancing of that. What’s interesting is, just as economists have done a lot of empirical work on the benefits and costs of trade, political scientists have done a lot of work on this. The empirical work is not quite up, I think, to the standards of what economists have done in terms of the economic phenomena, but partly it’s because it’s very difficult to quantify, first of all, what constitutes peace, how you operationalize this, what constitutes a trade agreement. Trade is endogenous in many respects, so if there’s a lot of trade, what exactly is the consequence of that? What’s the exogenous variation where more trade leads to more peace? You’d like to see something like that. I’m not sure we have really hard social science evidence on it, but I think it’s a factor that we economists often overlook. A lot of trade policy debates are foreign policy driven, and it’s not something we should really neglect. The idea that free trade might be connected to peace seems quite plausible to me in an era of communism, where you have expansionary foreign governments, and for a long time, there was, as you know, no McDonald’s in Moscow. If you look today, it seems something has changed. China is our largest trading partner, but many observers of foreign affairs would argue that the relationship between US and China has some reasonable chance of leading to foreign conflict. So something has changed in the structure of the equilibrium where now nations that trade a fair amount might fairly readily go to war relative to what we used to suspect. Of course, there is a McDonald’s in Moscow. There’s probably quite a few. People in Moscow eat sushi. They consume all kinds of American popular culture, if only downloaded illegally on the internet. What do you think has changed in the structure of the problem to have made the free trade–peace connection possibly now so weak?…

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