KAREN DYNAN is Professor of the Practice of Economics at Harvard University. From 2014 to 2017, she served as Assistant Secretary for Economic Policy and Chief Economists at the U.S. Department of the Treasury.
An uncomfortable truth for American economists is that they have limited influence on economic policy. Take trade, for example. Anyone who has studied introductory economics knows that free trade benefits countries in the long run, by allowing them to specialize in producing the goods and services in which they have a comparative advantage. Economists are in near-universal agreement about this point, although most also agree that it is important to help workers who lose their jobs in the short run because of trade.
Yet free trade has never been very popular in Washington. The administration of U.S. President Donald Trump has imposed costly tariffs on imports from Canada, China, Mexico, and the EU, but such restrictions are not a mere idiosyncrasy of Trump. President Ronald Reagan introduced quotas on Japanese auto imports in 1981, and the North American Free Trade Agreement faced opposition from both Democrats and Republicans when it was introduced to Congress in 1993. And many previous administrations have imposed trade restrictions on steel in order to support U.S. producers: Richard Nixon imposed import quotas, Jimmy Carter set price floors for foreign steel, and both George W. Bush and Barack Obama enacted steel tariffs during their presidencies.
Trade is hardly the only area in which economic policy goes against expert consensus. The Republicans’ 2017 tax reform left largely intact the mortgage interest deduction, which allows homeowners to deduct the interest on loans used to buy or build a home, even though the vast majority of economists believe that it leads to overinvestment in housing and excessive mortgage debt relative to the social optimum. And in recent decades, U.S. states have greatly expanded occupational licensing—regulations setting minimum qualifications for entering a field—for florists, hair stylists, interior designers, and other professions for which the consumer protection benefits of licensing are doubtful. Most economists agree that this sort of occupational licensing hurts workers by restricting entry into a profession and hurts consumers by keeping prices high.
Why don’t economists
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