"I DON'T CARE who writes a nation's laws, or crafts its advanced treatises, if I can write its economics textbooks." So said one of the greatest textbook writers of them all, Paul Samuelson.
But even Samuelson didn't live forever--he died in 2009 aged 94--and now others decide what the rising generation is reading. It is a fair bet that, on one of the most critical issues of modern economic policy, his successors' books would not meet with the master's approval. That issue is trade.
Although Samuelson spent most of his life promoting unqualified free trade, he came close in his declining years to admitting he was wrong. In a paper in 2004, he suggested that there might be some circumstances in which a nation did not benefit from free trade. His analysis was carefully hedged; but, given his unique status not only as a textbook writer but as the first American economist to win a Nobel Prize, the effect on the faithful was as if the pope had conceded there might not be a God after all.
The interesting thing is that Samuelson's doubts have not merited so much as a footnote in most of today's top selling textbooks. This is not an isolated oversight. The textbooks have overlooked many other key developments, not least the work of Ralph Gomory and William Baumol, who have posited a much more widely applicable, if equally mathematically watertight, challenge to conventional trade theory. These omissions are all the more surprising for the fact that economics textbooks are constantly revised and updated, the better no doubt to keep sales ticking.
Robert Prasch, an economic historian at Middlebury College and a prominent critic of the free-trade consensus, puts it succinctly: "The economics profession generally is probably 15 years behind reality, and the textbook writers are a further 15 years behind the profession."
When will the dismal science catch up with reality? Judging by my inquiries, probably not anytime soon--and maybe not before its adepts have vaporized what little is left of American economic prowess.
In the reality-based community, the attitude towards the economics profession could hardly be more sullen. Thom Hartmann, a talk-show host and author who ranks as one of the American media's most impassioned critics of globalism, points out that, in marked contrast to economic theoreticians, ordinary Americans have long sensed there is something wrong with trade policy. "To the extent there is a trend, it is at the grassroots," he says. "People have seen the factories go, and now many of the jobs that cannot be exported are being filled by illegals. Ordinary Americans don't understand the theoretical issues but they are gravitating to a very simplistic nationalism reminiscent of Europe in the 1930s."
Many of America's thinking classes are no longer willing to drink the KoolAid. As the most recent presidential administrations have staggered from one economic debacle to another, economists have found themselves pilloried not only for failing to offer timely warnings of the dangers ahead but, in far too many cases, for the erstwhile rapture with which they endorsed the policies that resulted in the Wall Street train wreck. The result, as the Washington-based commentator James Fallows has pointed out, is that there is increasing doubt these days about almost every aspect of established economic wisdom. Fallows, an author on East Asian trade who learned his economics as a Rhodes scholar at Oxford, adds: "I don't think that anything as coherent as a new view, or systematic critique, has emerged. It's more an inchoate sense that the established 'laws' and principles are increasingly mismatched to the observed realities."
Although the number of economists prepared to question conventional trade theory openly has steadily risen in recent years, they remain a small minority--and a marginalized one. Even as evidence mounts that the profession is presiding over one of the most remarkable fiascos in intellectual history, many factors discourage waverers from breaking ranks. …