I’m starting to think that Paul Krugman is so enamored with being a darling of the left, that he has forgotten – or perhaps abandoned – even the fundamentals (law of comparative advantage). Boudreaux pits him against himself again:
Paul Krugman worries that, although trade between high-wage countries is mutually beneficial, "trade between countries at very different levels of economic development tends to create large classes of losers as well as winners" – and so is suspect because it likely harms ordinary American workers (“Trouble With Trade,” December 28).
A famous trade economist argues that this concern is misplaced. In a 1996 essay, this economist – responding to a protectionist who worried that western trade with low-wage countries would harm workers in the west – wrote that this protectionist "offers us no more than the classic ‘pauper labor’ fallacy, the fallacy that Ricardo dealt with when he first stated the idea, and which is a staple of even first-year courses in economics. In fact, one never teaches the Ricardian model without emphasizing precisely the way that model refutes the claim that competition from low-wage countries is necessarily a bad thing, that it shows how trade can be mutually beneficial regardless of differences in wage rates."
Oh – the economist who wisely warned against the pauper-labor fallacy is none other than Paul Krugman.*