This article from 2009, by Alan Viard, is relevant today because of the Trump/GOP's proposal for "border adjustment taxes".
But there is something else, which I think is important. Take this idea:
The free market is an optimization mechanism, but what it ought to optimize is not clear. To take extreme examples, the free market will likely more efficiently allocate slave labor than any other system - if slave trade is permitted. Add to it the fact that the free market cannot optimize everything, there are some conditions that must be satisfied (e.g., about the availability of information to both sides of economic transactions) for the market to work, and it is clear that there needs to be a framework in which we can talk about what type of results we want from our economic system, how to quantify those results so that trade-offs can be evaluated, and then what mechanisms to use to optimize those results (achieve the best results possible, achieve results most efficiently).
It seems to me that a good many economists spend too much of their time studying the optimization mechanisms of the economy, and not enough on what we ought to optimize. Having fewer families facing economic stress versus having more goods and services to consume is not a trade-off discussed in the article mentioned above, and not in most articles on economics that I see. Only the things that the economists know how to quantify are supposed to prescribe the limits of what we can or ought to value. That is, "is it good for business?" is the metric in most discussions, and rarely is asked "what is business good for?".
But there is something else, which I think is important. Take this idea:
Furthermore, if a border adjustment did somehow yield a permanent reduction in the trade deficit, such a reduction would lower rather than raise American living standards; we would forever send more goods and services to foreigners while receiving fewer goods and services from them in return.Here "living standards" is implicitly defined to be the amount of goods and services we consume. But suppose our exporting a bit more meant some more good, stable jobs in the US. What is the economic value of that? how is my quality of life affected by having close to full employment in my neighborhood and having a political environment that cannot be Trumpified?
The free market is an optimization mechanism, but what it ought to optimize is not clear. To take extreme examples, the free market will likely more efficiently allocate slave labor than any other system - if slave trade is permitted. Add to it the fact that the free market cannot optimize everything, there are some conditions that must be satisfied (e.g., about the availability of information to both sides of economic transactions) for the market to work, and it is clear that there needs to be a framework in which we can talk about what type of results we want from our economic system, how to quantify those results so that trade-offs can be evaluated, and then what mechanisms to use to optimize those results (achieve the best results possible, achieve results most efficiently).
It seems to me that a good many economists spend too much of their time studying the optimization mechanisms of the economy, and not enough on what we ought to optimize. Having fewer families facing economic stress versus having more goods and services to consume is not a trade-off discussed in the article mentioned above, and not in most articles on economics that I see. Only the things that the economists know how to quantify are supposed to prescribe the limits of what we can or ought to value. That is, "is it good for business?" is the metric in most discussions, and rarely is asked "what is business good for?".
