In Bryan Caplan’s book The myth of the rational voter: why democracies choose bad policies, he outlines four biases that influence the way most voters think about economics. One of the biases he identifies is anti-foreign bias – the tendency for voters to become particularly pessimistic about the economic consequences of interacting with foreigners. A recent book by Diana Mutz addresses this issue. The book is called Winners and losers: the psychology of foreign trade. After reading this book I got the impression that Caplan might at least have that underexplained the matter.
Mutz’s book, as the title suggests, focuses on how the typical American thinks about trade. She is well aware that most citizens are not well informed about economics. As she puts it rather kindly: “even if you are asked about something simple and straightforward, the level of economic knowledge is not high,” and that while the public has strong opinions about trade, “saying that people have an opinion about a issue does not mean that saying that those opinions are well-founded.” She makes these kinds of comments in her book just now Often enough that economists who read it don’t experience too many blood pressure spikes, and for that I want to thank her. But the topic is certainly worth exploring, as she notes: “People’s perceptions of the impact of trade at a national level may or may not be accurate, but these perceptions are critical to understanding their views on trade policy.”
As she researched the issue, Mutz discovered that her “studies did not paint as well-intentioned a portrait of trade opposition as I expected.” Among other things, she found that “domestic ethnocentrism—differences in how positively blacks, whites, and Latinos in the U.S. rated their own group relative to other racial groups—was the best predictor of trade opposition. Those who didn’t like racial outgroups didn’t like trade… I thought I was studying an economic issue, but people’s views were less about the essentials than about what kind of people they thought they deserved… In short, the roots of Opposition to trade was not as rational and well-intentioned as I had assumed.”
By far the most common objection to international trade is the belief that it costs American jobs. But here’s a result that surprised her (and me!). She also looked at how Americans think about foreign direct investment (FDI), in which foreign companies invest in the United States, build their factories here and hire Americans to work in those factories. What Mutz found was that voters opposed trade because they believed it would cause Americans to lose their jobs Also opposed to foreign direct investment even if they thought it would create jobs for Americans. Mutz writes:
Contrary to my initial assumptions, the question of attitudes towards foreign direct investment was as strongly correlated with the trade issues as the trade issues were with each other. This pattern is notable for two reasons. First, it suggests that Americans’ attitudes toward these issues are part of a single underlying attitude construct. Regardless of the specifics in a particular question, people are often a drawbridge-raiser or drawbridge-down type when it comes to trade and economic globalization.
Second, this pattern foreshadows some of the discoveries to come, namely that opposition to trade is not, in fact, just about job losses. Attitudes toward inward FDI and support for international trade are strongly positively correlated, even though the former bring jobs to the country, while the latter are perceived to cause job losses. What these items have in common is involvement abroad, and not an association with job loss.
And this ties into why I think Caplan underestimates the extent of anti-foreign prejudice. Citizens are not just pessimistic about the outcomes of interacting with foreigners; they are certainly hostile to the idea, even though it would be economically beneficial in itself. Most surprising of all, for trade opponents, a situation in which trade results in a “win-win” scenario for America and its trading partner is still considered unfavorable! As Mutz described it,
Americans who find it important to ‘win’ in trade prefer policies that benefit their own group hurt the outgroup on policies that help both their country and trading partner countries. In other words, for a policy that can elicit massive support in the US, it is important not only that the US benefits, but also that it hurts the trading partner country, so that the US achieves a greater outcome. relative advantage.
This is pretty grim. Although the anti-foreign bias described by Caplan appears to be a situation in which Americans worry unnecessarily that foreign trade would harm Americans, in reality those who oppose free trade would reject a scenario in which even by their own light free trade would harm the Americans. trade helped Americans if so Also foreigners helped – they are not happy with Americans being helped unless foreigners are actively harmed in the process.