its counterparts acting in the background to hold employment constant. This is not at all the way that non-economists think about the issue. Both supporters and opponents of free trade normally claim that their preferred policies will create jobs free-traders are forever warning that the Smoot-Hawley tariff caused the Great Depression. And the alternative view does not come at all naturally. during the naFta debates I shared a podium with an experienced, highly regarded U.S. trade negotiator,a trong NAFTA supporter. At one point a member of the audience asked me what i thought the effect of NAFTA would be on the number of jobs in the United States; when I replied"none",based on the standard arguments, the trade official exploded in anger: "It's remarks like that which explain why people hate economists The balance of payments is not a problem: The standard textbook presentation of the Ricardian model assumes balanced trade -- indeed, it is usually a one-period model in which trade must be balanced. Yet the news is full of stories about the balance of payments, of complaints about trade surpluses and deficits. Why are these absent from the story? Again, economists have good reasons for thinking that it is a good approximation to separate balance of payments from real international trade issues. In Ricardo's case, the essential ingredient was the argument by David Hume that trade imbalances are self-correcting: a surplus country will acquire specie, leading to rising prices that price its goods out of world markets, while a deficit country will correspondingly find its goods increasingly competitively priced. In the modern world, again, the channels involve less Invisible Hand and more government intervention: when monetary policies target the unemployment rate, exchange rates do the adjusting. Economists are also aware that even persistent trade imbalances are not necessarily a problem, and certainly that surpluses are not a sure sign of health or deficits one of weakness. Trade may be balanced in Chapter 2; but Chapter 13 explains that the trade balance is equal to the difference between savings and investment, and that a country may justifiably run persistent deficits if it is an attractive site for foreign investment Again, none of this is obvious to non-economists. The essential accounting identity, savings minus investment equals exports minus imports, is if anything a better-kept secret than the concept of comparative advantage. The debate over NAFTa was entirely phrased in terms of the apparent prospect that the United States would run a trade surplus with Mexico-- that was why the treaty was in our interests--and the deficit that has actually materialized is universally regarded as a bad thing In sum, while the concept of comparative advantage may seem utterly simple to economists, in order to achieve that simplicity one must invoke a number of principles and useful simplifying assumptions that seem natural and reasonable only to someone familiar with economic analysis in general. ("What do you mean, objects fall at the same rate regardless of how heavy they are --if I drop a cannonball and a feather .. you're assuming away air resistance? Why would you do that? )Those principles and simplifying assumptions are indeed reasonable, but they are not obvious 4. The Two cultures I once had a very unpleasant, but ultimately useful, conversation with the editor of one of America's leading intellectual magazines. He was in the process of refusing to print a piece I had written at his request, and his dissatisfaction with what I had written was the main subject at hand. But along the way I somehow mentioned the need to represent economic ideas with carefully thought-out models and he responded with a mixture of bafflement and asperity. Clearly the idea that economic ideas could benefit from being modeled was new to him, even though his journal frequently publishesits counterparts acting in the background to hold employment constant. This is not at all the way that non-economists think about the issue. Both supporters and opponents of free trade normally claim that their preferred policies will create jobs; free-traders are forever warning that the Smoot-Hawley tariff caused the Great Depression. And the alternative view does not come at all naturally. During the NAFTA debates I shared a podium with an experienced, highly regarded U.S. trade negotiator, a strong NAFTA suppporter. At one point a member of the audience asked me what I thought the effect of NAFTA would be on the number of jobs in the United States; when I replied "none", based on the standard arguments, the trade official exploded in anger: "It's remarks like that which explain why people hate economists!" - The balance of payments is not a problem: The standard textbook presentation of the Ricardian model assumes balanced trade -- indeed, it is usually a one-period model in which trade must be balanced. Yet the news is full of stories about the balance of payments, of complaints about trade surpluses and deficits. Why are these absent from the story? Again, economists have good reasons for thinking that it is a good approximation to separate balance of payments from real international trade issues. In Ricardo's case, the essential ingredient was the argument by David Hume that trade imbalances are self-correcting: a surplus country will acquire specie, leading to rising prices that price its goods out of world markets, while a deficit country will correspondingly find its goods increasingly competitively priced. In the modern world, again, the channels involve less Invisible Hand and more government intervention: when monetary policies target the unemployment rate, exchange rates do the adjusting. Economists are also aware that even persistent trade imbalances are not necessarily a problem, and certainly that surpluses are not a sure sign of health or deficits one of weakness. Trade may be balanced in Chapter 2; but Chapter 13 explains that the trade balance is equal to the difference between savings and investment, and that a country may justifiably run persistent deficits if it is an attractive site for foreign investment. Again, none of this is obvious to non-economists. The essential accounting identity, savings minus investment equals exports minus imports, is if anything a better-kept secret than the concept of comparative advantage. The debate over NAFTA was entirely phrased in terms of the apparent prospect that the United States would run a trade surplus with Mexico -- that was why the treaty was in our interests -- and the deficit that has actually materialized is universally regarded as a bad thing. In sum, while the concept of comparative advantage may seem utterly simple to economists, in order to achieve that simplicity one must invoke a number of principles and useful simplifying assumptions that seem natural and reasonable only to someone familiar with economic analysis in general. ("What do you mean, objects fall at the same rate regardless of how heavy they are -- if I drop a cannonball and a feather ... you're assuming away air resistance? Why would you do that?") Those principles and simplifying assumptions are indeed reasonable, but they are not obvious. 4. The Two Cultures I once had a very unpleasant, but ultimately useful, conversation with the editor of one of America's leading intellectual magazines. He was in the process of refusing to print a piece I had written at his request, and his dissatisfaction with what I had written was the main subject at hand. But along the way I somehow mentioned the need to represent economic ideas with carefully thought-out models, and he responded with a mixture of bafflement and asperity. Clearly the idea that economic ideas could benefit from being modeled was new to him, even though his journal frequently publishes