More on those TPP Economic Estimates

A couple days ago, I briefly expressed skepticism about the economic estimates being offered up related to the TPP (see also here). Working independently, but with similar ideological priors, here’s my Cato colleague Dan Ikenson offering more detailed thoughts:

With apologies to my trade economist friends, anyone who treats the estimates produced by economic models as mathematical truths is, well, part of the problem. Lawrence doesnt do that, but too many trade policy combatants do. Certainly, some models are more rigorous than others, but all rely on assumptions. The greater the number and complexity of exogenous policy changes being modeled, the greater the number of estimates and assumptions to incorporate, and the further removed from reality the results will be. Sometimes the estimates are merely best guesses and sometimes the assumptions have no better than a 50 percent probability of occurrence. For example, many of the economic benefits of TPP will derive from reductions in non-tariff barriers to trade, such as regulatory opaqueness. How does one model the increase in regulatory transparency? How does one account for stricter environmental or labor or intellectual property regulations? How does one assign numeric values to rules limiting restrictions on cross-border data flows?

…Economics is not science. The preferences, information, and knowledge that drive economic decisions are all personal, nuanced, and dispersed. They cannot be represented mathematically with any precision. Assumptions about how economic agents should react that are, at best, based on probabilities and expectations of utility- or profit-maximization dont always hold. …