Mutz, Caplan, and Anti-Foreign Bias

In Bryan Caplan’s book The Myth of the Rational Voter: Why Democracies Choose Bad Policies, he outlines four biases impacting how most voters think about economics. One of the biases he identifies is anti-foreign bias – the tendency of voters to become especially pessimistic about the economic impact of dealing with foreigners. A recent book by Diana Mutz looks at this very issue. The book is called Winners and Losers: The Psychology of  Foreign Trade. After reading this book I was left with the impression that if anything, Caplan may have understated the issue.

Mutz’s book, as the title suggests, focuses on how the typical American thinks about trade. She’s well aware that most members of the public are not well informed about economics. As she rather genteelly puts is, “even when asked about something simple and straightforward, levels of economic knowledge are not high,” and that while the public holds strong opinions on trade, “to say that people have opinions on an issue is not to say that those opinions are well-informed.” She drops comments like this throughout her book just often enough to prevent any economists reading it from experiencing too many blood-pressure spikes, and she has my thanks for it. But the subject is well worth exploring, as she points out – “People’s perceptions of the national-level impact of trade may or may not be accurate, but these perceptions are key to understanding their opinions on trade policy.”

As she explored the issue, Mutz found that her “studies did not paint as well-intentioned a portrait of trade opposition as I had anticipated.” Among the things she found was that “domestic ethno-centrism – differences in how positively Blacks, whites, and Latinos in the US judged 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 bottom line than about what kind of people they viewed as deserving…In short, the roots of opposition to trade were not as rational and well-meaning as I had assumed.”

Far and away, 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 American’s felt about foreign direct investment (FDI), where foreign companies invest in the United States, building their factories here and hiring Americans to work in those factories. What Mutz discovered was that voters opposed to trade because they believed it caused Americans to lose their jobs were also opposed to FDI, even when they believed it would create jobs for Americans. Mutz writes,

Contrary to my initial assumptions, the question tapping attitudes toward inward foreign direct investment was just as strongly correlated with the trade questions as the trade questions were with one another. This pattern is noteworthy for two reasons. First, it suggests that Americans’ attitudes on these questions are part of a single underlying attitude construct. Regardless of the particulars in any given question, people tend to be either drawbridge-up or drawbridge-down types 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, strictly about job loss. Attitudes toward inwardly-directed FDI and support for international trade are strongly positively correlated, even though the former brings jobs into the country, while the latter is assumed to cause job loss. What these items share is involvement with foreign countries, not a connection to job loss.

And this ties into why I think that Caplan, if anything, understates the extent of anti-foreign bias. Citizens aren’t merely pessimistic about the outcomes of interacting with foreigners – they are positively hostile to the idea, even if by their own lights it would be economically beneficial. Most surprising of all was that for trade opponents, a situation where trade results in a “win-win” scenario for America and its trading partner is still viewed unfavorably! As Mutz described it,

Those Americans who care about “winning” at trade prefer policies that benefit the ingroup and hurt the outgroup over policies that help both their country and trading partner countries. In other words, for a policy to elicit mass support in the US, it is important not only that the US benefit, but also that it hurt the trading partner country so that the US achieves a greater relative advantage.

This is pretty grim. While the anti-foreign bias described by Caplan seems to be a situation where Americans were unduly worried that foreign trade would harm Americans, it actually appears to be the case that those opposed to free trade would reject a scenario where even by their own lights free trade helped Americans if it also helped foreigners – they aren’t happy with Americans being helped unless foreigners are actively hurt in the process.