tag:blogger.com,1999:blog-9560953.post1667004977494972996..comments2023-12-31T19:34:14.853-05:00Comments on Dymaxion World: Why I Hate Economistsjohnhttp://www.blogger.com/profile/09690430991814528863noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-9560953.post-25742174219541971172007-05-10T03:18:00.000-04:002007-05-10T03:18:00.000-04:00It does seem that it would be a lot easier to talk...It does seem that it would be a lot easier to talk about trade if we did not believe the idea of comparative advantage is a real and tested theory or that it ever made any sense at all. It has seemed to me that is so. Ricardo's idea, noted up as a hypothetical notion in a couple of paragraphs of a 300 page book in 1817 did not work then and has not since. It seems to me he must have known this since he did not test the idea with real figures and he knew very well why England was "so circumstanced" as to defeat the Portugese in cloth manufacture. That was the result of a treaty made about a hundred years before in which the Portugese agreed to get their cloth from England (not making it themselves) in consideration of an exclusive position for their wine (or that from Oporto--hence "port"). England wanted a good source for wine as European supply was stopped due to a war at the time. Nothing to do with comparative advantage. And it was English capital that captured the wine making of this "port" in Portugal so Ricardo's assumption that capital would stay at home was false, to his own knowledge. And he did assume that if capital could and would go as it peased to where the rate was best, there would be a leveling out to an average return, then his idea did not work either.<BR/>When you work out a table of the cases his notion presents you will soon see there is a case of Portugal having either a relative or an absolute advantage for several of them in man hours on cloth making (labour theory of value used by Ricardo). Also wrong and Ricardo must have known it was the treaty and the subsequent history of power looms that made England way ahead in this trade by 1817. So let us forget about comparative advantage and the economists and talk about the political economy of trade. That will lead to a sensible discussion.Unknownhttps://www.blogger.com/profile/00891223462384059408noreply@blogger.comtag:blogger.com,1999:blog-9560953.post-81851339899264595232007-05-09T01:30:00.000-04:002007-05-09T01:30:00.000-04:00First, I suspect we're on the same page on a lot o...First, I suspect we're on the same page on a lot of things but I'm going to continue to quibble because I haven't had a good argument in a while. <BR/><BR/>Fundamentally I think much of the disagreement is in degree not in kind. Comparisons to the late 19th century are a case in point. <BR/><BR/>OECD stats indicate that the share of world population of Japan, Germany, and the US combined in 1870 was 9%. Using 2001 as a contrast, China had about 20.7% of world population with India clocking in at ~16.6%. <BR/><BR/>Japan's per capita GDP grew 88% from 1870-1913. The figures for Germany and the US are 102% and 117% respectively. Whereas China's grew 327% from 1973-2001, India a more "modest" 130%. (Sorry the time periods aren't commensurate but I'm giving the advantage to the late 19th C.)<BR/><BR/>Another thing that I wish I had made clearer in my earlier post is that while the U.S., Japan and Germany industrialized dramatically , so did a lot of other countries. Much of the Western European per-capita GDP grew 80-100% during the same time period (e.g., France, Austria, Denmark). Who constitutes the "core" economies during this period? Is it just the UK? I'm not sure there's a clear distinction between upstarts and incumbents. Also, did growth in Japan et al come at a cost to the UK? Were British jobs being lost hand over fist because of foreign rivals?<BR/><BR/>This isn't to say that the wave of globalization in the 19th C wasn't substantial. It just seems to me that what's happening now is in many ways on a larger scale (especially given population proportions), and at a more rapid pace. I suppose reasonable people can disagree but it's hardly an absurd proposition. Also, does Blinder even make this assertion? In the article he talks about it being the biggest economics issue "for a generation". But I'm curious what policy implications you would draw from the 19th C to apply today.<BR/><BR/>In terms of the blue collar- white collar issue, I agreed in my earlier comment that not failing to properly account for the adjustments faced by the latter was wrong. I merely wanted to point out that merely making a distinction between the two is reasonable.<BR/><BR/>In terms of policy prescriptions, I think a focus on face-to-face jobs is problematic but for different reasons. No one would argue that they are invulnerable but they probably are more secure in the face of offshoring. E.g., remote controlled construction just isn't that plausible. Ditto for onsite auditing. Even if it was plausible, who services the machines? The real problems to me are a) picking winners in general is bad and b) it requires restrictive immigration to work.<BR/><BR/>Since we do agree a lot, I guess my comments here are prompted somewhat by the surprising level of vitriol. Blinder is "hysterical" and more blind to reality than anyone? I'd write it off to polemic and creative license but the "hate" seems genuine. I can only surmise that this level of animosity is prompted more by previous statements or actions since this article seems rather innocuous to me. Even still, do you really hate these people? Or I am I taking things way to seriously?<BR/><BR/>Finally this isn't a criticism but I'm really curious what kind of protectionism you'd advocate. Would it have implications for poor in the developing world?Fag Fuckerhttps://www.blogger.com/profile/10226113009467590677noreply@blogger.comtag:blogger.com,1999:blog-9560953.post-84787326722909208202007-05-08T19:09:00.000-04:002007-05-08T19:09:00.000-04:00Population growth wasn't a typo, but it's not just...Population growth wasn't a typo, but it's not just that people are having lots of babies in the developing world -- it's that the developing world has grown, as Blinder writes, by 1.5 billion people. It's an order of magnitude more than the transition the global economy made in the late 19th century, when Germany, Japan, and the US were all simultaneously industrializing and entering the global economy to a much higher degree than they had been. (Lowering tariff barriers, importing new technologies from old core economies, etc.) But the dynamic is the same.<BR/><BR/>Clearly, there's "some distinction" between blue- and white-collar jobs. The question is whether it's enough to justify the hysterical concern Blinder has for the latter, and the neglect free-traders showed for the former.<BR/><BR/>And the problem with Blinder's education recommendation is that we don't know, and can't know, what technologies will make a job that's currently "face-to-face" offshoreable. Blinder recommends construction over architecture, for example. What happens when someone invents a remote-controlled drywaller that can be run fron Bangalore or Kinshasa? Or pick any example you prefer -- all the jobs that are currently in danger of being offshored were once considered safe because they were traditionally done locally, too. The education fix is the same old neoliberal prescription, and it's not that it's a bad idea, it's just that it's inadequate.johnhttps://www.blogger.com/profile/09690430991814528863noreply@blogger.comtag:blogger.com,1999:blog-9560953.post-46958933251903851142007-05-08T17:07:00.000-04:002007-05-08T17:07:00.000-04:00I agree that this column seems bizarrely out of da...I agree that this column seems bizarrely out of date. Blinder seems to be having this epiphany that (shocking!) free trade is not unambiguously good and that the adjustments are wrenching.<BR/><BR/>However, I'm not sure you're being very charitable with his arguments.<BR/><BR/>First, I don't know if Blinder would use words like "unprecedented" but it does seem that the current economic context is at least unusual. While economic disruption in the face of new players is hardly new, the size and pace what's being going on for the last decade or so seems unique. <BR/><BR/>It certainly is in terms of technological change. The fact that you can have an engineering project run constantly 24 hours a day by having rotating teams on different sides of the world is new.<BR/><BR/>I also struggle to find an analogue to China, India, and the former Soviet Bloc all entering the global economy in force. The issue isn't population growth (which may have been a typo on your part) but that they have become much less autarkic and protectionist (fairly quickly I might add). You rightly point out that previously closed countries entering in force is hardly unprecedented but the scale and to some extent the rapidity seems pretty new to me.<BR/><BR/>Second, I totally agree that Blinder is wrong to only now be insisting on support for those who lose from liberalization. I think a strong social safety net is important to cushion ongoing dislocation. However (at the risk of being self-serving), I think there is at least some distinction between the loss of blue collar and white collar jobs. Working in a factory out of high school does not entail the large opportunity cost of post-secondary education. Urging people to forswear current earnings and take on a large debt load to boot is problematic if the promised economic payoff doesn't materialize.<BR/><BR/>Third, "more of the same" isn't entirely old hat. He's not advocating merely more education, but an emphasis on jobs that require face-to-face contact. However I do think Dean Baker is right to point out that this is probably misguided from an efficiency point of view and requires protectionist immigration policies to be effective.<BR/><BR/>Finally, while Blinder's article is a muddle, embarrassingly obvious at times and certainly worthy of criticism I think two key messages are worthwhile (with caveats):<BR/><BR/>1) trade liberalization is often good. <BR/><BR/>However, I do disagree with it as a blanket policy prescription and may not be appropriate under certain circumstances. I think the pace, sequencing and nature of the liberalization must be carefully managed to reap the benefits but I think they are positive in aggregate. This comes across in the trade literature and I see analogous conclusions from the Shumpetrian endogenous growth lit.<BR/><BR/>2) Focusing on western comparative advantage, i.e., the "knowledge economy" and especially science and R&D is probably a good idea. Investing significantly in protectionist policies is probably not sustainable in the very long run or is extremely expensive.<BR/><BR/>What I would add is that a strong social safety net is needed to cushion the dislocative effects. Universal health care or at least health care portability would be a good start for the U.S.Fag Fuckerhttps://www.blogger.com/profile/10226113009467590677noreply@blogger.comtag:blogger.com,1999:blog-9560953.post-17906760296270579662007-05-08T14:44:00.000-04:002007-05-08T14:44:00.000-04:00Bravo, great polemic. There is one thing you can ...Bravo, great polemic. There is one thing you can count a liberal (in the classical sense) economist to know: which side his bread is buttered on. It was all fun and games when it was the last generation's working class that was getting culled.Anonymousnoreply@blogger.com