Cold Hearted Economists

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Dave over at Always Low Prices points out that the jobs being lost to outsourcing and overseas manufacturers are going people in dirt poor nations. This fact is always over looked by politicians and "journalists" who take an anecdote to make these loses into a national tragedy. Most of the world is dirt poor in comparision to Americans, but politicians seemingly want to put up trade barriers and at the same time tax citizens for foriegn aid.

There is a reason the Delong's and Krugman's have been accused of being right-wingers and there seems to be many economists who actually fit that description. Economics today is what many left-wingers decry as liberal economics or, if your Australian, rational economics( does that make the opponents irrational?). This is why Delong and Krugman both support free trade while, I know from reading Brad's site, advocating some sort of state support for those negatively affected by globalization. They recognize that markets are the best choice for the allocation of resources, but seek a safety net so that the losers aren't affected too badly.

What about those economists, like myself, who aren't American liberals, surely I don't give a damn about other people? Let me ask a question, what other profession devotes as much time and resources to researching how man can better themselves? The fact that so many economists sound like right-wingers is the result of research which points them in that direction, but believe it or not, a lot them have a heart too. I sometimes joke with my friends that I'm a socialist. This doesn't have to do with actual beliefs but the simple facts that it's much easier to get laid in a country with a socialist government as an American.

There is nothing that makes me happier than when I see solid economic growth coming out places like India and China. Every person who led a miserable life and then entered the middle class makes me richer in ways beyond just short-term job growth. That's the way we should should look at the situation and not through the lense of spoiled kids on the streets of Seattle. Economists study how man betters himself even if its not the technical definition of what we do.

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Of course it's good. I read a short post on the subject at Truck & Barter this m Read More

This post from the very interesting blog Always Low Prices sparked an interesting response from one of the Truck and Barter bloggers. Here is an... Read More


hey, I'm a spoilt kid in seattle, and I walk down the street sometimes, and I take grave offense at your post!!!
just kidding... of course...
but I believe America's current right-wingers aren't any better than the left at controlling the size of government...

American politicians have NO obligation whatsoever to improve life in dirt-poor countries. None! I don't vote for those dogs and pay their salaries so they can make things better in China and India. To heck with that! I only care about this country, and I think my elected representatives have only one obligation and responsibility, which is to run THIS country for the sole benefit of Americans like me.

Right on, Lugo. Economists suck.

The point is not that the economists suck. The point is that economists whose opinion on outsourcing consists of insipid platitudes about globalization and how we should be happy that things are getting better in China and India are living in a dreamworld.

The reality is this: Politician A says "I support free trade. Don't feel bad about losing your job... globalization makes this inevitable, and anyway you're helping the poor overseas."

Politician B says "I support jobs for this district, and I will stop unfair competition from overseas manufacturers."

Who do you think Joe SixPack is going to vote for? If economists truly believe free trade is a Good Thing, you need to craft more appealing arguments than I saw in this post or in the linked article about WalMart. Some guy who lost his textile job in South Carolina and now has to work for peanuts at WalMart doesn't give a rat's asz about China and India, and I don't blame him at all.

I agree that many economists recognize that your textile worker does not give a rat's anything about China, but he most likely does care about his children, who will not be better off than he was as a textile manufacturer unless the painful process of cost reduction / productivity enhanacement is permitted to take place.

It is a true economic platitude that those painful productivity enhancements cause the increase in real incomes from one generation to the next.

If he wants to make the Chinese AND his own children poorer, that's his business, and he can do so by buying more expensive products not made in China. But since protectionism will harm ME and MY children, he will have to fight me through political means if he wants to protect his job.

Why should I have to be punished so that your textile worker is not? What right does he have to make my children poorer?

Kevin, this isn't about "rights", and the issue will not be settled on the basis of abstract and unproven concepts like "productivity enhancements for future generations". This is about interest group politics today, and whoever has the money and the votes will prevail.

Aren't you the game theory guy? You should know that for the most part, people will generally choose to avoid one unit of pain today (loss of their textile job) rather than be given ten units of pleasure tomorrow (supposed "productivity enhancements" for the children).

I am sure you also know that when politicians have a choice between causing a little bit of pain to a lot of voters like you and me, who are about an issue but are not immediately affected, and causing a lot of pain to a powerful, wealthy, and vocal interest group (like those seeking protectionist measures), they invariably choose the former. So yes, he will have to fight you politically, but I think he and the interest group that represents him are a lot more motivated than you are.

Productivity is not an unproven concept. As they say, you can look it up.

I think that the textile guys want to use the political process to make me, my children, and their children poorer, so that they may be better off in the short run. (Note however, the political process does have limits; these are frequently called rights).

One's personal discount rate is one's personal tradeoff between pain today and pleasure tomorrow. The existence of savings shows that people are willing to put off pleasure today to get more tomorrow--and the productivity statistics show that for a very long time, people have been getting a lot more. Textile workers care about their children.

And I reject the concentrated benefit, diffuse cost view of giving money or money equivalents to those displaced by "globalization".

Economics has taught me that the costs to protection are actually quite large--even to those who advocate and immediately benefit from protection will be hit somewhere down the line. That is, the costs are also concentrated!

I'm not the game theory guy; I'm the time series guy--the one who understands the long-term implications of even small costs created by bad policies. In the long term, even small the annual costs of protection can yield large losses in incomes.

Productivity is a proven concept. What is not proven is the degree to which it will be enhanced, if at all, by outsourcing. Nor have you proven the degree to which you and your children will be poorer as a result of protection. If you have to pay $.50 extra for a 3-pack of socks just to keep sock-making in America, would you do it? I would. To the extent I can, I buy American, even if it costs more. (Sadly, of course, it is often simply impossible to do so for many goods.)

At the very least, I'd like to see some numbers associated with this whole debate, because right now it is strictly the province of emotion. It is hard for me to get all outraged about special interest groups seeking protection when the costs of protection and the benefits of outsourcing have never been precisely quantified.

I have a response! Hopefully, it get's completed.

We're still waiting, Bob!


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This page contains a single entry by Bob published on September 13, 2004 12:11 AM.

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