Donald Trump has ushered in a new wave of conservative who is worried about losing their jerbs to outsourcing and foreigners. Here's the argument: if we hire people in other countries to do work that we could have hired American workers to do, we're putting American workers out of work, and therefore harming the economy. Maybe we can get products for less money, but if nobody has a job to buy the goods, it doesn't matter.
Here's a good article on why that's wrong (I spent approximately 10 seconds searching for this):
While opening foreign markets should be one objective of trade policy, real free trade requires liberalization at home. The real benefits of trade are measured by the value of imports that can be obtained for a given unit of exports — the so-called terms of trade. Trade barriers at home make imports more expensive, and reduce the amount that can be purchased with a given unit of exports. Trade restrictions penalize consumers, import-using industries and taxpayers.
Yet, holding firm to those domestic barriers, while insisting that foreign markets open wider, is the standard strategy for negotiating free trade agreements.
There it is in a nutshell, trade barriers (that make importing expensive, thereby preferring domestic goods) reduce the amount of imports that can be obtained for a given quantity of exports. They make the deal worse. That's the point, keep prices high to maintain employment. Here's the cartoon version of why this doesn't work.
Bob and Joe are farmers. Bob raises corn and milks cows to feed his family. Joe does the same for his family. Neither trades with the other. Joe has slightly better soil for his farm than Bob, and he has some ideas about how he could get a much larger crop if he had more time. Bob has an opportunity to obtain get some great milking cows through a friend.
If Bob got the extra cows he could provide for the milk needs of both of their families plus a little, but he'd have to give up farming. If Joe expanded his corn crop he could provide for the corn needs of both of their families plus a little, but he'd have to give up milking.
Trade is born. Bob and Joe now produce more than they need. Specialization restructured the economy to the mutual benefit of all involved. Joe lost his milking, and Bob lost his corn harvest, but both benefited and the output of the economy grew (GDP went up). In currency terms, this transaction was deflationary, because the same amount of product now costs less to obtain.
This example, by the way, is not that far off from how trade actually develops (and it does so organically). There is no difference if Bob and Joe are standing on the other side of an arbitrary national border, on the other side of an ocean, or if they speak a different language, have a different skin color, or pray to different gods. That's the beauty of free trade, you know that both sides benefit because they were freely able to engage in it.
UNSEEN CREATION
The case for free trade is not obvious. The benefits of trade are dispersed and accrue over time, while the adjustment costs tend to be concentrated and immediate. To synthesize Schumpeter and Bastiat, the “destruction” caused by trade is “seen,” while the “creation” of its benefits goes “unseen.” We note and lament the effects of the clothing factory that shutters because it couldn’t compete with lower-priced imports. The lost factory jobs, the nearby businesses on Main Street that fail, and the blighted landscape are all obvious. What is not so easily noticed is the increased spending power of the divorced mother who has to feed and clothe her three children. Not only can she buy cheaper clothing, but she has more resources to save or spend on other goods and services, which undergirds growth elsewhere in the economy.
Consider Apple. By availing itself of lowskilled, low-wage labor in China to produce small plastic components and to assemble its products, Apple may have deprived U.S. workers of the opportunity to perform that low-end function in the supply chain. But at the same time, that decision enabled iPods and then iPhones and then iPads to be priced within the budgets of a large swath of consumers. Had all of the components been produced and all of the assembly performed in the United States — as President Obama once requested of Steve Jobs — the higher prices would have prevented those devices from becoming quite so ubiquitous, and the incentives for the emergence of spin-off industries, such as apps, accessories, Uber, and AirBnb, would have been muted or absent.
But these kinds of examples don’t lend themselves to the political stump, especially when the campaigns put a premium on simple messages. This is the burden of free traders: Making the unseen seen. It is this asymmetry that explains much of the popular skepticism about trade, as well as the persistence of often repeated fallacies.
THE MYTHS
One of the most frequently invoked trade myths is the portrayal of trade as a competition between “us” and “them.” Central to this perception is that exports are Team America’s points, imports are the foreign team’s points, and the trade account is the scoreboard. Since that scoreboard shows a deficit, the United States is losing at trade, and it’s losing because the foreign team cheats — too often with impunity. Sound familiar?
This fundamental mercantilist fallacy about the nature of trade has a nationalistic appeal, where America is some monolithic entity best served by policies that strengthen her stature vis-à-vis some foreign monolith. But trade does not occur between countries. Trade is the culmination of billions of daily transactions pursued by individuals seeking value through exchange.
When we transact at the local supermarket, we seek to maximize the value we obtain by getting the most for our dollars. We strive to “import” more than we “export.” But when it comes to trading across borders or when our individual transactions are aggregated at the national level, we tend to forget these basic principles and accept the fallacy that the goal of trade is to achieve a surplus. But, as Adam Smith put it: “What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.” Never mind the intellectual consensus: This is common sense.
The benefits of trade come from imports, which deliver more competition, greater variety, lower prices, better quality, and new incentives for innovation. Arguably, opening foreign markets should be an aim of trade policy because larger markets allow for greater specialization and economies of scale, but real free trade requires liberalization at home. The real benefits of trade are measured by the value of imports that can be purchased with a unit of exports — our purchasing power or the so-called terms of trade. Trade barriers at home raise the costs and reduce the amount of imports that can be purchased with a unit of exports.[ /quote]
I think American companies should hire Americans, however I don't think the government should force them too or impose tariffs. All tariffs are going to do is increase the cost of goods for the consumer since companies aren't going to sacrifice profits.
I also understand that undocumented workers make it so my food isn't outrageously expensive. I already pay $5 for two avocados, I don't want to pay $5 per avocado.
Pretty sure protectionism is what led to American car companies getting complacent with their crappy products and nearly going bankrupt when foreign competition finally arrived. Economic protectionism does not breed innovation.
I'm by no means an economic expert or anything, but maybe more people just need to learn skills that are in demand here, now. I also agree that tariffs will not do much good because those costs will just be passed onto the consumer.
I don't reply in this forum often, but the way this thread is going seems to lack any reasoned dissent, so I'll give it a go. I mostly want to talk about the cartoon example @Danoff used and why it's awful, but I'll go through the whole post real quick. Footnotes at the bottom.
Donald Trump has ushered in a new wave of conservative who is worried about losing their jerbs to outsourcing and foreigners. Here's the argument: if we hire people in other countries to do work that we could have hired American workers to do, we're putting American workers out of work, and therefore harming the economy. Maybe we can get products for less money, but if nobody has a job to buy the goods, it doesn't matter.
Here's a good article on why that's wrong (I spent approximately 10 seconds searching for this):
So, first of all, I don't feel like this is really a case for 'Free Trade' as much as it's a case for globalization. Those terms are almost interchangeable, but there are some specifics that keep them apart. The fear of workers losing jobs to overseas workers doesn't really fall into only a trade discussion, as it involves foreign policy, foreign market innovation, outsourcing, and a whole host of other international dealings. Trade agreements are a big part of that sure, but they're not the only part.
Now, that article doesn't really talk about how free trade =/= lost jobs domestically. It talks a lot about 'growing the economic pie' and such, but that's not the same thing as creating/protecting domestic jobs. It also utterly fails to mention the relationship between income, inflation, and purchasing power, electing instead to gloss over all of that with the simple statement:
Every day we enjoy its fruits, which include better and more affordable products; access to a larger pool of customers, suppliers and capital; and greater employment and business opportunities with foreign companies operating in the United States.
That is really all it has to say regarding the affect of trade policy on the individual, and even that is only half-targeted at individuals. An individual doesn't really benefit from a larger customer base or international business opportunity; a multinational company sure does, and through an extended trickledown maybe an individual does, but I know I'm not enjoying the fruits of a global potential customer base every day, at least not in any tangible way(1). Are you?
It does talk about how countries with relatively freer trade grow their economies faster than those that don't. Great. There's no disagreement there, and the statistics certainly back that up. The SEZs in China have been growing like crazy on the back of freer trade, so has India and other second-world developing nations.
You know what else those areas are doing? Paying below first world standards, not enforcing the lax or nonexistant regulation of industry instituted by their governments, manipulating currency(2), and a host of other less than idyllic practices that are leveraging their economies on the backs of their workforce and environmental damage(3). I'm prepared to accept that their freer trade is helping, but it's hardly the only cause.
I fully accept and embrace the idea that free trade and globalization increase total global wealth. The arguments surrounding that are more or less infallible and have been beaten to death, resuscitated, and beaten to death again many times over. The growth we've seen from India and China in the last decade proves that if you look at wealth across global population.
I have a harder time accepting that they increase individual wealth within a country that is close to or at the top of the pile. Do globalization and free trade increase individual wealth for a person in the US or the EU? Possibly, but I think there's still a healthy debate to be had on that front. I think there are certainly individual cases where it does, but there are also cases where it does not. Whether it results in a net increase across the population I don't know.
Here's the cartoon version of why this doesn't work.
Bob and Joe are farmers. Bob raises corn and milks cows to feed his family. Joe does the same for his family. Neither trades with the other. Joe has slightly better soil for his farm than Bob, and he has some ideas about how he could get a much larger crop if he had more time. Bob has an opportunity to obtain get some great milking cows through a friend.
If Bob got the extra cows he could provide for the milk needs of both of their families plus a little, but he'd have to give up farming. If Joe expanded his corn crop he could provide for the corn needs of both of their families plus a little, but he'd have to give up milking.
Trade is born. Bob and Joe now produce more than they need. Specialization restructured the economy to the mutual benefit of all involved. Joe lost his milking, and Bob lost his corn harvest, but both benefited and the output of the economy grew (GDP went up). In currency terms, this transaction was deflationary, because the same amount of product now costs less to obtain.
This example, by the way, is not that far off from how trade actually develops (and it does so organically). There is no difference if Bob and Joe are standing on the other side of an arbitrary national border, on the other side of an ocean, or if they speak a different language, have a different skin color, or pray to different gods. That's the beauty of free trade, you know that both sides benefit because they were freely able to engage in it.
I understand this is an absurdist rendition used to illustrate your point. You just did a really bad job with it.
I'm going to let slide the force majeure of Bob gaining cows for zero cost from an actor that is not involved with this looped economy. That by itself totally discredits everything that comes after it(4), but it's not even the biggest problem I have with this parable.
The problem I have is that it assumes everyone is going to act in good faith, forever. People don't do that. People are self-interested, Hobbesian dirtbags who place themselves first at nearly every opportunity. That behavior only getsworse when people form groups (like nations).
You can't build policy expecting that nobody will ever defect.
Beyond even that, your model fails to account for advancement or outside influence. For example, what if Bob builds a machine that milks his cows for him? Now, he has a lot more free time since he's not milking cows all day, so he decided to get back into farming because he is wasting money buying his crops from Joe. Bob uses his spare time to farm enough corn for his family and no longer needs Joe's corn. Now, Bob can still sell his milk to Joe, but Joe is no longer contributing to the exchange, so why would Bob keep giving him milk? Joe dies.
Another scenario: A fire rolls through and totally destroys Joe's crop. Bob had no crops planted, expecting to get food from Joe for milk. With no harvest from Joe, Bob can't feed his cows and they die. With no milk and no harvest, Bob and Joe both die. Yay specialized economies!
Finally, what if there's a farm over the next hill that is fully robotized, run by a single person. It produces twice as much milk as Bob and twice as much corn as Joe, but takes half the labor. Joe and Bob can't compete in the market with RoboFarms, so what are they supposed to do? They decide to get job training to work on that farm, but after they both finish tech school (that they somehow paid for on subsistence budgets) it turns out that RoboFarms only needs one tech, so they hire Joe. Bob is now in debt from school and has no way to make a living, so he dies(5).
And that's not even getting in to how Bob or Joe could collapse the market by gambling on futures or stockpiling or price controlling or any number of other wonderful activities that countries, corporations, and individuals do on a daily basis. But it's an illustrative parable, not a detailed road-map to build your global economy on, so I'll let it go here.
The simple fact is that with labor prices being what they are on the global market, American companies should basically never hire Americans unless they absolutely have to, especially for low-end manufacturing and assembly type jobs that require no real skills or education beyond being shown how to operate the machine/assemble the parts. That's not even getting in to energy markets and how unregulated countries operate versus regulated countries and what that means for prices on machine time and general manufacturing...
If you want U.S. companies to hire U.S. workers, you're going to have to use some sort of incentive, because wages in the U.S. just can't don't compete with wages in the third world.
Now, all of this is just my first pass. I fully expect that there are parts of it that aren't reasoned as well as they could be or are flat wrong. I just wanted to get something out there to start the debate.
Footnotes:
There is the argument to be made that the interests of multinationals = the interest of individuals, but that's a horse I'm not prepared to dig up at this time. Suffice it to say that I utterly disagree with that and feel that any gain to the individual is purely incidental in the workings of the corporation.
That's not to say that incidental gain =/= tangible gain, but it's a poor foundation to build an argument in favor of capitulating to multinational corporations on.
The debate about China and currency manipulation is complex, and I won't pretend to be an authority on it. I do think there is enough evidence to say they're certainly doing some shady things in that department, and whether they turn out to be just on the right side of things or not is a 'wait and see' issue. Either way, the stranglehold that the government has on the market in China makes it very difficult to say with any certainty exactly what factors are prime in thier explosive growth in the last two decades.
You really thought I was going to let that slide? Ha! Here's the issue in case it wasn't self-apparent: You can't outline a nice little loop economy and then introduce commodities from outside of the loop, especially for zero resource or utility cost. The whole point of the little exercise is to show the cyclical nature of economies and how specialization can be used favorably, but that all goes out the window when you have God granting Bob cows. Anything in the loop has to be in the loop, period.
These are every bit as absurdist and catoonish as the original, but they serve the same purpose. I in no way believe them to be airtight, and you're more than welcome to poke holes in them as I did to the original. They exist purely as foils to the original.
The final one is the worst as I fall victim to the same unlooping issue that the original does, using RoboFarms out of the blue. At least in mine they all exist in the same co-causal loop though, cows aren't just falling out of the sky...
I'm by no means an economic expert or anything, but maybe more people just need to learn skills that are in demand here, now. I also agree that tariffs will not do much good because those costs will just be passed onto the consumer.
It's about money, the skills are here, I mean you can pretty much teach anyone how to screw something together, but there aren't people willing to work for pennies a day, give up benefits like vacation time or health insurance, and most workers in the US expect some sort of safety standard.
The simple fact is that with labor prices being what they are on the global market, American companies should basically never hire Americans unless they absolutely have to, especially for low-end manufacturing and assembly type jobs that require no real skills or education beyond being shown how to operate the machine/assemble the parts. That's not even getting in to energy markets and how unregulated countries operate versus regulated countries and what that means for prices on machine time and general manufacturing...
If you want U.S. companies to hire U.S. workers, you're going to have to use some sort of incentive, because wages in the U.S. just can't don't compete with wages in the third world.
I don't disagree with you, all I was saying is that I personally think companies should hire Americans and build their products in the US. I understand that isn't possible or economically feasible.
First of all, thanks for your post. Without someone like yourself willing to step forward, nobody can learn. Second of all, you're almost entirely across the board wrong. But in order to explain that to you I need you to focus on this discussion. One of the tendencies of someone who is wrong but doesn't want to see it is to try to complicate the discussion rather than to distill it down to concepts which can be analyzed. You throw in some tidbits about the environment, for example, that will do absolutely nothing to further a discussion about trade. That's not to say the environment is not an important issue, or one which must be accounted for, but it only exists here to muddy the water. If you want to have an honest discussion here, we should maintain focus on what matters to this topic.
So, first of all, I don't feel like this is really a case for 'Free Trade' as much as it's a case for globalization. Those terms are almost interchangeable, but there are some specifics that keep them apart. The fear of workers losing jobs to overseas workers doesn't really fall into only a trade discussion, as it involves foreign policy, foreign market innovation, outsourcing, and a whole host of other international dealings. Trade agreements are a big part of that sure, but they're not the only part.
Now, that article doesn't really talk about how free trade =/= lost jobs domestically. It talks a lot about 'growing the economic pie' and such, but that's not the same thing as creating/protecting domestic jobs. It also utterly fails to mention the relationship between income, inflation, and purchasing power, electing instead to gloss over all of that with the simple statement:
That's because the relationship between income, inflation, and purchasing power is almost entirely irrelevant. You don't even try to substantiate why they're relevant either. Inflation only occurs naturally in a market that is shrinking. GDP goes down but the amount of currency in circulation stays the same. Trade, especially for the country with a trade defecit, is force for growth in the economy, and will naturally result in deflation. The US government would never let that happen, but not for reasons that are helpful to this discussion.
An individual doesn't really benefit from a larger customer base or international business opportunity; a multinational company sure does, and through an extended trickledown maybe an individual does, but I know I'm not enjoying the fruits of a global potential customer base every day, at least not in any tangible way(1). Are you?
There are about 1000 ways that jump to mind that I benefit from it, but to take your statement at its most narrow interpretation, when a company has a global customer base they are able to increase efficiencies in production techniques. A product that is simply not viable to bring to market for a market of one nation can be completely viable when combined with the markets of 10 other nations. In that way, I get access to more products, for less money, and those products reduce the costs of other products as well simply by existing and competing.
It does talk about how countries with relatively freer trade grow their economies faster than those that don't. Great. There's no disagreement there, and the statistics certainly back that up. The SEZs in China have been growing like crazy on the back of freer trade, so has India and other second-world developing nations.
You know what else those areas are doing? Paying below first world standards, not enforcing the lax or nonexistant regulation of industry instituted by their governments, manipulating currency(2), and a host of other less than idyllic practices that are leveraging their economies on the backs of their workforce and environmental damage(3). I'm prepared to accept that their freer trade is helping, but it's hardly the only cause.
Ok, that's fine. They can pay below first world standards and have less regulation on their industry. Great. What's the problem? When they do that, we get access to labor/goods at lower prices. Which is deflationary for us. It raises our standard of living.
I fully accept and embrace the idea that free trade and globalization increase total global wealth. The arguments surrounding that are more or less infallible and have been beaten to death, resuscitated, and beaten to death again many times over. The growth we've seen from India and China in the last decade proves that if you look at wealth across global population.
I have a harder time accepting that they increase individual wealth within a country that is close to or at the top of the pile. Do globalization and free trade increase individual wealth for a person in the US or the EU? Possibly, but I think there's still a healthy debate to be had on that front. I think there are certainly individual cases where it does, but there are also cases where it does not. Whether it results in a net increase across the population I don't know.
So yes, across the population it increases wealth. On the level of nations it also increases wealth across the population (necessarily). Each trade transaction in a free system is done for the benefit of both actors. Both individuals believe they are benefiting from the agreement (and they almost always are correct). Accumulate thousands of these transactions within a nation and you have thousands of transactions in which the actors benefited.
I understand this is an absurdist rendition used to illustrate your point. You just did a really bad job with it.
I'm going to let slide the force majeure of Bob gaining cows for zero cost from an actor that is not involved with this looped economy. That by itself totally discredits everything that comes after it(4), but it's not even the biggest problem I have with this parable.
I ignored it because it doesn't matter what the cost is. The cost is low enough for Bob and Joe to consider it worthwhile. That's all that matters. If it's too high, they stick with life as usual. If it's low enough to make it worth it to adjust, they do so and profit. I know you're looking for some sort of trickery, but there isn't any.
The problem I have is that it assumes everyone is going to act in good faith, forever. People don't do that. People are self-interested, Hobbesian dirtbags who place themselves first at nearly every opportunity. That behavior only getsworse when people form groups (like nations).
Actually capitalism assumes that everyone acts in their own self interest, not necessarily in "good faith". No altruism is required. Capitalism cannot exist without the rule of law. If you want to extrapolate that to a national level we can. Let's say the US says to China that they need to provide us with free goods and services or we'll nuke them. That would be not a "good faith" trade agreement. That's the absence of law at the national level. If that happens, China does not benefit.
Beyond even that, your model fails to account for advancement or outside influence.
For example, what if Bob builds a machine that milks his cows for him? Now, he has a lot more free time since he's not milking cows all day, so he decided to get back into farming because he is wasting money buying his crops from Joe. Bob uses his spare time to farm enough corn for his family and no longer needs Joe's corn. Now, Bob can still sell his milk to Joe, but Joe is no longer contributing to the exchange, so why would Bob keep giving him milk? Joe dies.
Joe goes back to providing for himself the way he was before. Or he finds someone else to trade with. Or he dies, that's fine. If Joe can't provide for himself and Bob is supernatural in his abilities to produce for the rest of the population - Joe can't compete. And if nobody offers him charity, and he can't provide for himself, he dies. That's fairly tautological.
Another scenario: A fire rolls through and totally destroys Joe's crop. Bob had no crops planted, expecting to get food from Joe for milk. With no harvest from Joe, Bob can't feed his cows and they die. With no milk and no harvest, Bob and Joe both die. Yay specialized economies!
Let's just cut to the chase and assume that the fire rolls through and kills Bob and Joe directly by burning them. My economic model (which isn't even a model, just a description of natural human behavior) didn't account for the possibility that Bob could die in a fire and Joe could get cancer. Oh no! It's flawed!
Are you saying that specialized economies are less resilient? Because if so you're completely wrong, but if you're not saying that I don't want to waste time on it.
Finally, what if there's a farm over the next hill that is fully robotized, run by a single person. It produces twice as much milk as Bob and twice as much corn as Joe, but takes half the labor. Joe and Bob can't compete in the market with RoboFarms, so what are they supposed to do? They decide to get job training to work on that farm, but after they both finish tech school (that they somehow paid for on subsistence budgets) it turns out that RoboFarms only needs one tech, so they hire Joe. Bob is now in debt from school and has no way to make a living, so he dies(5).
There it is! The main argument against free trade - the concern that competition will put people out of business. This has nothing to do with trade across borders, and, appropriately, your example doesn't use national borders.
Yup, competition is scary. It may require some reorganization of the market. But market reorganization in the face of unexpected productivity is a good thing. It's the force for increased standard of living and wealth. It's the only reason we're sitting in air conditioned buildings having this discussion over a vast connection of machines with mind boggling computational ability.
Most people that put forth this argument understand that it's wrong within national borders, but somehow lose lock on why it's wrong when you draw an arbitrary line in the sand between the individuals trading and post different colored flags on either side.
And that's not even getting in to how Bob or Joe could collapse the market by gambling on futures or stockpiling or price controlling or any number of other wonderful activities that countries, corporations, and individuals do on a daily basis. But it's an illustrative parable, not a detailed road-map to build your global economy on, so I'll let it go here.
The simple fact is that with labor prices being what they are on the global market, American companies should basically never hire Americans unless they absolutely have to, especially for low-end manufacturing and assembly type jobs that require no real skills or education beyond being shown how to operate the machine/assemble the parts.
Even for low-end jobs that require no real skills or education there is an economic incentive to hire workers near the point of sale - it reduces shipping costs. For example, it costs less to hire people to nail wood together to build a house than it does to build the house in china and ship it to the US.
The US workforce is not hired out of charity, or because people love America. They're hired because the combination of 1000s of factors results in a decision that they're the best person for that particular job. Whether that's because they're near the point of sale, speak the language, have some specific skills, live near the resources being used to create the product, or any other reason is irrelevant. Companies are not being forced to hire Americans.
First of all, thanks for your post. Without someone like yourself willing to step forward, nobody can learn. Second of all, you're almost entirely across the board wrong.
I very well could be. It's a little tought for me, because I'm almost trying to pull a Haidt-style argument here. I personally don't have strong feelings either way and probably lean towards favoring freer trade, but I definitely see that it's an issue that has two sides. It's challenging trying to argue for one that I'm at best indifferent toward against someone who is clearly passionate and well-read about his side. I'll do my best 👍
But in order to explain that to you I need you to focus on this discussion. One of the tendencies of someone who is wrong but doesn't want to see it is to try to complicate the discussion rather than to distill it down to concepts which can be analyzed. You throw in some tidbits about the environment, for example, that will do absolutely nothing to further a discussion about trade.
I really take issue with distilling things like this too far. Having an argument about the concept of trade in a vacuum is about as useful as having an argument about trade in an actual, physical vacuum to me. Things don't work like that. You can't talk about trade without talking about the environment or many other things. They're all co-causal in the systems we have set up.
If your only point here is to say that in a vacuum free trade is great I think it's pointless to continue. If you want to talk about why free trade is good in the real world then there's more to say. The real world has to factor things like environmental impact into deciding if trade is good.
That's not to say the environment is not an important issue, or one which must be accounted for, but it only exists here to muddy the water. If you want to have an honest discussion here, we should maintain focus on what matters to this topic.
Uh, sure? That's not really what I was getting at in that part of my post. Unless you mean that labor trade accounts for the movement of jobs between countries, which I suppose is true and sort of what I meant?
If that's what you were getting at with this, I'll be talking more about that later. Stay tuned.
That's because the relationship between income, inflation, and purchasing power is almost entirely irrelevant. You don't even try to substantiate why they're relevant either.
Emphasis is mine.This ties back to my first point: things don't occur in a vacuum. You yourself don't even totally dismiss this part.
I didn't expand on that because it seemed to be beyond the scope of the original argument, I mentioned it only as it is a factor that needs to be considered that the article brushed by with narry a mention.
Inflation only occurs naturally in a market that is shrinking. GDP goes down but the amount of currency in circulation stays the same. Trade, especially for the country with a trade defecit, is force for growth in the economy, and will naturally result in deflation.
That's really not super true. Global economy has been growing for quite awhile but inflation has still been occurring within the U.S. (arguably less than it actually should have been due to government intervention) and most of the rest of the world. China's economy has been growing like crazy but they've still suffered inflation every single year. So has India.
There are about 1000 ways that jump to mind that I benefit from it, but to take your statement at its most narrow interpretation, when a company has a global customer base they are able to increase efficiencies in production techniques. A product that is simply not viable to bring to market for a market of one nation can be completely viable when combined with the markets of 10 other nations. In that way, I get access to more products, for less money, and those products reduce the costs of other products as well simply by existing and competing.
This is true for any large base though, not only an international one. 350,000,000+ people in the U.S. probably make most any product viable on their own. Even if you only capture .01% of the population you have 35,000 customers if you're nationally available (1).
I get the argument, but it's not exclusively an argument for international trade, just for big markets. Not every country is fortunate to have a large population so obviously this is more relevant to them.
I think there's a tangential and fairly weak argument to be made that cheaply available foreign products stifle domestic innovation somewhat, but I don't necessarily want to get into that here (2).
Ok, that's fine. They can pay below first world standards and have less regulation on their industry. Great. What's the problem? When they do that, we get access to labor/goods at lower prices. Which is deflationary for us. It raises our standard of living.
So, yes, shamelessly taking advantage of impoverished third world workers and allowing foreign governments to destroy the environment raises our standard of living. You're going to argue that's totally a good thing?
Beyond even that, I would say it really only raises some of our standard of living. You know who's living that doesn't make better? The guy who got laid off from his assembly plant because manufacturing in India is way cheaper and shipping is really cheap and actually gets cheaper the more the global economy grows.
This starts to get into the difference between global economy and local economy, which I talked about some in my first post, with you only responding:
But maybe I wasn't clear enough in what I was talking about.
Basically it's this: increases in GDPPC globally don't always result in increases in GDPPC locally (3). Actually, that's probably a bad avenue to go down, because GDPPC is such a fickle mistress at the best of time. Let's say this instead:
If Country A industrializes and starts pumping unskilled labor out for super cheap, Country B is going to start using that labor, because it's cheaper than what Country B can offer. This lets consumers in Country B buy goods more cheaply, as they're being manufactured more cheaply. It also means that there is no unskilled labor taking place in Country B, so what are all the people who used to do those jobs doing now? Sure, some of them will seek education and find different jobs in fields that Country B still performs, but there exist a non-zero number of people who aren't intelligent enough or rich enough our whatever enough to be capable of doing any job other than the unskilled labor they used to do. What are those people doing?
I ignored it because it doesn't matter what the cost is. The cost is low enough for Bob and Joe to consider it worthwhile. That's all that matters. If it's too high, they stick with life as usual. If it's low enough to make it worth it to adjust, they do so and profit. I know you're looking for some sort of trickery, but there isn't any.
Wasn't looking for trickery at all, just saw an issue. I covered this in the footnote attached to that part. Also, I don't think it's super worth getting into a pick apart of that example, because it was caricatured and sort-of irrelevant, as were my counter examples. I will if you want, but I think they've sort of served their purpose at this point.
Capitalism cannot exist without the rule of law. If you want to extrapolate that to a national level we can. Let's say the US says to China that they need to provide us with free goods and services or we'll nuke them. That would be not a "good faith" trade agreement. That's the absence of law at the national level. If that happens, China does not benefit.
Isn't that basically how things actually work though? From the sidelines, it seems like basically all interaction consist of every party acting in as bad of faith as possible all the time. You get international trade agreements out of the mutual assertion of "do this or we're going to screw you over" from both sides.
You get wars when one side thinks the other is bluffing.
Joe goes back to providing for himself the way he was before. Or he finds someone else to trade with. Or he dies, that's fine. If Joe can't provide for himself and Bob is supernatural in his abilities to produce for the rest of the population - Joe can't compete. And if nobody offers him charity, and he can't provide for himself, he dies. That's fairly tautological.
Let's just cut to the chase and assume that the fire rolls through and kills Bob and Joe directly by burning them. My economic model (which isn't even a model, just a description of natural human behavior) didn't account for the possibility that Bob could die in a fire and Joe could get cancer. Oh no! It's flawed!
Are you saying that specialized economies are less resilient? Because if so you're completely wrong, but if you're not saying that I don't want to waste time on it.
This is more what I was saying. Yes, I would say that at least the 5-second-glance version is that specialized economies are less resilient, and I think there's at least some decent evidence to support that. Ask Detroit. Or Youngstown.
Isn't the general wisdom that diversification=resilience? Harvard Business Review certainly thinks so:
Harvard Business Review
Even though Nigeria is the region’s largest oil exporter, it emerges as resilient because its economy is far more diversified than commonly assumed. The services, retail, transport, and construction sectors make up a large share of GDP, and the country’s vast film industry, Nollywood, is good for commercial activity in the country outside oil and gas.
However, Angola, the other large oil exporter in the region, ranks close to the bottom because its economy is not diversified. Other markets ranking at the bottom do so mostly because of political volatility, poor governance, and overreliance on commodity exports.
There it is! The main argument against free trade - the concern that competition will put people out of business. This has nothing to do with trade across borders, and, appropriately, your example doesn't use national borders.
Yup, competition is scary. It may require some reorganization of the market. But market reorganization in the face of unexpected productivity is a good thing. It's the force for increased standard of living and wealth. It's the only reason we're sitting in air conditioned buildings having this discussion over a vast connection of machines with mind boggling computational ability.
I'd like to know how forced market reorganization is the only factor in how we got from pre-colonialism to what we have now, but...
I think you're conflating technological progress with increased globalization. Those things aren't required to be tied together. They sort-of have been historically, but not always. I think that it's tough to say that the reason we have air conditioning and the internet (5) is down to free trade; it's down a lot more to technology and physical understanding increasing to the point where such inventions were possible. There was invention well before globalization started, so it's safe to say there would have continued to be invention if globalization hadn't caught on and things had stayed more isolationist.
Most people that put forth this argument understand that it's wrong within national borders, but somehow lose lock on why it's wrong when you draw an arbitrary line in the sand between the individuals trading and post different colored flags on either side.
Which is why I didn't use that. But, I can attempt to explain why it's not an apple to apples argument:
Competition within your country is governed by the same laws. If you're a democracy, you've voted (or your officials have) on what companies can and cannot do within a given field. Every company that you're competing with domestically has to follow those same rules.
International competition is totally different. Those companies have a totally different set of rules they get to follow. If your business produces pollutants and your country says you can't pollute, you can't compete with a company in a country that can pollute. You're no longer competing on a level playing field (6).
Until their government declares them "Too Big to Fail" and gives them more money to keep doing it with, sure.
Plus, we're not talking about some dude with $20. We're talking about nations with budgets that make up a statistically significant portion of the global economy.
Even for low-end jobs that require no real skills or education there is an economic incentive to hire workers near the point of sale - it reduces shipping costs. For example, it costs less to hire people to nail wood together to build a house than it does to build the house in china and ship it to the US.
For now. Shipping is only getting cheaper as fuel efficiency increases and logistics algorithms improve. How do you deal with it when the labor rate offsets the shipping cost? Obviously you'd start building houses in China and shipping them to the U.S. but as I questioned above, what happens then to all the people who currently build houses in the U.S. first of all, and second how is that not exactly just taking away jobs from the U.S. which you said trade doesn't do?
Obviously that's not true because the % of population that is in the market =/= total population, but you get the gist. You're going to have to be looking at some pretty extraordinarily specialized products to need a bigger base than that.
Just because a product exists that performs function x doesn't mean that it performs that function the best way possible. However, if that product is ubiquitously available and cheap, it drives down demand to create a better way of doing x. There exist examples of this apleanty, but I'm too lazy to dig them up, and this strikes me as a fairly common-sense issue anyways so I would hope I don't need to.
That's ignoring how terrible of an index GDPPC actually is for quality of life and so on, but...that's well beyond the scope here.
This is a genuine "Please show me" not me being an asshole. I get what you're saying, but I think you're skipping some steps and I'm having some difficulty filling those in.
I mean, don't we have the internet because of Al Gore?
That's only the tip of the iceberg with that too. Think about competing with a state subsidized company in a dictatorship, that can change its laws on a whim to favor its own company. How can a company based in a reasonably corruption-free democracy compete with that?
I very well could be. It's a little tought for me, because I'm almost trying to pull a Haidt-style argument here. I personally don't have strong feelings either way and probably lean towards favoring freer trade, but I definitely see that it's an issue that has two sides. It's challenging trying to argue for one that I'm at best indifferent toward against someone who is clearly passionate and well-read about his side. I'll do my best 👍
I really take issue with distilling things like this too far. Having an argument about the concept of trade in a vacuum is about as useful as having an argument about trade in an actual, physical vacuum to me. Things don't work like that. You can't talk about trade without talking about the environment or many other things. They're all co-causal in the systems we have set up.
If you try to take everything into account in economics, every possible incentive, every possible action, every possible scenario, you'll accomplish nothing. The approach to economics is an engineering approach. You will never have perfect knowledge, and you have to accept that. Once you accept that you can put a spacecraft in orbit around Saturn. But you'll never get there if you don't distill the job to the principles.
You can talk about trade without talking about the environment. Let's say China is polluting (they are) and the US would like China to pollute less (we do). The US trades with China, and so we benefit from China's pollution. If free trade is left to be free in this regard, the pollution will continue. If we want to hurt our economy (and China's), hold back technological development, and stunt our standard of living, we can employ any of a vast array of tools to limit our contribution to China's pollution. There are miles of regulations that can be imposed (and are imposed) on who gets to import goods into the US from a particular country.
It's not an easy job - creating regulations that actually achieve a particular goal without creating unintended consequences. There will be all kinds of actions taken in response to regulations, and those actions need to be accounted for in the creation of the regulation. It's a far more complex job than anyone (regulators included) seems to be willing to give it credit for. But this is a layer on top of the free trade discussion. That discussion has to be had in terms of the costs and benefits. This will cost us X amount of production, hold us back in innovation - is it worth it? The answer can be yes, but without first understanding the principles below it you can't have a proper discussion.
This, by the way, is the same approach that you have to take with environmental impacts inside the country. Once again the arbitrary color of the flags is not a driving factor.
That's really not super true. Global economy has been growing for quite awhile but inflation has still been occurring within the U.S. (arguably less than it actually should have been due to government intervention) and most of the rest of the world. China's economy has been growing like crazy but they've still suffered inflation every single year. So has India.
Totally irrelevant. The main driver of inflation is government policy. This is why you have to understand the economic principles before drawing conclusions. Mathematically the following is true - increased production with a fixed currency quantity = deflation. There is no point in arguing anything else. So why can inflation still occur? Because currency quantities are not fixed.
This is true for any large base though, not only an international one. 350,000,000+ people in the U.S. probably make most any product viable on their own. Even if you only capture .01% of the population you have 35,000 customers if you're nationally available (1).
I get the argument, but it's not exclusively an argument for international trade, just for big markets. Not every country is fortunate to have a large population so obviously this is more relevant to them.
So you concede my point in the end. That a country with a small market will benefit from globalization. However, any small market (regardless of the line in the sand or the color of the flag) will benefit. So if you can only get 20,000 people to buy your product in a large market like the US, but you can also get 10,000 to buy it in china, and 15,000 to buy it in Japan (I know these are not consistent by population), and 5,000 to buy it in India, and 15,000 to buy it in Europe, and 5,000 to buy it in South America. You can open a factory to produce 70,000 units when you could not have opened that factory to produce 20,000 units. This can be the difference between robots building a product or people. It can be the difference between using high end production tools and labor-intensive crafting. It can be the difference between a product that costs $10 to make and a product that costs $0.2 to make. In the meantime the growth is stimulated, demand is satisfied, people are employed, and we all experience a tiny increase in standard of living.
I think there's a tangential and fairly weak argument to be made that cheaply available foreign products stifle domestic innovation somewhat, but I don't necessarily want to get into that here (2).
It refocuses innovation in a direction that is more immediately advantageous. You can either spend resources developing ways to eliminate labor while there are people in other nations who would love to be put to work, or you can put them to work and spend the resources developing better products.
So, yes, shamelessly taking advantage of impoverished third world workers and allowing foreign governments to destroy the environment raises our standard of living. You're going to argue that's totally a good thing?
Is it "taking advantage" of impoverished third world workers to offer them a job so that they can feed their families? How would they be better off to not have the option? Naturally it's not a good thing to put a gun to their head and tell them to work, or to poison their town with pollution. But to offer them a wage that they'll accept, in living/working conditions that they'll freely accept? That's necessarily a good thing, as decided by the very people you're worried about.
*Not in all cases of course. But to the spirit of your question, that's the answer.
Beyond even that, I would say it really only raises some of our standard of living. You know who's living that doesn't make better? The guy who got laid off from his assembly plant because manufacturing in India is way cheaper and shipping is really cheap and actually gets cheaper the more the global economy grows.
This starts to get into the difference between global economy and local economy, which I talked about some in my first post, with you only responding:
But maybe I wasn't clear enough in what I was talking about.
Basically it's this: increases in GDPPC globally don't always result in increases in GDPPC locally (3). Actually, that's probably a bad avenue to go down, because GDPPC is such a fickle mistress at the best of time. Let's say this instead:
If Country A industrializes and starts pumping unskilled labor out for super cheap, Country B is going to start using that labor, because it's cheaper than what Country B can offer. This lets consumers in Country B buy goods more cheaply, as they're being manufactured more cheaply. It also means that there is no unskilled labor taking place in Country B, so what are all the people who used to do those jobs doing now? Sure, some of them will seek education and find different jobs in fields that Country B still performs, but there exist a non-zero number of people who aren't intelligent enough or rich enough our whatever enough to be capable of doing any job other than the unskilled labor they used to do. What are those people doing?
It is true that an economy will restructure in the face of cheap labor from other areas (competition). But markets continually restructure in the face of competition. Competition here or competition abroad, it makes no difference. The only way to prevent the economy from restructuring is to prevent economics entirely - which is the driving force behind human progress (and is a natural human behavior besides).
No country has a monopoly on unskilled labor. We still need people here to dig ditches and break concrete. That's not something we can import. Right now, people are still cheaper at doing lots of things (though we constantly try to make them more expensive). If there is a huge market of retarded people in the US who would love to work doing something mindless for $10/hr and could get hired at that cost, but we mandate $15/hr and so those people are illegal to hire in the US. Is it the fault of free trade that the job goes overseas? That's domestic regulation that creates that gap.
It's true that diverse economies are more resilient. That doesn't mean that specialized economies cannot be diverse. I don't need to demonstrate "the opposite" because I didn't claim "the opposite". What I claimed was the specialized economies can be more resilient than non-specialized economies. It's not a linear relationship. It's not the case that on one side you have everyone providing only for themselves as the most resilient economy on one side, and everyone providing one thing that they don't need in exchange for what they do need on the other side being the least diverse.
If you want to optimize an economy for resiliency, you need to have an economy that is flexible. Neither of the two that I described above are flexible. A simple problem could cause 100% of households to fail when each household has only their own labor an resources with which to overcome that problem. Likewise a simple problem can overcome 100% of households when nobody has any skills outside of one specific area. A resilient economy is one that restructures in the face of changing market conditions. A resilient economy is one that can lay off thousands of workers and reabsorb those workers into their economy at different still-productive capacities. More than anything, a resilient economy is one that grows in response to existing demands and does not waste resources trying to grow in areas where demand is filled.
In other words, a free economy is a resilient economy.
Wasn't looking for trickery at all, just saw an issue. I covered this in the footnote attached to that part. Also, I don't think it's super worth getting into a pick apart of that example, because it was caricatured and sort-of irrelevant, as were my counter examples. I will if you want, but I think they've sort of served their purpose at this point.
Isn't that basically how things actually work though? From the sidelines, it seems like basically all interaction consist of every party acting in as bad of faith as possible all the time. You get international trade agreements out of the mutual assertion of "do this or we're going to screw you over" from both sides. You get wars when one side thinks the other is bluffing.
To the degree that nations use violence to achieve their trade agreements it is detrimental. In large part, that is exactly NOT how it works. Trade agreements are not violent.
No, tautologies are not a problem for me. I hope they're not a problem for anyone. If Joe cannot provide for himself, does not receive some form of charity, and cannot trade with others. Joe dies. There's nothing anyone can do to alter that statement. You can take the "form of charity" to an extreme level - like enslaving people to provide for Joe (in that case, the charity is the gift of force used to enslave people).
"Forced" market reorganization? That's a bit of a confusing term when mixed with a term like "market forces" which are not actually force. Economic adaption (or, economics for short) is the only factor in how we got from pre-colonialism to what we have now (and how we got to pre-colonialism too).
I think you're conflating technological progress with increased globalization. Those things aren't required to be tied together. They sort-of have been historically, but not always. I think that it's tough to say that the reason we have air conditioning and the internet (5) is down to free trade; it's down a lot more to technology and physical understanding increasing to the point where such inventions were possible. There was invention well before globalization started, so it's safe to say there would have continued to be invention if globalization hadn't caught on and things had stayed more isolationist.
I'm not conflating anything with globalization. Globalization is the name we give to economics that spans nations. It's arbitrary. It's economics. Your last statement is true, that if economies had been kept more isolated from one another there would still have been invention. But the larger the economic base, the faster the growth (and invention).
Competition within your country is governed by the same laws. If you're a democracy, you've voted (or your officials have) on what companies can and cannot do within a given field. Every company that you're competing with domestically has to follow those same rules.
International competition is totally different. Those companies have a totally different set of rules they get to follow. If your business produces pollutants and your country says you can't pollute, you can't compete with a company in a country that can pollute. You're no longer competing on a level playing field (6).
Yup, and that's not economics. That's regulation. That's the effect of creation regulation within an economy. The regulation had better be worth the costs. If you're a democracy and you vote that everyone in your country has to comply with a certain rule, don't blame trade when your economy suffers. It's regulation that caused the economic slowdown. You only further slow your economy by passing additional regulation that says that you can't trade with people who don't comply by the same rules.
For example, suppose the US decides that no person can be legally employed for less than $15/hr. Companies must now either pay their employees more (which means layoffs, because the company has to restructure to do that), or they stop making certain products (which means layoffs), or they hire people from a country that does not have that requirement (which means layoffs). Blaming free trade for layoffs when they were direction created by regulation is absurd. Telling the company that they have to pick from the first two options, that the third option is off the table, will only further the economic damage.
I didn't say that no job will be lost to trade. I said the opposite, the economies must restructure in the face of market forces (either domestically or internationally). If the economy is allowed to do that, and can leverage a more efficient arrangement, growth will be created - which means job creation. Not necessarily the same job.
A great example is Netflix and Blockbuster. Everyone ultimately benefits from Netflix (less labor/physical goods) putting Blockbuster (more labor/physical goods) out of business. Even the people that were cleaning the carpet at Blockbuster. I've given an explanation of how that is before on GTPlanet. I'll try to dig it up.
Edit:
Here it is spread across 3 posts. One, two, and three.
I'm arguing for what I want to know more about in this case, since no one else was. I thought your original post was not well flushed out on some important details, so I pried out more information.
Just cause I don't agree doesn't mean I'm only building an argument to be knocked down; haven't you ever formally debated?
If you try to take everything into account in economics, every possible incentive, every possible action, every possible scenario, you'll accomplish nothing. The approach to economics is an engineering approach. You will never have perfect knowledge, and you have to accept that. Once you accept that you can put a spacecraft in orbit around Saturn. But you'll never get there if you don't distill the job to the principles.
I completely agree with this, and I'll touch on it later. I think that you might have been going a little too far with it in one step originally. This post I'm quoting now in almost every area that I felt was still foggy, so cheers for that.
You can talk about trade without talking about the environment. Let's say China is polluting (they are) and the US would like China to pollute less (we do). The US trades with China, and so we benefit from China's pollution. If free trade is left to be free in this regard, the pollution will continue. If we want to hurt our economy (and China's), hold back technological development, and stunt our standard of living, we can employ any of a vast array of tools to limit our contribution to China's pollution. There are miles of regulations that can be imposed (and are imposed) on who gets to import goods into the US from a particular country.
It's not an easy job - creating regulations that actually achieve a particular goal without creating unintended consequences. There will be all kinds of actions taken in response to regulations, and those actions need to be accounted for in the creation of the regulation. It's a far more complex job than anyone (regulators included) seems to be willing to give it credit for. But this is a layer on top of the free trade discussion. That discussion has to be had in terms of the costs and benefits. This will cost us X amount of production, hold us back in innovation - is it worth it? The answer can be yes, but without first understanding the principles below it you can't have a proper discussion.
This, by the way, is the same approach that you have to take with environmental impacts inside the country. Once again the arbitrary color of the flags is not a driving factor.
So, this is more the salient part for me, and again we agree on this now that I've actually seen more of your full position on it. It seemed to me originally that you were saying all trade is always good under all conditions, and that struck me as wrong for non-theory reasons. Again, I'll touch on this further down, but suffice it to say I think we agree on theory.
So you concede my point in the end. That a country with a small market will benefit from globalization. However, any small market (regardless of the line in the sand or the color of the flag) will benefit. So if you can only get 20,000 people to buy your product in a large market like the US, but you can also get 10,000 to buy it in china, and 15,000 to buy it in Japan (I know these are not consistent by population), and 5,000 to buy it in India, and 15,000 to buy it in Europe, and 5,000 to buy it in South America. You can open a factory to produce 70,000 units when you could not have opened that factory to produce 20,000 units. This can be the difference between robots building a product or people. It can be the difference between using high end production tools and labor-intensive crafting. It can be the difference between a product that costs $10 to make and a product that costs $0.2 to make. In the meantime the growth is stimulated, demand is satisfied, people are employed, and we all experience a tiny increase in standard of living.
Yes. I think it's a fairly tautological statement that from a pure profits perspective larger markets are better. I think it's also fairly tautological that in a capitalistic market sans intervention, competition will work to lower prices.
It refocuses innovation in a direction that is more immediately advantageous. You can either spend resources developing ways to eliminate labor while there are people in other nations who would love to be put to work, or you can put them to work and spend the resources developing better products.
I sort of agree with this. I'm going to keep the rest of my response to this in a footnote because it's not at all relevant to the trade discussion (1).
Is it "taking advantage" of impoverished third world workers to offer them a job so that they can feed their families? How would they be better off to not have the option? Naturally it's not a good thing to put a gun to their head and tell them to work, or to poison their town with pollution. But to offer them a wage that they'll accept, in living/working conditions that they'll freely accept? That's necessarily a good thing, as decided by the very people you're worried about.
*Not in all cases of course. But to the spirit of your question, that's the answer.
Well, this is a more interesting discussion and not really related to trade. Basically, my question to you is: Do you think people are better off being brought into the world economy to provide cheap unskilled labor, or subsistence farming completely disconnected from the world economy in every way?
Answering this is probably totally beyond the scope of this discussion, and it's a very personal answer anyways, because it depends on your definition of "better off" in the first place. Sure, they may be economically richer, but are they happier? Notreally. So is the outcome actually better for them?
It is true that an economy will restructure in the face of cheap labor from other areas (competition). But markets continually restructure in the face of competition. Competition here or competition abroad, it makes no difference. The only way to prevent the economy from restructuring is to prevent economics entirely - which is the driving force behind human progress (and is a natural human behavior besides).
No country has a monopoly on unskilled labor. We still need people here to dig ditches and break concrete. That's not something we can import. Right now, people are still cheaper at doing lots of things (though we constantly try to make them more expensive). If there is a huge market of retarded people in the US who would love to work doing something mindless for $10/hr and could get hired at that cost, but we mandate $15/hr and so those people are illegal to hire in the US. Is it the fault of free trade that the job goes overseas? That's domestic regulation that creates that gap.
So, yes. I swear I'm getting to the part where I talk about all the stuff I said I'll talk about later, but this is not that part. This is the part where I say (again) that I'll talk about this later.
Sum for this part is I agree and this seems borderline tautological.
It's true that diverse economies are more resilient. That doesn't mean that specialized economies cannot be diverse. I don't need to demonstrate "the opposite" because I didn't claim "the opposite". What I claimed was the specialized economies can be more resilient than non-specialized economies. It's not a linear relationship. It's not the case that on one side you have everyone providing only for themselves as the most resilient economy on one side, and everyone providing one thing that they don't need in exchange for what they do need on the other side being the least diverse.
If you want to optimize an economy for resiliency, you need to have an economy that is flexible. Neither of the two that I described above are flexible. A simple problem could cause 100% of households to fail when each household has only their own labor an resources with which to overcome that problem. Likewise a simple problem can overcome 100% of households when nobody has any skills outside of one specific area. A resilient economy is one that restructures in the face of changing market conditions. A resilient economy is one that can lay off thousands of workers and reabsorb those workers into their economy at different still-productive capacities. More than anything, a resilient economy is one that grows in response to existing demands and does not waste resources trying to grow in areas where demand is filled.
In other words, a free economy is a resilient economy.
"Forced" market reorganization? That's a bit of a confusing term when mixed with a term like "market forces" which are not actually force. Economic adaption (or, economics for short) is the only factor in how we got from pre-colonialism to what we have now (and how we got to pre-colonialism too).
I'm not conflating anything with globalization. Globalization is the name we give to economics that spans nations. It's arbitrary. It's economics. Your last statement is true, that if economies had been kept more isolated from one another there would still have been invention. But the larger the economic base, the faster the growth (and invention).
And Free Trade is not arbitrary? Anyways, I think we're basically saying the same thing through this part, that advancement will happen mostly regardless of other factors, and again that big markets are good for profits, which absent regulation are good for competition, which drives advancement.
Yup, and that's not economics. That's regulation. That's the effect of creation regulation within an economy. The regulation had better be worth the costs. If you're a democracy and you vote that everyone in your country has to comply with a certain rule, don't blame trade when your economy suffers. It's regulation that caused the economic slowdown. You only further slow your economy by passing additional regulation that says that you can't trade with people who don't comply by the same rules.
For example, suppose the US decides that no person can be legally employed for less than $15/hr. Companies must now either pay their employees more (which means layoffs, because the company has to restructure to do that), or they stop making certain products (which means layoffs), or they hire people from a country that does not have that requirement (which means layoffs). Blaming free trade for layoffs when they were direction created by regulation is absurd. Telling the company that they have to pick from the first two options, that the third option is off the table, will only further the economic damage.
This is finally it. This is the part where I stop kicking down and talk about things:
So, basically, like I said earlier, I think distilling this too far is sort-of useless. Here's why: the concept of trade distilled to its absolute is only the concept of an economy. It's the idea of people making personal value judgments about commodities. If Person A has X and Person B has Y, and they both decide that X=Y, they will freely exchange those items based on their needs at any given time. This isn't a debatable idea, it's just how things work. To deny that is to deny that people make value judgments.
The thing is, that is only an argument for economy existing. It doesn't care what economy or what actors are involved, it's purely saying that goods have values determined by actors. This is, again, a truism.
At this most basic level, it becomes impossible to argue two sides, because there are no sides; there is only the absolute fact that goods have value.
That's not what people mean when they say they're against free trade. They don't mean that they think goods have no value. They mean they're against free trade as it currently exists in the real world. They mean they think that the value judgments that have been made in the deals that affect them are wrong.
They mean they think the regulation is wrong, not the act.
This opens up a different discussion though. This opens up the discussion of how those agreements are reached, how that regulation is agreed upon, how those values are assigned. Yes, at a pure level, that's not a discussion about the concept of trade, but that's what people actually are talking about when they say they think trade deals are great or a disaster. They're not saying that all trade everywhere forever is bad, just that this trade is bad.
This is why I said it was dangerous to distill too far. Dangerous wasn't the right word though, I suppose it should have been Pointless.
I didn't say that no job will be lost to trade. I said the opposite, the economies must restructure in the face of market forces (either domestically or internationally). If the economy is allowed to do that, and can leverage a more efficient arrangement, growth will be created - which means job creation. Not necessarily the same job.
I sort of disagree with this, but it's pedantic and I don't really have the energy. I agree with the broad idea that economic restructuring creates opportunity for job creation, I just think it's easy to loose sight of what that can mean for unskilled/low-skill labor. Like I said in my earlier post, there exist a non-zero number of people who can't perform jobs above that level, and it's easy for this kind of restructuring to eliminate those positions to lower numbers than those people, which makes it a bad deal for those specific people most of the time.
I don't know that I really have a lot more to say in this discussion to be honest. I suppose I'll wait and see what your response looks like, but I think we're now at a point where we agree on most things, and the things we disagree on aren't really covered by this thread (at least if you want its scope to be as narrow as it seems you do) so it might be winding down a little (2).
So, basically I think that thought pollution (for lack of a better term) is actually pretty problematic, and that large-scale globalism really magnifies the problem. This, however, is not a fault of globalism or trade, but a problem with the human psyche and how our Theory of the Mind operates. This lecuture covers the issue I'm refering to here really well. It's super long and while entirely interesting, it's not entirely relevant, so let me quote the most important parts:
Laurie Santos says:
One situation that matters is in the context of problem solving. I give you a problem and you have to come up with your own ideas about how to solve it. We're smart humans with causal understanding, so we're pretty good at this. But what if I put you in a situation where before you get to tackle the problem yourself you watch somebody solve the problem in an inefficient way, in a way that's causally implausible. If you do that kind of study with human kids, like four-year-old human kids, or even adult humans, what you find is that watching somebody else solve a problem badly messes up the extent to which you can find the correct solution, even if ahead of time you would have done it perfectly on your own.
This is a phenomenon that researchers have called over-imitation. It's a phenomenon where you imitate too much. This is a case where you're not supposed to be copying somebody's idea, but just witnessing their idea is messing up your own representation of how to solve this task. My colleagues at Yale, a student Derek Lyons and professor Frank Keil, have been studying this phenomenon of over-imitation, particularly in kids. What Derek finds is that not only do kids mess up their solution when they see somebody solve something inefficiently, but it also messes up their causal understanding of the problem. You can interview kids later and ask if they had to do that dumb thing to solve the box. Kids will spin a story not just about how they had to do it but why it was causally relevant. It changes their causal understanding of the box to see somebody do something in a dumb way.
(...)
If you show chimpanzees a case where somebody is solving a puzzle box in a very inefficient way, they have some mechanism to completely ignore that and solve it on their own. If you show a four-year-old child a case where somebody is solving a puzzle box in an inefficient way, they cannot override the information that they got. The extent to which they use that automatically is so built-in that it's going to not just make the child solve the problem the wrong way, it's going to make them unable to reason about the causal structure of that task in future cases.
So, still pretty long, but relevant. Basically, I think that it's probably underestimated how much of the way we do things is bad because it's just the way that they're done. As I said, the first solution isn't always the best, but humans imprint so heavily on that first solution that it may be borderline impossible for us to come up with a better one.
Obviously, this is a problem that can be overcome. There are extreme cases of people where they aren't affected by this (oddly (or maybe predictably), it's mostly persons on the spectrum who are most resilient) but it's a large problem. Having an instant global dissemination of ideas and solutions magnifies the scope of this massively, because you have many many fewer people working from a clean slate.
Anyways, that's probably best left to a totally different discussion, but it was a nice aside.
Finally, good lord it's exhausting to carry on like this. These posts take forever to write and require a fairly high level of engagement throughout the process. I really enjoy it, but how do some of you manage to go on in 5 or 6 threads at once? How do you have the time and energy?!
I'll continue our work force debate here. I'm going to use the Carrier factory in Indianapolis as my example.
Now, first off, them moving jobs to Mexico has nothing to do with lack of "skilled labor".
They had/have the employees. Just like all the factories we had down here in GA. I don't need to go back to school to learn how to do a job I did for a good while, I simply want our jobs back.
The problem is the companies. Even after the "deal" they made with Trump they are still sending almost 1000 jobs to Mexico.
I find the whole thing to be BS. They don't have to pay minimum wage, they don't intend to, but does watching something in a machine while you push a button really deserve $16 an hour? I was happy at $12.
Carrier’s parent company, United Technologies, made $15.6 billion in profits in 2015. Its CEO Gregory Hayes, whose predecessor walked away with a $195 million golden parachute, made $9 million last year. Hayes announced a ruthless cost-cutting plan at the end of last year including “reducing the manufacturing footprint in the U.S. and Europe, [that] will result in $900 million of annual savings when it’s done,” according to Bloomberg News.
Well, this is a more interesting discussion and not really related to trade. Basically, my question to you is: Do you think people are better off being brought into the world economy to provide cheap unskilled labor, or subsistence farming completely disconnected from the world economy in every way?
Answering this is probably totally beyond the scope of this discussion, and it's a very personal answer anyways, because it depends on your definition of "better off" in the first place. Sure, they may be economically richer, but are they happier? Notreally. So is the outcome actually better for them?
I didn't saying specialization accounts for resilience. I said that specialized economies can be resilient. In fact, I explained in my previous post why some level of specialization is required for resilience.
This is finally it. This is the part where I stop kicking down and talk about things:
So, basically, like I said earlier, I think distilling this too far is sort-of useless. Here's why: the concept of trade distilled to its absolute is only the concept of an economy. It's the idea of people making personal value judgments about commodities. If Person A has X and Person B has Y, and they both decide that X=Y, they will freely exchange those items based on their needs at any given time. This isn't a debatable idea, it's just how things work. To deny that is to deny that people make value judgments.
That's not what people mean when they say they're against free trade. They don't mean that they think goods have no value. They mean they're against free trade as it currently exists in the real world. They mean they think that the value judgments that have been made in the deals that affect them are wrong.
They mean they think the regulation is wrong, not the act.
If they're anti-regulation, blaming companies for taking their jerbs overseas is a super funny way of showing it. Claiming that we should stop trading with particular countries or that the remedy is to penalize certain trade arrangements is also a super weird way to show that you're upset with the burden of regulation that the American worker is saddled with.
I sort of disagree with this, but it's pedantic and I don't really have the energy. I agree with the broad idea that economic restructuring creates opportunity for job creation, I just think it's easy to loose sight of what that can mean for unskilled/low-skill labor. Like I said in my earlier post, there exist a non-zero number of people who can't perform jobs above that level, and it's easy for this kind of restructuring to eliminate those positions to lower numbers than those people, which makes it a bad deal for those specific people most of the time.
For people who are mentally retarded (yes I know some people might find that word offensive, but it's an accurate description and it used to be PC so I'm sticking with it), there will always be a certain number of jobs around that require no skills. Janitorial jobs don't get outsourced for example. The best thing we can do for those people is to enable them to compete by keeping regulation out of their way.
Finally, good lord it's exhausting to carry on like this. These posts take forever to write and require a fairly high level of engagement throughout the process. I really enjoy it, but how do some of you manage to go on in 5 or 6 threads at once? How do you have the time and energy?!
It takes a lot of time and energy. I've been criticized for not responding fast enough in other threads when life prevents me from putting this kind of time in because it seems like I have endless time to respond to posts like this. But it's really not so, I have to carve out an opportunity.
I'll continue our work force debate here. I'm going to use the Carrier factory in Indianapolis as my example.
Now, first off, them moving jobs to Mexico has nothing to do with lack of "skilled labor".
They had/have the employees. Just like all the factories we had down here in GA. I don't need to go back to school to learn how to do a job I did for a good while, I simply want our jobs back.
The problem is the companies. Even after the "deal" they made with Trump they are still sending almost 1000 jobs to Mexico.
I find the whole thing to be BS. They don't have to pay minimum wage, they don't intend to, but does watching something in a machine while you push a button really deserve $16 an hour? I was happy at $12.
So you're angry at minimum wage? Why complain about the company for sending jobs to mexico when minimum wage is the problem? They're not "your" jobs. Nobody is entitled to their job just because they have had it in the past. If someone else comes along and can do your job just as well for a fraction of the cost, you might lose yours. That's how economics works, and it's why the US became a world power.
It's always survival of the company and it's always greed and profit. Companies don't exist for the purpose of hiring people (in or out of the US). They exist to turn a profit. People get hired when they can earn more than they cost.
Supply and demand. There is a lot of demand for everything in Manhattan, and less so in GA. That's why the price is high. You can't arbitrarily raise the prices in GA and expect the market to support it. You can't get off of the supply and demand curve.
You can't just sweep all of economics under the rug and pretend that it's meaningless. Money is only meaningful because it has value attached to it. Real, tangible value. When it loses value, here's what you get:
You receive money not because someone handed you a worthless piece of paper for an arbitrary reason, but because you created value and exchanged it for money you consider to be more valuable.
If they're anti-regulation, blaming companies for taking their jerbs overseas is a super funny way of showing it. Claiming that we should stop trading with particular countries or that the remedy is to penalize certain trade arrangements is also a super weird way to show that you're upset with the burden of regulation that the American worker is saddled with.
Yeah, but people are really bad and deducing their way all the way down to their true rejection (1) when they find something that offends them. In this case, they see jobs moving overseas and the first (or maybe second or third) reason they see is foreign trade.
They stop there. They don't follow the chain any farther because they see what they think is a problem (and there'a lot of superficial evidence that we've already covered for this being the case) and they see other people also thinking it's a problem so they decide it must be the problem.
Also, it ties into their bias that things like minimum wage must be good. People don't change their minds about things they've made up their minds about very often. Thinking past that 'trade is the problem' might start to call some of their other closely held beliefs into question, like 'is minimum wage good' or 'are Americans the best people to employ for X' or something of that nature. They'll recoil from that, think there's no way that idea could be wrong, and go back to the last safe idea they had to challenge: Trade.
Yeah, people are bad a thinking critically. The sun rises in the east.
For people who are mentally retarded (yes I know some people might find that word offensive, but it's an accurate description and it used to be PC so I'm sticking with it), there will always be a certain number of jobs around that require no skills. Janitorial jobs don't get outsourced for example. The best thing we can do for those people is to enable them to compete by keeping regulation out of their way.
Tangential, but what are your thoughts on the only-ever-increasing robotization of literally everything? We're rapidly getting to a point where it's going to be a lot more than far below average IQ individuals who find themselves out of work, but not to foreigners taking their jerbs.
It takes a lot of time and energy. I've been criticized for not responding fast enough in other threads when life prevents me from putting this kind of time in because it seems like I have endless time to respond to posts like this. But it's really not so, I have to carve out an opportunity.
So you're angry at minimum wage? Why complain about the company for sending jobs to mexico when minimum wage is the problem? They're not "your" jobs. Nobody is entitled to their job just because they have had it in the past. If someone else comes along and can do your job just as well for a fraction of the cost, you might lose yours. That's how economics works, and it's why the US became a world power.
Well, they probably were doing a fine job, they just weren't doing it as cheaply as (or enough better than) someone somewhere else could. Semantic but important.
You can't just sweep all of economics under the rug and pretend that it's meaningless. Money is only meaningful because it has value attached to it. Real, tangible value. When it loses value, here's what you get:
(snip)
You receive money not because someone handed you a worthless piece of paper for an arbitrary reason, but because you created value and exchanged it for money you consider to be more valuable.
This is way outside of the scope of a trade discussion, but @ryzno is at least sort-of correct in not really the way he meant to be. The value of money is tied to a lot of value judgments made by a lot of people who aren't all only you. You decide how much money you think X is worth to you, and it X=/=actual cost you don't do/get X, but it's not like you personally determine the exchange rate of currency or anything like that (2). You determine the value of money to you personally on a transactional basis, but you don't really get to define its value in the global sense any more than you do that of any commodity.
But that's the thing, money is just a commodity. It behaves like a commodity in the market, following rules of supply and demand, and trades for non-equal goods on value scales just like any other commodity. It just allows people to trade other commodities more easily, since they can just trade it for money instead of having to find someone who has what they want and wants what they're selling.
That doesn't mean that money has no value. It means that its value is subject to value judgments, not set by divine command or something. It's just that not all of those judgments are made by you personally, but they all affect you.
As usual, I don't know anything...
Seattle is raising their wages without an increase in demand and guess what, prices are increasing too... So don't tell me it won't work.
We do agree it is an imaginary number on a piece of paper, right?
I did not ask for this life, I'd be happy fighting people off my land and feeding myself. Not grinding like a slave with nothing to really show for it. Money is a man made thing. WE DO NOT NEED IT TO SURVIVE. Yes, I know we do need it but only cause we created it... Screw the system, re-read my meme, there is a lot of truth in it.
I could care less about minimum wage. I would like a guaranteed pay, but getting paid average of $1.20ish per mile or roughly $22 dollars per hour has me smiling every day. And guess what, I don't really answer to anyone, unless I miss a dead line, something got damaged or I completely screw up the load(all things I control). I'm glad I got out of the warehouse and I'm glad my job CAN'T be sent over seas(they do hire illegals).
You missed the key word "our". We helped build these "American" companies with our blood, sweat and tears. So excuse me if I feel bad for my brothers getting screwed over by a company, WE built, that don't care about the people that got them where they are. Greed brother. Just like you ignored my part of the parent company making $15+ billoin in the profit, who needs that much money? Just screw the system and drain it so there is nothing left to "trickle down". They could sacrifice a billion for wages...
The guy from Virgin theory is correct. Take care of the employee and the employee will take care of the client.(I know the quote is not word for word...)
You know me Danoff and you know I have a problem fully explaining things. I'd hope by now you would look past that and look at my point. We are getting screwed.
Oh and 10% of Carriers business is government contracts. Just think about that. I would have dropped them and found a real American made product, contracts get discounts anyways.
Tangential, but what are your thoughts on the only-ever-increasing robotization of literally everything? We're rapidly getting to a point where it's going to be a lot more than far below average IQ individuals who find themselves out of work, but not to foreigners taking their jerbs.
Automation has always been a force for increased standard of living and overall wealth. The economy will restructure, and people will complain at the restructuring process (as always).
This is way outside of the scope of a trade discussion, but @ryzno is at least sort-of correct in not really the way he meant to be. The value of money is tied to a lot of value judgments made by a lot of people who aren't all only you. You decide how much money you think X is worth to you, and it X=/=actual cost you don't do/get X, but it's not like you personally determine the exchange rate of currency or anything like that (2). You determine the value of money to you personally on a transactional basis, but you don't really get to define its value in the global sense any more than you do that of any commodity.
But that's the thing, money is just a commodity. It behaves like a commodity in the market, following rules of supply and demand, and trades for non-equal goods on value scales just like any other commodity. It just allows people to trade other commodities more easily, since they can just trade it for money instead of having to find someone who has what they want and wants what they're selling.
You do get to personally determine the exchange rate of currency... for you. You just don't get to define it for others. You constantly assess what products are worth a certain amount of money, and how much/what kind of your labor is worth a certain amount of money. When the balance doesn't fall correctly, you don't make the purchase. Even for something that you might consider a necessity like food or electricity. People buy solar panels or farm when the price gets too high for some of those things. Or they conserve.
As usual, I don't know anything...
Seattle is raising their wages without an increase in demand and guess what, prices are increasing too... So don't tell me it won't work.
Define "work". You can increase prices but demand will go down. That's how supply and demand works. Increase minimum wage, demand for minimum wage employees goes down (unemployment). Increase prices, demand goes down. Do you know what the line would look like if someone started selling houses in NY city for what they cost where I live? Everyone in the city would try to buy it. Demand is reduced because real estate prices are high.
I did not ask for this life, I'd be happy fighting people off my land and feeding myself. Not grinding like a slave with nothing to really show for it. Money is a man made thing. WE DO NOT NEED IT TO SURVIVE. Yes, I know we do need it but only cause we created it... Screw the system, re-read my meme, there is a lot of truth in it.
There is no truth in your meme. Whoever wrote it does not understand basic economics. Central banking did not invent currency, it gets invented organically in any situation where trade is advantageous. Even in video games where currency does not exist but trade exists, players will create currency. I've seen it happen.
You missed the key word "our". We helped build these "American" companies with our blood, sweat and tears. So excuse me if I feel bad for my brothers getting screwed over by a company, WE built, that don't care about the people that got them where they are.
The owners of the company built the company, and they contracted employees to help them work. Employees create value in hopes of continuing employment and getting paid, but they don't own the company (let's ignore stock options for now).
Greed brother. Just like you ignored my part of the parent company making $15+ billoin in the profit, who needs that much money? Just screw the system and drain it so there is nothing left to "trickle down". They could sacrifice a billion for wages...
You have no idea what you're talking about. Realized corporate profit is savings, not wages, not CEO bonuses. Companies try to avoid it due to tax liability, preferring to re-invest rather than to realize profit. Volkswagen was sitting on something like $30? Billion in savings? I can't remember exactly what it was. It's gone. Corporate cash reserves enable them to smooth over market shifts and economic downturns without massive layoffs, and it enables them to adjust assets into new markets.
Yes, they could reduce their savings, which makes the company more brittle, in exchange for hiring at a higher wage than their competitors in hopes of getting better talent. But they'd only do so if it created more value. Wages are balanced not by a supply of money but by the amount of value that can be purchased by that wage. Once again, you can't shift the supply and demand curve with prices.
Everything you're arguing is coming from a lack of understanding of economics.
Oh and 10% of Carriers business is government contracts. Just think about that. I would have dropped them and found a real American made product, contracts get discounts anyways.
Automation has always been a force for increased standard of living and overall wealth. The economy will restructure, and people will complain at the restructuring process (as always).
I was going to start a thread about automation, but since @HighSeasHoMastr already made the point in here, I'll continue the discussion here...
When you say 'restructure', what do you mean by that? The idea that people can just do something else for a living if/when their job basically becomes non-existent might work to a certain degree, but what happens when we start to see millions of jobs being lost to automatons - driverless cars replacing bus and taxi drivers, driverless trains/trams, driverless haulage, drone delivery services etc.. There will arguably come a time when there are simply not enough jobs for people without specialist skills, and there may come a time where millions of people's income will no longer come from working as a result - how does an economy restructure around that?
I was going to start a thread about automation, but since @HighSeasHoMastr already made the point in here, I'll continue the discussion here...
When you say 'restructure', what do you mean by that? The idea that people can just do something else for a living if/when their job basically becomes non-existent might work to a certain degree, but what happens when we start to see millions of jobs being lost to automatons - driverless cars replacing bus and taxi drivers, driverless trains/trams, driverless haulage, drone delivery services etc.. There will arguably come a time when there are simply not enough jobs for people without specialist skills, and there may come a time where millions of people's income will no longer come from working as a result - how does an economy restructure around that?
It's all a question of how quickly change comes. If change comes gradually, people can more easily find work in adjacent jobs that are similar to the ones they've been doing. If change comes quite suddenly, a lot of people might find themselves out of work at once. The result, though, is a surplus of labor - which the market also responds to. So if you have a huge surplus of ex-taxi drivers very suddenly, business opportunities exist based on lower-priced drivers (such as expanded package delivery services), and so business like amazon can expand to leverage that labor.
To drive obviously, but with self driving vehicles coming one day, the only job they will have is to get out and deliver the package. Which they already do. And I'm sure someone is working on removing that job.
To drive obviously, but with self driving vehicles coming one day, the only job they will have is to get out and deliver the package. Which they already do. And I'm sure someone is working on removing that job.
Yup. But that's down the line. You're also completely avoiding the point in favor of going after the example. The point is that a surplus of manpower in a particular area leads to restructuring of business practices. The market will tap cheap resources.
It's all a question of how quickly change comes. If change comes gradually, people can more easily find work in adjacent jobs that are similar to the ones they've been doing. If change comes quite suddenly, a lot of people might find themselves out of work at once. The result, though, is a surplus of labor - which the market also responds to. So if you have a huge surplus of ex-taxi drivers very suddenly, business opportunities exist based on lower-priced drivers (such as expanded package delivery services)...
Danoff - I'm in agreement with you that "freer" trade is "better", but I don't think your solution for ex-taxi drivers is adequate. It has the potential to leave the taxi-drivers hanging.
Yes, some of the surplus taxi drivers can shift over to driving for package delivery services, but as you say (almost by definition) these delivery jobs will be lower-paid positions, so the ex-taxi drivers will be making less money than before and will find it harder to support themselves or their families.
Somehow, our society needs to operate in such a way that displaced taxi drivers can find new jobs with equal pay, not lower-paying jobs.
I'm essentially saying what you say here, but adding that there should be another step:
Danoff
****Yup, competition is scary. It may require some reorganization of the market. But market reorganization in the face of unexpected productivity is a good thing. It's the force for increased standard of living and wealth. It's the only reason we're sitting in air conditioned buildings having this discussion over a vast connection of machines with mind boggling computational ability***
The marketplace has said that we have "excess" taxi-drivers, so the "market" (ie. the taxi drivers) need to reorganize. The taxi-drivers need to find another fruitful place of employment. Maybe they can all become race-car drivers:idea:
IMO, our society needs to help its citizens with these displacement situations.
Maybe, all that's needed is one course during high school where this topic is discussed. Or maybe everyone should get 30 days of job/career retraining from the State unemployment office. But certainly, a society that expects long-term success, needs to offer some sort of amelioration strategies for its citizen/employees who run into these displacement situations.
Danoff - I'm in agreement with you that "freer" trade is "better", but I don't think your solution for ex-taxi drivers is adequate. It has the potential to leave the taxi-drivers hanging.
Yes, some of the surplus taxi drivers can shift over to driving for package delivery services, but as you say (almost by definition) these delivery jobs will be lower-paid positions, so the ex-taxi drivers will be making less money than before and will find it harder to support themselves or their families.
Somehow, our society needs to operate in such a way that displaced taxi drivers can find new jobs with equal pay, not lower-paying jobs.
Less pay isn't a problem if the cost of living goes down. A huge shift in the job market will affect more people, but it's also more likely to make a bigger impact on living standards as well.
Interestingly, this might make the really big shifts preferable to smaller ones. In the latter case you can still lose your job, but not much changes to make up for it.
Maybe, all that's needed is one course during high school where this topic is discussed. Or maybe everyone should get 30 days of job/career retraining from the State unemployment office. But certainly, a society that expects long-term success, needs to offer some sort of amelioration strategies for its citizen/employees who run into these displacement situations.
Maybe it just needs to be accepted that a job isn't forever? If people had that in mind, maybe they would prepare for the problem before it is a problem.
Danoff - I'm in agreement with you that "freer" trade is "better", but I don't think your solution for ex-taxi drivers is adequate. It has the potential to leave the taxi-drivers hanging.
Yes, some of the surplus taxi drivers can shift over to driving for package delivery services, but as you say (almost by definition) these delivery jobs will be lower-paid positions, so the ex-taxi drivers will be making less money than before and will find it harder to support themselves or their families.
Yup. Which means that they still have employment but that they have a strong incentive to find higher paying employment - which is further market restructuring.
In some cases, that's exactly what happens. In other cases, higher paying jobs open up. There is no guarantee where demand is going to go. What I can guarantee is that if there is an untapped pool of cheap labor it will be tapped. So if huge layoffs happen in a particular industry, the market will take advantage of that displacement.
Nobody is guaranteed work, and it would be a strong growth disincentive if it were.
Maybe, all that's needed is one course during high school where this topic is discussed. Or maybe everyone should get 30 days of job/career retraining from the State unemployment office. But certainly, a society that expects long-term success, needs to offer some sort of amelioration strategies for its citizen/employees who run into these displacement situations.
Why? Why is it your responsibility if I lose my job? You should feel free to help, of course, of your own free will. But for me to tell you that it's your responsibility that I have a job, and a job that pays as much as my old job, is just wrong. It's not your responsibility, it's mine.
Also, it really has to come from the person. Only they know what their skills and interests are, so only they can know what employment is desirable to them. Going into a state run training facility to take courses in whatever the government thinks might be a good market at the time would be a big waste of resources, resources that can be used employing people to achieve actual growth in production.
Most of the time (not all of the time) large market shifts are not sudden. Slowly the pay for taxi drivers decreases, and one by one they decide that it's not worth it and move on to other jobs. Sometimes huge swaths of people lose their jobs, but when that happens they make a splash in labor supply that affects prices and has a corresponding impact in demand.
It's all a question of how quickly change comes. If change comes gradually, people can more easily find work in adjacent jobs that are similar to the ones they've been doing. If change comes quite suddenly, a lot of people might find themselves out of work at once. The result, though, is a surplus of labor - which the market also responds to. So if you have a huge surplus of ex-taxi drivers very suddenly, business opportunities exist based on lower-priced drivers (such as expanded package delivery services), and so business like amazon can expand to leverage that labor.
What happens when you have self driving cars carrying robots that deliver packages and are completely serviced by other robots who are managed by other robots, there will come a point in time when the market will have to artifically intervene to keep human's relevent from their own demise.
What happens when you have self driving cars carrying robots that deliver packages and are completely serviced by other robots who are managed by other robots, there will come a point in time when the market will have to artifically intervene to keep human's relevent from their own demise.
