Posted on 11/20/2004 9:56:42 AM PST by curiosity
Not to belabor the point, and for whatever it's worth, I'd like to clarify a few points in the previous points (the responsibility for divergence is entirely mine).
1. When speaking of the first- and the second-best I used the term broadly: an introduction of any one constraint "reduces" the best by 1, from first to second. So, you may have a model with three constraints, but if some other, fourth constraint is in focus, then for the purpose of THAT model the three-constraint optimum is the first and and the four-constraint optimum is the second best. I understand that this terminology is usually applied in a more narrow sense -- to the absence/presence of informational asymmetries, as far as I know.
2. I was probably even less precise when I spoke of the role of government. I agree with you: I too think that it is the responsibility of the government to work towards the common good --- provided that what that good is and the commonality thereof are known.
What I spoke of earlier, especially referring to the post-war changes is not whether the government should work towards the common good but whether it alone should do so. What troubles me is the cultural decline of personal responsibility and accountability for one's actions. Under these circumstances, the government becomes the sole source of protection, and that inevitably deteriorates into socialism (the less we do ourselves, the more in trouble we get, the more help is need, the more we look to the gpv't to provide it). I believe, and others wrote extensively, that this narcissistic trait has appeared roughly after WWII and became increasingly more pronounces since then. (Your point about old roots of protectionism is well taken).
This is very far from being libertarian. In fact, I am usually somewhat irritated by the posts of libertarians on this board: they never tell me how they expect public goods to be provided, for instance. I am not for the absence of government but against big government -- there is great deal in between.
3. Back to the caveat about knowledge of what common good is. You write: "I am not. I believe that governments have a duty to work for the common good, and that includes protecting their citizens ability to earn high wages." The devil is, as usual in details: what constitutes "high?" Can the current wages be unreasonably high (in the sense of the national income)? DO you have any doubt that the income of IT labor was affected by what amounted to rationing? Do you find it fair that some retiree was paying that extra portion of wages?
The point is that nobody was arguing for any government intervention into IT wages, which were inflated for decades. It is only when they go down that we hear all the rhetoric.
What is "high" wage, then? It appears that we are not talking about high or low wages but about the sign of their changes: when wages rise, we are happy by default and don't expect the government to protect the investors and consumers; but when they decline, we all should be sad and ask the government to intervene to protect the status quo. Has anyone analyzed and questioned that status quo?
Sorry, I find that even on economics grounds completely unreasonable. But, again, who said that all these sentiments of the public are expressed by economic agents?
4. This is what I would like to make more precise: as you wrote,
) The first best outcome for the world may not be the best outcome for an individual country.
Undoubtedly true in the equilibrium state of a closed system. What is not clear to me whether it is true dynamically. [ To speak at the level of anecdote: an entity that adopts computers early may actually increase its advantages over others -- more generally, if there are increasing returns here). It is clear that social institutions are least vulnerable to free trade: most of the countries as we know them today did not exist when out Constitution was written --- how many of them have adopted it, or any sizable portion of it? I do believe that the main reason for the success of this nation is precisely in values and social/political institutions. Suppose I posit that our institutions translate into this specific comparative advantage: the ability to adjust, and make best use of, the ever changing environment (i.e., act when we do not know that the "common good" is). I understand that this all may be questioned. Buy suppose I take this as an assumption and ask, given that this comparative advantage is not likely to diminish, can free trade be disadvantageous for the country? As you can see, the question is intrinsically dynamic.
An analogy is two computers called America and China. If the first has a larger processor and memory, any FREE use of the resources of China cannot possibly be disadvantageous: a more computationally powerfull computer will be "a step ahead" in the game. Over time, the initial disparities may be expected only to increase. The only thing that can equalize the situation is to transfer some of the memory and processing power --- the analogue of social institutions that other countries are not willing to adopt. In sum, free trade cannot hurt unless other countries adopt our social/political institutions, which they have not done so far (if anything it is we who appear to be giving them up).
My question is therefore not even about the equilibrium but about a steady dynamic, perhaps. I know this is too vague (steady in terms of what? Constant rate of change? constant acceleration?) Sorry if I bore you with this vague intuition --- too vague to resemble even a rudimentary model.
In any case, thanks for your posts and pointers to the literature. I have enjoyed your comments.
Who will there be to re-pump our -- the world's human condition laser -- when we fall all at once to a more grounded state?
We can not risk spurious triggers of that decay.
The Civil War was about that. The further development of the human condition in the North could not proceed further while the South relied on slavery and all the economics and politics that slavery brings with it.
"Free trade" -- a dubious name for what the practice is, is helpful in large scale at times, for temporary periods -- it does spread incentives for the improvement of the human condition around the world to places otherwise most dank and dark. It is helpful in some tiny level at all times -- smuggling, black market etc. In small as an outlet, as a necessary small testing of the economic immune system. As a channel against over-suppression and over-control of markets.
Yet it also goes to far, and will break -- a wonderful mastery if a nation or group of nations can minimize, mitigate and make harmless that break. And because of social and economic forces it is just about impossible -- unless a nation is able to elevate the human condition and at the same time take a very humble tack and prays to gain the grace and confidence of Divine Providence.
As to the Press -- how many reporters majored in economics? other than Krugman (ugh)> I saw the trend to offshore begin when CEO's went from salaries with some perks to large bonus systems based on stock performance. I was working for a large company at the time and the entire atmosphere changed almost overnight... we did make the changes to JIT, which helped, but everything went to stock perforance and major bonuses at the very top with fewer people doing the actual work.
Patently untrue. The "expectations" of quality need to be lowered...that's all. I have to hand it to them; they have done that exceptionally well. The quality of products sold in nearly every category has nosedived to the point of hilarity. Buy a moderate quality, say, dresser in 1980; expect to have it for life. Buy one now (in the same price category in today's dollars) expect the front of the drawer to fall off in a year. When people don't have a moderately priced option, of course they will buy your junk.
In any course on Organizational Behavior you'd hear that it is impossible to achieve, or once achieved to sustain, success without employee loyalty (if tasks are complex).
Again, ridiculous; because employee loyalty is achieved today by the the "fear of loss"...not the hope of gain.
As Nietzsche said, "If only he could shake his head, his burden would roll off his shoulders. But who can shake his head?" If only you could open your mind to knowledge, a few minutes of your time devoted to reading would produce amazing results. But who can pick up a book after spending her life holding reading and education in contempt?
Unless you have a doctorate, my education is equal to, or better, than yours. It just wasn't an indoctrination by a bunch of 60's-era socialist business professors. Do you want to compare gradepoints...I'm MORE than willing. And, I read plenty, but in my various positions I have had a chance to observe the inner workings of many companies; some publicly traded and some not. I know what works...and what doesn't. My opinions on economic issues come from reality; not books. They used to be similar to yours.
Incidentally, the entire middle of your post is B.S. Maytag is on the ropes because of hideous management; going back for some years (I won't call the person out..but the current CEO is no better). They chose to "diversify" in an attempt to increase profits. They expanded on the low end and pulled the entire product line down the drain. That nearly always happens when you bring in an individual from a far-flung locale to run a business in which he/she has no vested interest other than stock options and bonuses. It WILL be sold, probably to a Japanese firm which is easily identifiable. And, no, I don't work for them.
Re: Maytag: Korean, not Japanese.
I too enjoyed our discussion. I hope you had a Happy Thanksgiving. I look forward to more discussions with you in the future.
That's an interesting theory. I've never actually seen a case where it worked in the real world. If you're right, you'll be famous. Now all you have to do is prove it.
It should be simple. All you have to do is show me the point in time where electronics prices stopped falling and actually started rising.
You're obviously not familiar with such concepts as economies of scale and oligopoly. You need to take a class in industrial organization.
You first.
Here, let me help you with your own argument and correct for errors. The law of diminishing returns on the factors of production are always in play. A firm cannot continue to add variable factor inputs and expect to further reduce its total costs. While it is true that the average fixed costs decline as you get more output the marginal costs will at some point increase. What you are referring to in your example is a decreasing cost industry. Now then, in a decreasing cost industry, costs fall primarily because the labor pool gets more centralized and homogeneous and because new technologies become outdated rapidly - after the R&D has been recaptured by profits.
So, if the Japanese can provide products that are produced from a decreasing cost industry utilizing scale to undercut domestic would-be-producers, the displaced labor moves on to other things (to be fair to the argument, some move up and some don't), and the Japanese labor wage-rate will eventually fall (the nature of the decreasing cost industry). This being the case I should expect that you'd be ecstatic at the idea that the domestic laborer did not have to endure a decline in his/her standard of living like the worker in the Japanese decreasing cost industry.
bump for later...someday
There would have been an opportunity cost to maintaining those rents. Ask yourself what we would have had to give up in order to primarily produce enough electronic equipment to service our entire domestic demand [I write it this way because we do still produce electronic equipment]. It's easy to discuss costs that are apparent. The wise economist discusses those cost that aren't so apparent.
I'm reading your post late.
What a lot of people don't understand is that conventional wisdom changes. The change is a result of applied wisdom. Meaning, what was smart ten years ago may not be smart now.
It's amazing to see how people cling to their ideas, even after the ideas have been disproven and new thoughts emerge.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.