The younger ones retrained and got comparable jobs. Older ones were not so lucky and took large pay cuts.
In addition to the labor income, our economy also lost the rents that come with an oligopolistic industry such as television and consumer electronics. We did not lose these rents because we were less productive or had inferior technology. We lost it because of Japanese industrial policy that deliberately targets oligopolistic industries so that the Japanese economy can capture rents. They do it by pricing below cost for a long enough period so that Japanese producers acheive critical mass in the industry, and then can finally drive our producers out of business by exploiting economies of scale. Our loss in oligopoly rents was permanent.
In 1961, out of every 12 airplanes flying anywhere in the world, 11 were produced in the U.S. Now, this is clearly not the case. What happened to those workers?
In mid 1800s Pittsburgh was producing half of all steel and three quarters of glass in the world. What about now?: What happened to those workers?
Skills in steel production are easily transferable, and the industry is pretty competitive (few rents involved), so letting this industry lose to foriegn competition was smart.
If the workers cannot atain comparable productivity in This is incorrect: these workers find jobs in other industries. A person that assembled cars can assemble airplanes without loss of income.
And you're basing this on....
The one who assembled TV sets in 1980s assembled computers in 1990s at a HIGHER level of income. Your perception, driven perhaps by what you read in the newspapers, is simply incorrect.
Prove it.
The wholes in free trade theory have been apparent to academics for 20 years. Now they're finally being made public. It's about time.
Don't be silly. Please point to specific papers that you have in mind.
See post #131. The classical case for free trade is based on a bunch of idealized assumptions: perfect competition, constant or decreasing returns to scale, symetric infomrtion, and the like. The minute you start relaxing these assumptions, as in the real world they seldom hold, many circumstances emerge in which free trade cease to be optimal.
It was you that brought up assumptions, so let's assume that you are correct and that the Japanese, in fact, sell at below cost. That would mean that the more they sold the more money they'd lose - and for two reasons if you consider the law of diminishing returns on the factors of production as output increased. Let's also assume that the Japanese government is involved in this conspiracy to drive out U.S. domestic producers and that they help their producers by subsidizing. Let's also assume that the now displaced American worker can only find a "burger flipping" job OR, have to remain a public charge to the taxpayer for how many ever weeks the benefits last. The final assumption is that the American consumer gets no utility from the below cost products that the Japanese producers made.
My next two questions are:
How are we worse off? And what happens to the Japanese economy for their shenanigans in altering the marketplace?
This quasi-scientific statement does not explain the absence of this industry in the U.S.: new firms could've been formed.
It is also not true that we lost these jobs due to dumping or some such actions of the Japanese: we were less productive --- as measured by the ratio of costs, particularly labor, to revenues.
Skills in steel production are easily transferable, Transferable to what?
and the industry is pretty competitive (few rents involved),
It appears that you are in love with the word "rents" Actually, steel industry at the time was all but competitive: transportation costs were prohibitive and created high barriers to entry for foreign competitors. so letting this industry lose to foreign competition was smart. Who was that smart? Who was taking this course of action purposefully. Nobody "let" this happen --- it just did.
Most importantly, you missed the point, which was: what happened to workers when those industries went into decline? And the answer is that they find other jobs. The point also was that with all the talk about outsourcing, unemployment at the level that until recently was considered the lowest possible. True, some people, especially close to retirement drop out of the labor market, but most find other jobs. The younger ones retrained and got comparable jobs. Older ones were not so lucky and took large pay cuts.
So? Make up your mind what you are talking about. If you look longitudinally over the lifetime of a person, it is clear that the older one gets the harder it is to make transitions. What does that prove? And what's new?
Prove it.
You are welcome to speak to your dog in this tone. When addressed to me, requests, if any, must be accompanied with the word "please."
The wholes in free trade theory have been apparent to academics for 20 years. Now they're finally being made public. It's about time.
TQ: Don't be silly. Please point to specific papers that you have in mind. See post #131.
Thank you. I will look up some of these references at the first opportunity. Until then, I cannot comment on whether they invalidate the main conclusion, that free trade is beneficial in the long-run.
The classical case for free trade is based on a bunch of idealized assumptions: perfect competition, constant or decreasing returns to scale, symetric infomrtion, and the like. The minute you start relaxing these assumptions, as in the real world they seldom hold, many circumstances emerge in which free trade cease to be optimal.
The real question is optimal in terms of what? If the current state of the art is any indication, new models still deal with at most two periods, two countries, two commodities, etc. So much for impeccable credentials.
Consider for instance, the case of asymmetric information and suppose there is a case that shows disadvantages to free trade. But all such models take the informational asymmetry as given and exogenously specified. In the real world and over time, agents also acquire and trade information. So, yes, a partial-equilibrium analysis may show some temporary disadvantages to free trade --- that still does not invalidate the main point.