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Follow up to Mankiw’s NYT op-ed

Posted by: Annie Voy | February 19, 2011 | 8 Comments |

Here is a great extension by Uwe Reinhardt to the “Winning the Future?” op-ed by Mankiw (posted here last week). Does it (and should it) make a difference if the “scarf” is produced by someone outside the US?

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“That theory is less popular among noneconomists, especially politicians and unions. They wring their hands at what is called offshoring of jobs and often have no problem obstructing free trade with such barriers as tariffs or import quotas, which they deem in the national interest. (Two blogs recently offered examples of this posture.)” One thought I have of something we never hear about is the global unemployment rate–we hear about the local, state, and national unemployment rates (but never know about how the entire world is doing against unemployment).

As for the snow removal example, there is a third (yet not mentioned) possibility. I could hire both boys to do the job and everyone is better off. If I pay the XBox-playing boy some amount between $20 and $30 (so he benefits), and the new boy an amount between $10 and $20 (so he, too, benefits), everyone is better off as long as the total amount spent does not exceed $40 (so I still benefit).

As for the scarf problem, as long as my (or your) benefit from having one scarf exceeds the cost of the scarf, then I (or you) would probably buy the scarf that provides more benefit. If my (or our) marginal benefit from buying the second scarf is more than the cost of the scarf, then I (or you) would probably buy it.

I’ve always agreed with the economic theory that everyone gains, overall, from free trade. It makes sense for each country to trade what they can produce more efficiently. Looking at free trade from an economic standpoint, it is not a zero-sum game; we can all benefit from free trade.

However, it is interesting to finally hear an economist speak out about the potential problems of off-shoring jobs. I was taken aback a little to read that soon high-end market jobs could also be offshorable. It is true that most economists don’t consider borders except for when measuring outputs, etc. But shouldn’t economists in the United States be somewhat concerned that US industries don’t start offshoring higher-end market jobs? I am all for free trade, but this article brought up some concerns for me. When does the offshoring of Americans’ jobs stop making us more efficient in other fields and start chipping away at the US economy?

This article sort of reminds me of our class discussion on our thoughts about the fear of China surpassing the United States. It makes sense that America should fear the exporting of jobs especially higher end offshoring. I think that often times when we think of free market trade we think of countries like the United States thriving. But if foreign markets can create a cheaper product of the same quality then should they not also thrive? Yes, in fact they will thrive but I have a hard time believing the notion that “the owners of businesses that lose their markets in international competition and their employees will shift into new economic endeavors in which they can function more competitively.” So yes I think that free trade is beneficial, but there are winners and losers. I remember we discussed in class that if a job in the US is exported overseas it may create two or more jobs in India. So 2 people are taken out of poverty while on in the US is simply unemployed. So while global welfare IS raised, the United States may begin to hurt a little bit. It is scary to think about jobs that us as American college students are going to be going after being shipped abroad.

This article does scare me a little, thinking that more high-end jobs are being outsourced.
I remember in class one day we were talking about how people in India (I think) are now performing transcription work for a hospital in the U.S., and how easy and cost-efficient it was for the hospital. At the time, I thought, oh that’s great… it’s helping a less developed country grow and get more jobs and whatnot! But also, lingering in the back of my head was the thought that, there are so many Americans who are unemployed; how many people would love to have that job, or just be honored/lucky to have any job that takes them out of unemployment? Granted, the hospital would have to pay higher wages to workers here, but it all boils down to whether or not we should outsource jobs that Americans could easily do.
I guess that it kind of depends on a company’s priorities, and their concerns for the global future. I am all for keeping jobs within the U.S., even those small jobs that lack experience. As for the high-end jobs that he mentions, like scientists, mathematicians, radiologists, and editors, it is hard for me to imagine why the U.S. would want to outsource jobs that could (and should) be given skilled American professionals. I’d like to think that Americans want to keep their jobs within the country, but it seems that every company’s opinion differs.

I think this article brings up a VERY important economic issue. It makes sense to be worried about offshoring and the effects that it might present in the future. For the time being, it doesn’t seem to be causing many problems, but what happens when entire industries start being outsourced? Will the U.S. be forced to specialize in certain areas? Can the U.S. find a way to maintain its competitive advantage? Or will salaries in the U.S. simply start to fall as though they are being drawn towards a global equilibrium? Maybe the world will finally begin to level out. Of course, like Reinhardt mentions, not all countries can benefit from globalizaiton, but I think many poorer countries may very well finally start to see the light and catch up with the wealthier nations like the U.S..

I agree with most of what has been said. This article brings up great points on outsourcing and how much it affects the US. To think that 30-40 million jobs are outsource is pretty crazy. At the same time the US is providing 30-40 million jobs for other countries to help them get out of extreme poverty. I do not think buying a scarf from another country is bad at all. I am a fan of free trade as well.

I appreciate that Reinhardt concedes that “permitting full free trade across borders will leave in its wake some immediate losers, but citizens who gain from such trade gain much more than the losers lose”. While the argument for free trade is very strong, I think it’s also important to admit that some people lose out. Also, I think what people we’re trying to say in response to the “winning America” blog is just what Reinhardt says “It is often “nationalist sentiment” that sets non-economists apart from economists”. People think practically about economics, until they get concerned about protecting Americans and American jobs. Also, Alan Blinder offers an interesting position by being all about free trade but skeptical about off shoring of jobs.

This is a good article that brings up the future that our jobs here are going to go to a more educated and less expensive workforce abroad. It is meant to be a shock to the American people because if we sit back and do nothing than we will be out of manufacturing and high-end jobs.

What I would recommend from this is that the American people invest more in our public education systems and that our private ones revamp their traditional ways of teaching. Just as our country has a great education system, it is mostly in the collegiate level. We need to start teaching children more when they are young as countries such as China and India are doing. By instilling this youthful work ethic, our kids can also learn to speak more than just English, which in the future if you only know one language you will be left behind. American jobs are going to go, but we can reverse that by creating a generation that is smarter, more diversified, and innovative than ours.