Noah Smith: The Man Who Made Us See That Trade Isn’t Always Free

If empirical studies can lead top mainstream economists to question this once-universal belief, then the profession really is shifting from theory to evidence. With this in mind, I recently contacted Autor to ask him how his research on China has altered his own thinking about the costs and benefits of trade.

Autor told me that he had been astonished by his own findings. Autor, like most top economists, was once an orthodox thinker on the trade issue. He had expected American workers would adjust well to the shock of Chinese imports, finding other jobs for similar wages after a short period of dislocation. That was largely what happened in the 1980s and 1990s in response to Japanese and European competition. Instead, he and his co-authors found that trade with China in the 2000s left huge swathes of the U.S. workforce permanently without good jobs — or, in many cases, jobs at all.

This sort of concentrated economic devastation sounds like it would hurt not just people’s pocketbooks, but the social fabric. In a series of follow-up papers, Autor and his team link Chinese import competition to declining marriage rates and political polarization. Autor told me that these social ills make the need for new thinking about trade policy even more urgent. A large population of angry, unmarried men with deteriorating career prospects is a dangerous thing for any democracy.

From: The Man Who Made Us See That Trade Isn’t Always Free – Bloomberg View

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206 thoughts on “Noah Smith: The Man Who Made Us See That Trade Isn’t Always Free

  1. I’m all for challenging the orthodoxy of freer trade, even though I supported freer trade myself. And, as is my usual disclosure, I read only the excerpted portion and not the entire article.

    Here, though, is where I’d want to know more:

    He had expected American workers would adjust well to the shock of Chinese imports, finding other jobs for similar wages after a short period of dislocation. That was largely what happened in the 1980s and 1990s in response to Japanese and European competition. Instead, he and his co-authors found that trade with China in the 2000s left huge swathes of the U.S. workforce permanently without good jobs — or, in many cases, jobs at all.

    Maybe there hasn’t been enough time to see the effects? The 1980s began, more or less, with a recessionary period and a nose-dive in the “Volcker Recession” before picking up. And by now, if people have recovered, from the 1980s/1990s competition, it’s been long enough. If we start from the 2000s, however, then there were or weren’t gains–and then the 2008 collapse.

    I may be be confusing cause and effect. I doubt the 2008 collapse was caused primarily by freer trade with China, but perhaps that trade helped slow down or weaken the recovery? Maybe I’m confusing other things, too. Again, I haven’t read the article, or any of Smith’s studies, either (and if I had I probably wouldn’t have the chops to critique those studies).

    And whether I’m confused or not, even “only” a few years of economic displacement can wreck havoc on a person’s life. I certainly don’t want to minimize those effects.

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  2. I’m beginning to think of free trade the same way that Churchill saw democracy. Its not the best trade policy, its the worse save all others tried. Free trade can have some unintended and severely negative consequences especially without a wealth redistribution mechanism to ensure that the majority of gains do not go up to the top. Its still better than all the other known alternatives and does more to increase wealth and the number of goods available in every location.

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  3. Free trade theory was developed with the assumption that comparative advantage was a constant, not a variable, and that countries were trading goods and services, not the means of producing those goods and services. China, a communist country, views things in terms of “means of production”. They didn’t want US products, they wanted the US factories that produced our products.

    Say we start out with two countries. One has advantages in rice and sledgehammers, and the other has an advantage in wheat, corn, steel, machine tools, automobiles, aircraft, consumer appliances, electronics, energy, and defense. The first country uses its cheap labor and vast market to convince stock holders in the second country that they’ll make a whole lot of profit by producing their products in the first country, getting partial ownership of the new factories and a much cheaper labor force. As the first country starts profiting from this (along with the stock holders in the second country), the profits are plowed into luring more and more factories from the second country to the first. Eventually the first country has the advantage in not just rice and sledgehammers, but everything else, too, while the second country is reduced to producing corn and wheat.

    What’s been going on is different than the conventional notion of trade. We’ve been shutting down our own manufacturing plants and outsourcing production to China. Companies like IBM and UPS run constant ads bragging about how they’ll manage your overseas supply chain for you. Unemployed workers see those ads and instinctively know what’s going on. Their company’s owner got very rich by selling out the town to the Chinese, and the last jobs the company did was send their managers over to China to train their replacements. All the accumulated knowledge developed in the US on how to run that company was put in binders and handed to the communists, while our former machinists apply for second shift at Dairy Queen.
    .
    They’re not buying our products, they’re buying our means of production.

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    • Yep, that’s pretty much the deal.

      The theory of Comparative Advantage underlying free trade theory was, at its heart, based on geographic disparities. The vintners of Portugal and the shepherds of England didn’t derive their respective advantages due to some innate, genetic predisposition but due simply to the peculiarities of soil and climate which then, over time, led to the accumulation of cultural knowledge benefiting those activities.

      The contemporary trade regime, with the near frictionless transfer of capital and expertise, is based entirely on the arbitrage of disparities in wage rates.

      It’s not that the orthodox theory is wrong; it just doesn’t apply.

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      • Comparative advantage would still apply, but it would say whether the US should focus on producing wheat or corn, because all our other industries moved to China to take advantage of cheap exploitative labor with no environmental or other protections.

        You see, take comparative advantage in something like appliances versus hand made woodcarvings. We were better at appliances because of design, steel, machine tools, automated production, and a host of labor and management innovations. But now that advantage, the tools, knowledge, institutions, and marketing, can be commoditized, boxed up, and shipped abroad just like a refrigerator or a stove.

        But the trouble is, when you ship the appliance factory instead of the appliances, you no longer have any advantage in appliances and you’ve got a bunch of factory workers sitting around with no job. Free trade theorists tell us that those workers weren’t being productively employed (even though they’re now working at DQ instead of GE), and that we’ll move them to more productive IT jobs – right before we outsource those IT jobs to Bangalore. But hey, maybe they can get jobs as artists, making sand mandalas like those Tibetan monks. Oh, and what is Tibet’s GDP these days?

        America led the world while having the most expensive labor even whe we stepped off the first ships on the Atlantic coast. Having high labor costs drove up our productivity, and having a vastly better property system enabled ordinary people to use their property as capital to create new opportunities and start businesses. That quite quickly drove us to become the world’s richest and most powerful nation, the one with the most tools, resources, and capital. But if we sell all that to someone else while looking for a quick buck, we won’t maintain our standard of living because all we’ll be making is corn and wheat, perhaps with a side specialty in high speed pizza delivery.

        Or, in Marxist terms, fate is determined by control of the means of production, and the battle is between capital and labor for it. But if we sell the means of production to a foreign country that hates us all, labor and capital won’t have anything left to even fight over. We’ll all just be Elbonian mud farmers wondering how China and Honduras got so rich.

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        • But if we sell the means of production to a foreign country that hates us all, labor and capital won’t have anything left to even fight over.

          Nice sentence, but it doesn’t mean anything. And I mean that literally. There is no phenomenon happening right now in the real world to which that sentence accurately applies. And your theory of economic development is… well, I’ll just say that it is self-serving to the point of not being useful to any meaningful discussion of growth theory. If the U.S. economy stagnates and is over-taken by some other country, it won’t be because we sold anything to anybody. It will be because we stopped innovating.

          Take the analogy of an inventor, say the best, most innovative and productive inventor in the world. What does he do? He invents a new product or patents a new process and sells it. For a while he makes a lot of money, because he’s the only one who can make that product or license that process. Eventually, the patent runs our or the rest of the industry learns to make a product of equal or greater value. If he wants to stay on top, then he needs to come up with more products and more new processes. That’s how innovation works. It has an expiration date. You don’t take the lead and keep the lead, because of a one-time endowment.

          One day that inventor may decide to sell his workshop and his tools to some other inventor. He can do that, but he can’t sell his ability to innovate. Either the new inventor can innovate or she cannot. Buying the shop doesn’t transfer anything but the shop. I find that at the hear of almost all poor economic thinking is the assumption that the economy exists in a form of stasis, in which things are never created or destroyed but simply transferred. Thinking in terms of iterations helps immensely.

          PS – Also at the heart of a lot of bad thinking on economics and a host of other issues is the anti-foreign bias. It’s something that runs through all of @george-turner’s comments.

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          • You don’t take the lead and keep the lead, because of a one-time endowment.

            This.

            Our failure was not moving things to China for a quick buck, it was assuming that the unskilled (or tightly skilled) workforce would just naturally shift to a completely different skills paradigm without major changes to the base education system.

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            • Fifty percent of the population has an IQ less than 100. These are people who weren’t particularly good in school when they were kids, hated it with a passion, couldn’t wait to be done with it, and feel nothing but dread at the prospect of returning. I’m sorry, but you’re gonna play hell turning these people into knowledge workers; it’s just not gonna happen. Skilled trades, sure, preferably along an apprenticeship/OJT model. But there’s only so much of that work to go around too.

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              • No argument from me, but my point still holds. You can’t send away all your unskilled or tightly skilled work and just expect the population to shift away from that naturally, especially when the base education system still strongly resembles the one that existed during the industrial revolution.

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                • Oscar,

                  I get the suggestion, but it hits me right in the gut twice:

                  1. The “theory” in question here assumes that increased capital and trade flexibility results in increased profits which – again, theoretically – are supposed to filter down thru the economy creating new demand for certain types of good-paying employment. We’re just not seeing that (except for the dubious proposition that US tech firms NEED H1B folks – at restricted labor rates – to fill openings the homegrown can’t fill).

                  2. We don’t live in Lake Wobegon, where all the children are above average. We live in a world, unfortunately, where half the work force is at or below average intelligence, where intelligence” is presumably employed as a marker for “likelihood of success at performing well-paying service sector jobs”. I just don’t see that such an idea is consistent with reality.

                  On the other hand, I also get that you’re searching for solutions consistent with a free-trade regime. But that’s precisely what’s at issue: whether that regime is all it’s cracked up to be.

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                  • Well, no, the issue is not about the effects of free trade, but that you can’t pretend that past is prologue when it comes to what you need to do to deal with the effects of comparative advantage & free trade.

                    Previous shifts have always been possible with limited intervention because workers just shifted from one unskilled work to another (or in the case of tight skills, from one industry to a related one). Automation* & offshoring have not only accelerated the time frame of these shifts, but also upped the complexity.

                    It’s like modern cars versus classic cars. The basic thermodynamic process still drives the car (i.e. free trade, etc.), but you could not drop a 1960’s era mechanic into a modern repair shop and expect him to be productive. You might not even be able to effectively retrain him to be widely useful in a modern repair shop, depending on the person. But as a society, we’ve been pretending that we can do just that, simply because a handful of people have managed to transition successfully.

                    It’s not the regime, it’s our response to it.

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                    • It’s not the regime, it’s our response to it.

                      Autor think’s otherwise. So do Saez and Stigler…

                      Let’s go back to an issue I’ve asked every fan of neoliberal free trade since I showed up here: at what point do the effects of free trade on our domestic economy justify a UBI? Because labor is taking it up the yin-yang with these policies.

                      And just to help things along, I’ll tell you the total spectrum of answers I’ve received in response: a) we’re not there yet, and b) the beauty of global trade is it’s “self-correcting” on these issues. (All evidence to the contrary.)

                      Also, I’d add that throwing automation into the mix is a bit of a red-herring in this debate for pretty obvious reasons. Those two concepts and the effects they have in an economy are completely distinct and separable wrt to the current discussion, which is limited to the effects of free trade policy on the US economy.

                      Of course, I admit that automation is a big factor in reducing the earning power of labor which used to be performed by human beings. But ironically, that actually works to undermine your more general point about education being the panacea for our labor-force ills, since no amount of education can replace work performed by machines. :)

                      Which brings us back to my previous question: according to the theory you accept, when have we reached the point where a UBI is justified?

                      (I already know the answer. Not yet, or never….)

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                      • I’ve been a proponent of a UBI for a long time now, and like downthread, I wish we’d get over our aversion to the idea that some people are just going to be lifetime welfare recipients.

                        (of course, I’m also not averse to the idea that such people should not have unlimited reproductive/parental rights, but that’s a whole ‘nother can o’ worms)

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                          • Sure

                            Of course, a whole bunch of other welfare cash/benefit transfers would be phased out as a result, or would be significantly curtailed (e.g. You don’t get the UBI & Meals on Wheels, you get the UBI minus the cost of Meals on Wheels).

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                              • No, just math. There is only so much money to go around. If you are taping a welfare service that offers a good or service in lieu of a cash transfer, you should expect the UBI to be reduced in some fashion. Especially if it’s something that would nominally be expected to be purchased with UBI funds (like food).

                                What counts against a UBI and how much it does is what politics is for.

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                                  • Ooops, I misunderstood your comment about the math. The math, broadly construed, already justifies a UBI, and getting bogged down in the details seems counterproductive to the main thesis being advanced. The math says redistribute. That means some folks are gonna get something for nothing. Which irritates a lot of people! And not necessarily the “winners” in the neoliberal trade regime. Often it’s people who are just plain old assholes. For example, the people who devoted 7 of the first 17 pages in the ACA repeal bill to making sure that lottery winners absolutely would NOT qualify for medicaid…

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                                    • Again, I’m onboard with the UBI. Same with expanding Medicare/Medicaid to people on the UBI (either that or we have to offer subsidies that let those people afford insurance – pick one).

                                      But not about punition, just keeping the cost balance. If we expect a person to buy food with their UBI, and because of circumstances (age, disability, etc) they need to use a government meal service, the cost of the food that service provides should be deducted from their UBI, not the cost of the service itself (and given such a service can buy in bulk, the deduction should be even less than if they needed to buy on their own).

                                      If someone wants to dock it because ‘those people don’t deserve it’, I’d have to disagree with them. Welfare is a bad place to try and effect social change.

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                                      • Oscar, all that’s cool if, for example, the olds don’t have to pay more in premiums and deductibles than the youngs for healthcare provision, yes? I mean, according to one policy perspective those old folks entire UBI might go right into insurance company pockets!!!

                                        If that happens, Meals on Wheels sorta makes sense, doesn’t it?

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                                        • That is kinda my point. I mean, as much as the idea of a mandate rankles my sensibilities, I get it from a math standpoint. It makes health insurance more of a social insurance. Math is math, and doesn’t give a shit about politics or sensibilities.

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                                                • I’m not suggesting that they “go” anywhere.

                                                  I’m more suggesting that the “solution” found in “just give them money and it’s none of your business what they do with it” is unlikely to take off as a policy proposal.

                                                  Because, *OF COURSE*, it’s our business.

                                                  We have a responsibility! If we give these people money to feed their children, we need to make sure that they’re using the money to feed their children! We can’t just give them money to feed their children and then have them use the money to buy smokes and beer and then say “I need more money, my children are hungry”.

                                                  Hey, I know, we can create a program dedicated to food *VOUCHERS*. Only usable for food.

                                                  The demands of propriety will thus be met.

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                                                  • The weird thing about this comment is that you’re not expressing how you feel about the policy in question but are instead fixating on how lots of people (you as well?) will respond to it. But everyone in this discussion already knows all that stuff. Certainly Francis does. And Trumwill too.

                                                    Which makes me wonder what point you’re trying to make: that passing this type of policy would be politically difficult (which is trivially uninteresting), or that you oppose it but don’t want to come right out and say that?

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                                                    • that passing this type of policy would be politically difficult

                                                      More that it is impossible. Like, it won’t happen. Like, “but what if human nature changes fundamentally?” hypotheticals impossible.

                                                      that you oppose it but don’t want to come right out and say that

                                                      Saying “I support this” or “I don’t support that” strikes me as uninteresting. I don’t really grasp why other people find it important.

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                                                    • “The weird thing about this comment is that you’re not expressing how you feel about the policy in question but are instead fixating on how lots of people…will respond to it.”

                                                      He’s focusing on that part because that’s the hard part. It is not actually hard to give people money. It’s not especially hard to figure out how much. And it is, in fact, not even very hard to figure out where the money will come from.

                                                      The hard part will be to not say anything when you see someone use a UBI card to buy their obese daughter a large Coke.

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                                                      • He’s focusing on that part because that’s the hard part. It is not actually hard to give people money.

                                                        No, he’s saying the opposite, in fact, DD. That giving people money in the form of a UBI is not only hard but … what was the word he used? … oh yeah: “impossible”.

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                                                        • It’s *THEORETICALLY* possible.

                                                          It’s just not possible with the constraints of our culture (which includes, among other things, democracy).

                                                          I don’t see how that isn’t more interesting than whether I’d like it/dislike it if it were possible.

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                                                        • “The clear answer is to tell people to mind their own damned business.”

                                                          Sounds good. Enjoy your second-hand smoke and obesity epidemic.

                                                          “Oh but that’s not the government’s problem!” Well, I agree! But that’s you and me, and there are millions and millions more people who’ve made very strong public statements about how it should be the government’s problem, and these people are not all Christianist racists who can be put in the basket of deplorables and safely ignored.

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                                                  • Jaybird,

                                                    I’m more suggesting that the “solution” found in “just give them money and it’s none of your business what they do with it” is unlikely to take off as a policy proposal.

                                                    I’ll set aside the semi-snark of noting that what you describe is the libertarian version of UBI and just say that I agree with this. I think we need to take note of what the actual problem is that we’re attempting to solve and think about what possible solutions have been tried in the past, what has been successful and what has not, and what sorts of things engender resistance and what doesn’t.

                                                    The “problem” is simple: Advancing productivity, whether through automation or trade or whatever, is steadily decreasing the demand for labor as an input to production. This is especially critical in advanced, heavily capitalized first-world economies where there is little opportunity to utilize the excess labor producing other products or services higher on the Maslow hierarchy. But this is a good problem! Right? It means more stuff for less effort. The solution would appear to be simple; reduce the supply of labor to match the demand.

                                                    There are three ways to do this: 1) Reduce the size of the workforce, 2) reduce the amount of time each worker contributes annually, or 3) reduce the number of years each worker stays in the workforce.

                                                    The first sounds a lot like creating a permanent class of unemployed. Probably not a good idea but some of that could be accomplished by reducing the number of two-worker, two-income families, encouraging more stay-at-home parenting for instance.

                                                    The second is what happened when we struck upon the idea of weekends and a standard 40-hr workweek. Maybe we could do like France and institute, legally, a shorter standard workweek. But, you know, France and stuff.

                                                    The third is to reduce the retirement age. You know, no one really complains too much about retirees. Not even relatively young ones as long as they’re not on the public dole. The problem is that with a decreased demand for labor, median wages have stagnated and it’s simply more difficult for people to actually retire. This seems like the avenue most amenable to creative solutions.

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                                                    • This is especially critical in advanced, heavily capitalized first-world economies where there is little opportunity to utilize the excess labor producing other products or services higher on the Maslow hierarchy.

                                                      A good insight, but I find myself confounded by how much of the higher Maslow needs are met with positional goods. For that matter, there are too many people who seem to be locked into old paradigms of work being somehow tied to dignity.

                                                      The first sounds a lot like creating a permanent class of unemployed. Probably not a good idea but some of that could be accomplished by reducing the number of two-worker, two-income families, encouraging more stay-at-home parenting for instance.

                                                      I agree with you. Neither shall I be snarky about this paragraph.

                                                      But we both know that this is, at this point in our culture’s evolution, impossible.

                                                      As for #2, you’d have more luck with establishing a culture of three day weekends (or Wednesdays off) or something. This strikes me as possible (if only barely) for skilled workers.

                                                      As for retirement, we haven’t yet seen the first wave of Boomers retire (I was promised Boomers retiring!). I’m not sure that lowering the retirement age to 55 (or whatever) would help with the problem of 70-year olds not retiring.

                                                      But I don’t see any of these working for The Poor. The Upper Middle Class and up? Hells yeah. I’m down. 100%. Households where the median income is under, oh, 25 or 30k? No way. Not unless they were willing to live in Nowhere, West Dakota. (And, as far as I can tell, they aren’t.)

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                                                      • “As for retirement, we haven’t yet seen the first wave of Boomers retire…”

                                                        My parents are in that group, and they were pretty seriously hard-core work-until-drop right up until they hit 64.5 years old and finished remodeling their vacation home. And now they’re thinking “you know, I could really do a lot of this work by phone or email…and in fact maybe a lot of it doesn’t need to be done at ALL…”

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                                                    • The “problem” is simple: Advancing productivity, whether through automation or trade or whatever, is steadily decreasing the demand for labor as an input to production….

                                                      … The solution would appear to be simple; reduce the supply of labor to match the demand. There are three ways to do this: 1) Reduce the size of the workforce, 2) reduce the amount of time each worker contributes annually, or 3) reduce the number of years each worker stays in the workforce.

                                                      This is a very old line of reasoning disproven multiple times over the years. I’ll quote wiki.

                                                      In economics, the lump of labour fallacy is the idea that there is a fixed amount of work – a lump of labor – to be done within an economy which can be distributed to create more or fewer jobs. It was considered a fallacy in 1891 by economist D.F. Schloss, who held that the amount of work is not fixed.[1]

                                                      The term originated to rebut the idea that reducing the number of hours employees are allowed to labour during the working day would lead to a reduction in unemployment. The term is also commonly used to describe the belief that increasing labour productivity, immigration, or automation cause an increase in unemployment. Whereas some argue immigrants displace domestic workers, others believe this to be a fallacy by arguing that the number of jobs in the economy is not fixed and that immigration increases the size of the economy, thus creating more jobs.[2][3]

                                                      The lump of labor fallacy is also known as the lump of jobs fallacy, fallacy of labour scarcity, fixed pie fallacy, or the zero-sum fallacy – due to its ties to zero-sum games…

                                                      What is true is entire industries are being redone, much as farmers drastically increased their productivity many years ago. The increase in farmer’s productivity was a massively good thing for society long term, my expectation is that automation will be proven to be so as well.

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                        • “I wish we’d get over our aversion to the idea that some people are just going to be lifetime welfare recipients.”

                          And note that this idea comes from both sides of the political fence. For all that Chip Daniels likes to smug about “strapping young bucks”, it honestly is true that if you give people a UBI then there will be people who could conceivably work who will choose instead to not work. There is as much fretting about “but people NEED to work so that they have a SENSE OF PURPOSE” as there is about “but people NEED to work so that they aren’t getting SOMETHING FOR NOTHING”.

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                • Oscar Gordon,

                  No argument from me, but my point still holds. You can’t send away all your unskilled or tightly skilled work and just expect the population to shift away from that naturally, especially when the base education system still strongly resembles the one that existed during the industrial revolution.

                  I don’t believe you and I are in much disagreement here, but I question how much can be done via education reform. I spent some time training new drivers and I found the most frustrating part of the exercise was teaching them how to use the Qualcomm unit for e-log, navigation, and messaging. It’s all pretty straightforward, no more complex really than using a smartphone app. This was both older guys like myself and younger guys that you wouldn’t expect to have so much difficulty.

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                  • I’m looking at the whole system, not just the idea of current retraining. I don’t believe we can simply re-educate our way out of this. My thinking is that our primary education system is inadequate to the task of preparing a population for the evolving economy. I mean, pieces of it are, there are schools, and districts, that have the resources and the pedagogy to do it, but by and large, because the system is tasked with educating everyone regardless of ability, many parts of the system just can’t do more than offer the baseline education that is adequate for the ‘left half of the curve’ student.

                    I’m starting to think the European system of evaluating and slotting primary school students into vocational tracks has a degree of merit. I wouldn’t suggest we adopt as rigid of a system as many Euro countries have, but there is something there. And I say that as a person who would have most certainly been slotted into a voc-tech track in High School.

                    I’ll also add that I’m not entirely confident that IQ tests or other primary school evaluation methods do a very good job assessing ability in kids. Actually, I think such methods are probably quite lacking. Or perhaps it’s just environment that prevents those methods from working well. I knew so many guys in the service who were mediocre high school students at best, but who absolutely excelled in highly technical fields in the service (and these were not just well trained monkey fields, either, but places where you had to be very sharp). It’s amazing what happens to a persons mental ability when they are removed from abuse or neglect, given 3 squares a day, a stable environment, and plenty of exercise.

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                    • “I’m starting to think the European system of evaluating and slotting primary school students into vocational tracks has a degree of merit.”

                      Tracking is racist. The end.

                      And, y’know, for all that this is a cynical snarky reply, it’s not actually wrong to suggest that administrators will evaluate persons of…certain characteristics differently from persons of…other characteristics. Zero Tolerance isn’t entirely about liability protection.

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                      • Given, which is big part of the reason we don’t do it.

                        That doesn’t mean there isn’t value in the idea, only that there is a perverse incentive in our culture for authorities to game the system in harmful ways.

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              • This is one key reason why I support the welfare state and believe it will probably become more important as time goes on. There’s always going to be a subset of people who just aren’t useful to employers. There’s a line below which it’s better to have a robot, and an increasing number of people will fall below those lines. I’m not talking about people who used to weld car frames and have been replaced by robots. I’m talking about people who don’t seem to be up to learning any skill that a robot can’t do and who don’t have the people skills to go into any sort of service industry. People you wouldn’t trust to work unsupervised and who produce less than the cost of supervising them.

                At some point, we need to get over our outrage that some people live off of government assistance and watch TV all day. The good news is that not having those people in the workforce isn’t costing us very much, pretty much by definition. If they were worth a lot in the workforce, they’d be able to get decent jobs.

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                  • Road,
                    Yes, IQ is genetically determined. A bit. Kinda. It’s quite possible to improve your IQ, though. It just takes drive. And drive, well, that’s REALLY genetically determined (or, if you want to get weird on it, hormonally determined).

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                  • We’re not talking about IQ. There is lots of retraining that people with obsolete skills can undergo which people with lower than median IQs can successfully complete. I’m all for the state funding such programmes. Its if* those programmes are available (as in available at affordable or no cost to consumer) and people don’t take advantage of them and still gripe that’s when they are responsible for their own poverty (not that we’d let them starve, but its unclear why we are responsible to them for any more)

                    * This is a big if. Those programmes are more widely available in singapore, and at relatively affordable rates. America has a huge problem with post secondary education: the bottom half of the IQ distribution has little in the way of opportunities for systematic training in some skill before they join the workforce.

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            • I find these conversations frustrating, because they happen in a manner almost completely divorced from how things happen in real life.

              Go find me any number of U.S manufacturing jobs lost to trade. Find me any number of U.S. jobs lost to immigration. And then find the number of jobs lost to automation.

              The third category is responsible, by far, for the most job displacement and yet I’ve never seen Luddism deployed as a major political force. I’ll let everyone else offer reasons for why that might be.

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                  • A point to add:

                    Assume I concede to your claim that free trade is bad. We still have to contend with statement up above, that all other options are measurably worse.

                    This is why I’m not interested in arguing the merits of free trade. A discussion of how to deal with the effects is much more constructive.

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                    • I never said free trade is bad, full stop. And I hope that I didn’t give that impression. I said that free trade isn’t the monolithic (normative) good that its advocates have supposed. We see those negative consequences being expressed in countries across the globe as well as here, but we also have quite a few top-tier economists (Saez, Stiglitz, Autor) talking about the deleterious and corrosive effects free-trade has on (certain) domestic economies. In Autor’s case, the problems he suggests are inconsistent with the basic theory itself.

                      What we’ve been discussing assumes that free trade is a good thing but that the deleterious effects of it require a political solution. From my pov, merely recognizing that fact (insofar as it’s recognized by both of us) is inconsistent with the economic theory upon which free-trade is ultimately justified. (I won’t go into details here cuz it’s sorta far afield but over the years I’ve had this exact debate with just about every pro-free-trade economist/libertarian here at this site.)

                      If folks are inclined to pin job displacement on automation rather than free trade we get to a different set of conclusions regarding the coherence of free-trade orthodoxy, seems to me, tho the necessity of a political solution becomes even more apparent.

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                      • That is the point both & made, that economists were not misty eyed dreamers selling free trade like it’s crystal infused healing water.

                        Pundits & politicians, on the other hand…

                        As for job displacement, the how of it isn’t really relevant, is it? Does it matter if jobs disappear because of off-shoring, automation, or obsolescence? All three give the same result, one that, quite honestly, requires a political solution that neither party really seems terribly interested in handling, except to slap on band-aids.

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                      • If folks are inclined to pin job displacement on automation rather than free trade…

                        This is frustrating to me because these are essentially the same things — increased productivity. The theory behind trade is essentially the same as the theory behind specialization of labor, just carried out on a larger scale. And the gains amount to the same thing; the production of more stuff for less inputs. This is exactly the same gain we get from automation, which is just a particular form of productivity enhancement, a way to get more output from less input.

                        So even on a bare theoretical level and abstracting away all the imperfections of the real world, there is no reason at all to believe that trade could possibly increase the demand for labor, and every reason to believe it would lead to job losses. And it’s even more nonsensical to assert that one kind of productivity enhancement — automation — would lead to job losses while another form — trade — would not.

                        None of this is to say that either automation or trade is a bad thing. It’s all to the good that we can produce ever more stuff for ever fewer inputs, including labor. We just need to think harder about how to distribute the gains.

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                        • I don’t disagree. The reason I mentioned it is that the ace in the hole argument for free trade (the Cudgel! in fact) is that it lifted millions of third worlders out of poverty in a way which automation, by definition, could not have. Eg., “You oppose free trade? Whaaa? I didn’t know you hated the poor!!”. I’ve heard that line more times than I can count.

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              • No, robots haven’t been costing us many manufacturing jobs. They cost over $100,000 each and only do about 10% of manufacturing tasks, and we’re nowhere near having a million of them. They are good for exact, repetitive work.

                I’ve had to interface to a lot of them over the years, from ones that palletize your beer bottles to ones that put your Dell laptop and accessories into a shipping box.

                And we’ve been automating tasks for over a century now. We started with wicker pick baskets on conveyor systems back then we used vacuum tube photoeyes. Interestingly, we started relying on conveyor belts back in the 1700’s, and Cincinnati was the first city to build disassembly lines (meat processing) back in the early 1800’s. It is the American way of manufacturing.

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                • No, robots haven’t been costing us many manufacturing jobs.

                  Don’t think robots, think mechanization. My grandfather started a metal-smithing shop with his father right after WWI, specializing in hinges. It was relatively labor intensive until the 80s or so when mechanization caught up to the Problem of Labor and at the end of the run, when his son was running the business, a 12-15 person crew was reduced to 3 with greater output. My uncle used to celebrate the advent of new technology because it meant fewer employees…

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                  • “Don’t think robots, think mechanization.”

                    And there’s more than one kind of mechanization. How many draftsmen do you think are still around? We certainly don’t have any–engineers make their own drawings now, to the extent that they make drawings at all.

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                    • When I first entered college I enrolled in the engineering dept, and one of the many requirements was a drafting class. I absolutely loved it. All the technical detail, striving for a certain elegance and balance in the final product. And I said so to my prof at the time. His response: “Don’t get too attached, young Stillwater. Everyone will be doing this on computers with CAD programs in two years. I don’t even know why we teach it anymore.”

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                      • My high school Home Ec teacher mentioned one day that the administrators dropped her shorthand classes five years prior. She gave us a 2 minute highlight reel of how to do shorthand on the chalkboard.

                        I imagine that there are people reading this comment who don’t know what “shorthand” refers to.

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                      • My father worked as a draftsman for many years, and I learned the trade when I was a young boy. He had a huge drafting table and all the tools, and he would pay me a few dollars a drawing to get all the construction lines and simple geometric work done, then he would take over and do the detail work, dimensioning, and the lettering. I still remember how to do all of that, and even have a set of tools sitting in a box somewhere.

                        My first college level drafting course was half on paper, and half in AutoCAD. Since that class, I haven’t put pencil to paper (except to sketch something out on graph paper). It’s all in the computer now, and the job of draftsman has evolved into design engineer, and very few engineers actually produce detailed drawings anymore.

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                        • Back in the days when I’d use an HP pen plotter for AutoCAD drawings, I’d get frustrated with pen problems and the excruciating time it took to make three or four copies, often having to throw away even more copies due to ink or pen issues.

                          So nowadays I run my Autocad drawing through a CAM program to make CNC code for an X-Y-Z router table, turning the drawing into a wood cut (I use cherry or birch plywood which lets me use narrower line widths) which I then place in a 19th century printing press to run off as many copies as I want.

                          I of course keep my drawings backed up to a thumb drive and the cloud, and I keep the old woodcuts in a climate-controlled 10,000 sq foot warehouse that I leased just to store them.

                          I think it’s the future of engineering and design, at least in areas that don’t have termite problems.

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                          • That’s a neat way to do it, but how often are customers asking for paper drawings anymore?

                            And you’d think given how much HP charges for the damn things, modern plotters would be at least as reliable as a CNC router.

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                            • We have to leave paper schematics in the control panels for the maintenance guys.

                              But yes, using a CNC to make the woodcuts is way better than when Boeing and McDonald Douglas had rooms full of Jesuits and monks making the wood cuts.

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                  • I spent years putting computerized force multipliers into semiconductor fabs so that instead of a skilled technician at each machine babysitting the work, one knowledge worker could launch jobs on each and monitor for alarms while the machines processed away happily on their own.
                    The productivity gains are part of what keeps/kept Moore’s Law going, but staffing tumbled and it’s not coming back.

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                    • The irony of that story about my grandfather is that he wasn’t a Modernist about technology. His view was, if anything, dominated by Luddite tendencies: he was a company owner who believed to his bones that taking care or his employees was a moral imperative. He gave them all healthcare and retirement packages and paid for their relocation including help with home purchases when he moved the business from Chicago to southern Michigan. He was old school before old school was cool.

                      He was outa the game when mechanization really became affordable at his scale, and I’m sure a part of him was relieved that he didn’t have to make hard choices between efficiency and firing people counting on him for a paycheck.

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              • The Luddites were reacting to skilled workers reacting to machines enabling semi-skilled or unskilled workers to take their jobs.

                Today, the machines are replacing those same semi- or unskilled workers. There is no pride of workmanship to defend.

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          • “If the U.S. economy stagnates and is over-taken by some other country, it won’t be because we sold anything to anybody. It will be because we stopped innovating. ”

            I will bet any number of apples you care to name that this person considers Uber and AirBnb to be innovative.

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          • Nice sentence, but it doesn’t mean anything. And I mean that literally. There is no phenomenon happening right now in the real world to which that sentence accurately applies.

            And that’s why Donald J Trump is President of the United States.

            Our manufacturing sector got gutted because we outsourced so much of it. I did a job for a very old mom-and-pop hardware distribution company that was suffering because their US made tools couldn’t compete with the Chinese imports that companies like ACE Hardware were selling. To try and stave off bankruptcy, they hired a financial guy to set up deals with Chinese firms. They got in over their head and imploded. Their building was literally gutted, with companies bidding on their used conveyor equipment.

            I see this all the time.

            Though innovation can drive production and obsolete old products and markets, it can’t replace production. The people who do the most innovating are those who are doing the most producing, because the problems innovators solve are most often found on the factory floor. Africa doesn’t produce many innovations not because they’re inherently not innovators, but because they’re not constantly faced with new production problems that need new solutions.

            You won’t figure out a better way to make a wrench if you’re not making wrenches. As economists have noted, areas of innovation coincide with areas of production. Ideally an area has a diversity of industries whose workers can cross-pollinate.

            I’ve done a lot of work for AMP connectors in Harrisburg PA. Harrisburg had a lot of German immigrants who were very good machinists, and in WW-II we needed someone to make an enormous number of highly sophisticated electrical connectors for the B-29 bomber, so the area thrived, as did the Aircraft and Marine Products Company. Then came IBM and its need for sophisticated connectors for computers, and then the personal computer industry was born. All need lots of sophisticated connectors, and they need new designs yesterday, produced in quantities of tens of millions.

            But companies could also save money by moving manufacturing to Malaysia, Indonesia, and China. When connector companies like AMP did that they started building an overseas locus of tools, equipment, machinists, knowledge, and all the other things it takes to support a center of innovation and manufacturing in that type of product. Now AMP has overseas competitors who undercut them with cheaper, slightly low quality connectors. Many of those are probably in your computer. Now Harrisburg has more people working in leisure than in manufacturing.

            I also programmed IBM’s PC production lines in Research Triangle Park, NC, at the facilities that have been making their PC’s since the days of the 4.77 MHz clock. RTP is another center of innovation with cross pollination. Anyway, a few years after I had the plant running, Chinese startup Lenovo came in and bought IBM’s PC production facilities so they could penetrate the US desktop market, as desktop PC’s aren’t profitable to fly across the Pacific Ocean, unlike laptops. Shortly after that Lenovo just shut down the factory and fired everybody. Sure, it would be nice if we could retrain coal miners to do sophisticated PC assembly, but they’d get replaced by Chinese anyway.

            But coastal elites, who despise manufacturing and industry, say we should all just become information workers, pointing to Silicon Valley. Yet if Silicon Valley outsources their coding to Bangalore and Mumbai, and their silicon foundries to Nanjing, where do you think all the innovation will start happening? It will happen where all the coders are, as they sit around after work coming up with new things to code, and it will happen next to the foundries where engineers are spending all day solving production problems and coming up with new ideas to work around existing limitations.

            Only people who don’t do anything would imagine that we can all just sit around thinking up new ideas without getting our hands dirty. Tibetan monks can sit around all day thinking up new ideas, so why don’t they?

            Sure, I may have some anti-foreign bias, but the Democrats better find that too or they’d be better off running for office overseas, because they won’t be getting elected here.

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            • This is a fine smart rant, and works especially well on a bi-partisan basis. But your caricature of leftists is really just in your head. This — But coastal elites, who despise manufacturing and industry, for example is just plain false. Even if the Democratic party were to fold up shop tomorrow, coal jobs would not return to Appalachia.

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              • “Even if the Democratic party were to fold up shop tomorrow, coal jobs would not return to Appalachia.”

                So the reason they all left, that was a good reason that we should be happy about? The situation we’ve got now, that’s an OK one that we have no problems with? All those out-of-work coal miners, they can go to hell ’cause they’re a bunch of dumbass hick racists?

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                • What the fish with the hostility towards me? I’m just pointing out a couple of facts:

                  A. Increased productivity is the only way a society becomes wealthier.

                  B. It is quick, easy and (frequently) wrong, at least in this country, to blame politics, and especially a single political party, for long-term economic changes.

                  There’s a tremendous amount of research on the boom-and-bust cycles of resource extraction. Or you can go visit ghost towns across the US and around the world that visualize the literature.

                  No, WVa miners should not be left to rot. They are our fellow Americans and deserve better than they are getting. With mines closing and unions collapsing, they are particularly ill-served by either employer-based or union-based healthcare.

                  It is particularly poignant to see how many of that group voted for a candidate who is now backing bills and budgets that will impoverish them further.

                  But it’s also worth a darkly humorous chuckle to see how many good stalwart Republicans are calling to subsidize unwanted jobs. I don’t see much difference between helping out miners and passing minimum wage increases.

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                  • “What the fish with the hostility towards me? ”

                    Out of the entirety of Turner’s post, you focused on “coastal elites” and replied with glib snark about “the jobs aren’t coming back”.

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                    • DD:

                      That is a remarkably ungracious reading. Let me requote my very first sentence:

                      This is a fine smart rant, and works especially well on a bi-partisan basis.

                      Point 2: By all reputable reports, WVa coal mining is following the same path as horse-related jobs in the era of the automobile. Why is it snarky to say that? And if I’m wrong, then show me! Point me to a couple of studies about turning around employment in coal-extraction jobs in Appalachia. I try to be open to learning new things.

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            • And that’s why Donald J Trump is President of the United States.

              Our manufacturing sector got gutted because we outsourced so much of it.

              Again, no. This is empirically false. Our manufacturing sector hasn’t been gutted. We manufacture more things than ever before. We export more value in goods than we ever have before.

              What’s changed is that our manufacturing sector does not employ people at the same level that it used to. Whether we like it or not, it makes no economic sense to hire an American to bolt two prices of metal on a car together when a robot can do it faster and to a more efficient standard. And it makes no sense to hire an American to assemble an iPhone, which is why all the people who design and engineer and market and finance Apple’s products sit in California, but the units are assembled in China.

              There are still jobs in manufacturing, just fewer and ones that require a bit of skill. There is a lot of reasons why we don’t have more of those, but that has nothing to do with the Chinese or the Mexicans. That has to do with the sum of our economic and political choices, coming from left, right and center.

              You can make up all the alternative facts you want. You can blame foreigners all you want. But the thing about reality is, it doesn’t care if you agree with it. So put your hope in Trump’s policies. And I’ll wait for you to come up with a way to spin how half a wall and some tough talk towards the Chinese saved our economy. I’m sure it will be entertaining.

              You are right about one thing. Donald Trump is president because an awful lot of people would rather blame their problems on foreigners than take some responsibility for their own situation. Good luck with that.

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              • You are right about one thing. Donald Trump is president because an awful lot of people would rather blame their problems on foreigners than take some responsibility for their own situation

                Maybe we just disagree about this but it seems pretty clear to me they blame politicians in both parties for enacting policies that shipped their jobs overseas and not the people those jobs were shipped too.

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                • Maybe we just disagree about this but it seems pretty clear to me they blame politicians in both parties for enacting policies that shipped their jobs overseas and not the people those jobs were shipped too.

                  So, Americans are blaming politicians, because the US does not have enough low-skilled, low-wage assembly work? And they’re doing it even though more of those jobs were automated than offshored?

                  That’s even worse than blaming foreigners, because we elected those politicians and we demanded that they do what they do, because we want cheap goods and don’t want to pay higher taxes to get the sort of industrial policy that could possibly provide more higher-skilled jobs.

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                  • That’s even worse than blaming foreigners, because we elected those politicians and we demanded that they do what they do

                    I don’t know what “demanded” has to do with anything. I mean, you’ve been around the block and know how politics works. But more to the point, what you said usedtamight have been true. Until this election cycle anyway.

                    Add: even going back to NAFTA, lots and lots of liberals – and lots of conservatives too – were opposed to shipping our jobs to Mexico. What was Perot’s famous line about that? “That giant sucking sound you hear is US manufacturing jobs being shipped across the border”?

                    It was a big deal, and still is.

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                    • I’m going to bow out of this, because I don’t see the point in having a conversation this detached from reality. Like I said, go look at the studies for yourself and you can see the effect of trade on our economy and on the number of jobs and on wages. It isn’t all a good story, but it just doesn’t resemble what you’re describing.

                      We just have a fundamental difference of opinion on the desirability of enacting destructive trade barriers for the primary purpose of keeping Americans in low-to-medium skilled manufacturing work.

                      tldr: Ross Perot is not an authority on trade

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              • Full disclosure: I’m a guy who automates the manufacturing jobs. Never had a single plant shut down because we automated it. Had plenty close because they moved production overseas.

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                • I can’t tell if this is a sincere misreading or a willfull one. I’ll assume the former. Automation doesn’t shut down factories. Automation makes factories run with fewer employees. This is the main reason that we manufacture more things than ever with fewer workers in the manufacturing sector.

                  Immigration is a net job creator. Trade is a net job creator. The specific case of trade with China was likely a net job destroyer, but the amount of jobs lost to Chinese trade is much less than the amount of jobs lost to automation. If you don’t believe me, go look for yourself. You’ll find a range of estimates on both counts, but if you throw out the extreme under and over-counting, the numbers will tell you the story.

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                  • Sorry, but the jobs automation destroyed were mostly lost in the 1930’s though the 1980’s, but manufacturing employment stayed high. There aren’t many places where a robot has replaced a person. What robots usually replace are older, heavier, more specialized machines. Take palletizing. You can use an older model palletizer that spins all the boxes into preset patterns for each layer, or you can use a robot. You have to program the robot, but you had to program the earlier machine too.

                    Most of the manufacturing jobs lost were lost to automated machine tooling, conveyor systems (to deliver parts), and quite often to fork trucks and other equipment. American manufacturing has always done that, pushing the envelope. But the big job losses, 5 million out of 17 million, only come after 2001 or so. I program the new plants. Aside from a tiny handful, maybe 2 or 3 out of a workforce of a hundred, those jobs didn’t go to robots or automation any more than they did in the 1980’s and 1990’s, when I was programming the new plants.

                    What happened was that factories just up and moved overseas.

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                • PS – there is something too perfect about finding out the guy who spends most of his time here complaining about how foreigners are taking our jobs and trying to kill us and leftist politicians are abetting them in gutting the American economy is actually in the business of doing the thing that eliminates more jobs than all those other things. As I always say, projection is one of the most powerful political forces.

                  By the way, I say keep up the good work. It makes no economic sense to be hiring American? workers to build things that can more efficiently be built by machines. Just like it made no economic sense to keep the majority of Americans workers doing farm work once machines and better technology made farming more efficient.

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                  • You are obviously not following my argument. I’ve been automating factories for 30 years. I’ve programmed IBM’s keyboard testers, printer lines, and PC production lines. Production equipment for Toyota and Northern Tel. I’ve programmed Dell’s laptop and printer lines (their production philosophies might as well come from different planets). I’ve programmed the sorters and conveyor systems for everything from tires to drugs (several billion dollars worth of drugs travels across systems I’ve programmed). I’ve also programmed the distribution systems for Nike, Neiman Marcus, Ocular Sciences (contact lenses), Corning Brockway (bottles), Vanity Fair, Hagar, UPS, and at least 100 other companies. I did the electrical design or programming for the factories that make or ship your soap, your hospital gowns, your candles, your blankets, your heat pump, your car seats, and your fried chicken.

                    I interface with the machine tools and robots that make all that production work. I know the factory floor. I know what’s going on there. It isn’t a question of automating or not automating, it’s a question of how and how much. Our automation doesn’t replace workers, it keeps them working more efficiently because 95% of what we do is move parts to and from the people who are doing a task. We keep them from wandering around pushing a cart, wondering where something is supposed to go or figuring out where something is. We let them work faster and more efficiently by eliminating menial tasks, which means they can get higher pay.

                    But they can’t get that pay when the whole factory up and moves to China because it’s cheaper to use Chinese for all those menial tasks than to use US workers and automated equipment.

                    We had one plant that would normally use an automated wire stripper, capable of stripping tens of thousands of wires an hour. In China they just used a bunch of Chinese with wire strippers like you’d buy at Radio Shack.

                    At some overseas plants the electricians had never even seen a Port-a-Band (a portable band saw), an automatic pipe bender, or many of the other tools we take for granted. They do everything with hack saws and hammers. As labor goes, it’s horribly inefficient, but as wages go, hiring more Indians is cheap, cheap, cheap.

                    And they can lure American manufacturers with deals that guarantee greater profits through slightly lower costs, plus access to the vast Chinese market. The stock holders make out very well, but the American workers lose their jobs, and thus the wages those jobs provided. From then on Americans are paying the Chinese to make the product that used to be made here. Instead of circulating within the US, the money goes abroad to support Chinese workers, who then start building nice houses and buying Chinese cars.

                    By your argument’s logic, Americans lost their jobs to electric drills, table saws, and screwdrivers. It doesn’t work that way because with hand tools a whole lot of things simply wouldn’t get made. You seem to think the jobs would go to the most inefficient country where the labor is the least productive. Not so. America led the world because we’d apply the most automation. We mostly did that from the 1950’s through 2000, and total manufacturing employment stayed high, with 16 million to 17 million manufacturing jobs throughout the period.

                    Now we’re down to 12 million manufacturing jobs. Yet nothing I’m programming has really changed since the 1980’s, and in many cases since the 1970’s. The control panels are a little smaller. The photoeyes are a little smaller. The motors, belts, and machine tools are virtually identical.

                    Another example. Toyota opened its Georgetown KY assembly plant in 1988. They’ve kept adding jobs ever since. By your theory they should have shed about 1/3 of their workforce to automation since 2001. They didn’t, because they were heavily automated from the day they opened the doors. I was there in the engine plant back then, and robots were running around all over the place. They constantly improve their process, which is itself a process, and they keep adding jobs and increasing productivity.

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            • Anyway, a few years after I had the plant running, Chinese startup Lenovo came in and bought IBM’s PC production facilities…

              What if we reword this statement to “Anyway, a few years after I had the plant running, American company IBM, who wished to exit the PC business sold its production facilities…”? Why paint the Chinese buyers as the bad guys and not the American sellers? Besides, PCs are rapidly becoming the buggy whip of the computing world. That factory probably wasn’t long for the world anyway.

              It’s a bit shortsighted to paint an overseas employer as the devil when it’s been American companies that have been shipping jobs overseas for decades.

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              • And there we get to the problem that’s causing union and non-union manufacturing works to abandon the Democrats and support Trump.

                You place equal blame on the American sellers. Donald did too. But there’s a not-so-subtle thing he’s doing that the Democrats and other Republicans weren’t. He didn’t blame the American workers, or just lump owners, management, and employees all together as “American company IBM, who wished to exit the PC business”. I can guarantee that the people working the production lines didn’t want their plant sold and closed. They didn’t hold a big employee meeting and decide to sell, the big suits in the corporation did. I’m sure they were richly rewarded for it. Donald is blaming both the owners and the trade deals and burdensome regulations, backed by both parties, that created an environment where a US company needs to move to China.

                The former Democrat base, factory workers, are all afraid their company will up and shift production to China when their owners sell out for cash. Their families are all afraid of that. Democrats tell them “globalization is good for everybody! Besides, we’ll give you welfare and food stamps.”

                Donald Trump is telling them he’ll fight for them, and go after the owners who try to move their job overseas. One of them is going to wonder where their loyal base went, and one of them is going to represent workers interests from now on.

                Side note:
                I’m not too upset that IBM closed. In fact, I can’t see how they kept their doors open as long as they did with such a management and production system. Dell was eating them alive, and Lenovo modeled itself on Dell.

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                • “Democrats tell them “globalization is good for everybody! Besides, we’ll give you welfare and food stamps.” ”

                  But–as we saw with the establishment rejection of Sanders–not a UBI or access to Medicare. The Democrats still think that you should work, they just want it to be a little more obvious that you’re singing for rich men in the hope they’ll give you crumbs from their table.

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                • I’m going to have to push back on the regulatory burden argument. Regulations don’t just pop up out of thin air, they’re promulgated in response to something, say like Upper Big Branch. Are regulations burdensome for those already doing the right thing? Probably, but those costs are going to be borne by someone eventually, whether through regulation, lawsuit, or bearing the expense individually to avoid regulation.

                  Oftentimes, there is someone in industry who is preaching self-regulation before government regulation. Anecdotally, I can relate that a former employer, who ran a call center consulting business, told me he advocated self-regulation for years, and was ignored. Thus was born the Do Not Call List.

                  As for the bigger picture, I think the problem may lie with the short-term thinking engendered in share price and Wall St. expectations. Boosting profits by shrinking payroll expense is quickly rewarded by Wall St.

                  If Congress imposes tariffs on foreign goods produced by workers making sub-U.S. wages, that would encourage companies to keep jobs in American. At the same time, costs go up for the American consumer, due to either reduced competition or increased prices, or both. What happens to the rest of the world, at the same time? Firms paying workers in Bangladesh or Vietnam are hardly in a position to suddenly start paying American wages. Smoot-Hawley seems poised to make a comeback, with similar results.

                  The current government seems ready to conduct a grand economic experiment, the outcome of which no one can even begin to guess.

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                  • Some regulations make sense. Some don’t.

                    Magicians have to register their rabbits with the federal government (which involves fees) and have a rabbit evacuation plan in case of disaster. You’d think a magician could somehow magically protect a rabbit, but the federal government demands more. They have to submit to snap home inspections and everything.

                    Under federal law, hotels and restaurants have to accommodate miniature horses. Why not regular sized horses, even ones that drink beer?

                    The Economist asks why Obamacare requires hospitals to use 9 different codes to describe parrot injuries. Why do they have three codes for injuries caused by flaming water skis? Why does it take 30 minutes to an hour to fill out all the federal paperwork for one hour of medical practice?

                    Writing a regulation may be a good thing. Writing 150,000 pages of them is probably a bad thing.

                    One of the things that kept IBM from being competitive in the PC business is their internal regulations. IBM does a postmortem on every failed project since its founding. Those failures are codified into business rules that say “You can’t do this.” Those books fill shelves, and some managers use those books to make sure nobody can do anything. For example, I was going to write their conveyor code using a piece of software that was version 1.2 Under IBM rules, no production software can be less than version 2.0. So they said our project would be written in IBM C. IBM C, though it met the version 2.0 requirement, wasn’t even ready for beta testing. The help screen merely said “Ron Parson’s hates this.” No joke. I hated it too. We ditched their C compiler as unworkable. Things go worse from there. What we weren’t allowed to do is use something that worked, because every time we tried some manager would find us in violation of some obscure rule from a failed project in 1960.

                    One of my friends (who holds the patent on sleep mode for PCs) was a manager on IBM’s game console project. They were about to launch when some other manager halted it because the power switch wasn’t orange. Under IBM rules, all computer main power switches must be orange. Why? Because it’s a rule. Get enough rules and you can’t do anything, which is why you’ve never heard of an IBM game console. They can’t make those. It’s a new rule.

                    And those are innovative business men in the computer industry. Imagine how bad things would be if we let law school graduates write rules.

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    • Eventually the first country has the advantage in not just rice and sledgehammers, but everything else, too, while the second country is reduced to producing corn and wheat.

      The Theory of Comparative Advantage does NOT claim that one country is better at producing something than another country. One country might be better, AT EVERYTHING, than another country, and trade is still a great thing for both.

      The Theory of Comparative Advantage claims that different countries produce produces with different levels of effectiveness internally.

      Example #1:
      Country B can produce one unit of product X with 2 units of inputs.
      Country B can produce one unit of product Y with 4 units of inputs.

      Country C can produce one unit of product X with 1 units of inputs.
      Country C can produce one unit of product Y with 2 units of inputs.

      There is no point in “B” and “C” trading, because in this very simple example neither has a Comparative Advantage over the other (yes, really). Both produce one Y at a cost of 2 X’s.

      Example #2:
      Country B can produce one unit of product X with 2 units of inputs.
      Country B can produce one unit of product Y with 4 units of inputs.

      Country C can produce one unit of product X with 1 units of inputs.
      Country C can produce one unit of product Y with 1 units of inputs.

      Country C produces EVERYTHING better than Country B, it is STILL in their interests to trade. B should be producing as much X as it can, C should be producing Y. Each should trade with the other.

      Free trade being Good for the Economy is to Economics what the Theory of Gravity is to Physics. The problem is, as always, that the politics and optics of Free trade are normally terrible. The benefits are invisible and widely dispersed across the entire economy, the negative effects can be focused on people who know darn well who they are.

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      • You neglect that country C can sell country B its ability to produce Y with 1 unit of input, stripping country C of that ability.

        Lets play a game.

        You start with ten factories and I start with none.

        I buy all your factories.

        Now you have no factories and I have ten. You got a big pile of money that you blow on an estate on the French Riviera, but I have ten factories. My ex-pig farmers are now employed as factory workers. Your ex-factory workers are raising hogs. I win.

        There is nothing in economics that says that doesn’t happen.

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        • There is nothing in economics that says that doesn’t happen.

          For one, or even 10, factories? Absolutely.

          Some of my ex-factory workers are looking at lifelong problems and they’ll never make back their economic footing. And they’re going to know who they are, and that’s why the politics of this is really nasty.

          But what you said doesn’t actually disagree with what I said. Free trade being Good for the Economy is to Economics what the Theory of Gravity is to Physics.

          The math of it (from hundreds of years of research involving millions of trials across hundreds of countries involving hundreds of thousands of scientists) says that the benefits to the economy are greater than those individual losses.

          More, when we look at trade we’re normally looking at benefits which are very widespread. Everyone in America having their clothing costs reduced sharply and so forth.

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          • I think you exaggerate the scientific studies. ^_^

            Free trade in products, or goods and services, isn’t the same as poaching factories with complicated sharing agreements and such. Free trade means the two parties benefit, not that everyone benefits. The Chinese general benefits, as does the American factory owner. The general then rounds up a bunch of villagers and forces them to work in his factory, where their regimented life sucks and they live in bunks in concrete barracks. So their life sucks. The US workers get tossed out of a high paying job and end up unemployed and on heroin, so their life sucks. But the two guys who made the deal are much better off for it.

            Perhaps you can convince some African Americans that hundreds of years of science and economics proves the slave trade benefited everyone – because it was free trade.

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            • This is the problem with current state-corporate capitalism. It isn’t about the worker producing something and accumulating the wealth, it’s become about a firm or larger entity that rent seeks the market for wealth.

              I largly agree and have worked many plants also. Very few are fully automated and still very much human driven. Also agree that the controllers and equipment have changed little other than size and cost. This doesn’t mean it will stay the way it has been. The costs to go to complete automation is becoming lower each year.

              The bigger problem with state-corporate capitalism is that it isn’t distributed like a base capitalism system. A portion of the wealth is continually captured by the larger entities and that wealth isn’t distributed, it becomes rather concentrated geographically. This doesn’t end well because the population doesn’t follow the wealth concentration. The velocity of money decreases around the worker population compared to a more base owner operated type of capitalism. The wealth ends up in stagnant pools trying to chase various investment bubbles around.(not even mentioning the effects of trade deficit at this point)

              This thing called free trade, haha.
              If this thing where operating more as a base capital system, each owner-operator along the route would get a significant quantum of wealth. The truck owner-driver that takes it to the docks. The dock owner that gets it to the ship, the ship captain, the owner of the other dock, the truck owner-driver that takes it to the retaile owner. That entire thoroughfare would be more expensive if the actual costs and wealth were distributed, but that isn’t how it works is it? The state-corporate entities produce that thoroughfare at a margin of the cost that owner operators could. Why? They can control/subsidise the tax money funneled to that infrastructure at the tax payers expense!

              And really it doesn’t matter that the whole damn thing could crater if something hinky were to happen in those crazy investment bubbles being blown up and bursting.

              The thing that matters in all you have talked about is the part that the workers didn’t want their factories moving away. That is something that is completely disregarded. You know it, I know it. Someone looking at the math and economics at 60,000 feet doesn’t know it.

              And here is where the economic semantics of this go to die. The great step of economic models have been built around demand. Demand that has been driven subjective value of something. There has finally been in the recent age a regard for subjective preference.

              So subjective value on the demand side has finally been acknowledged.

              Here is the blindspot.

              Where is the subjective value considered on the supply side? Where has the subjective value been considered about what somebody wants to do to produce a product or service?

              In base capital systems, there is plenty of niche for owner operators to choose from. In this state-corporate ever evolving automated contraption where is the subjective preference for the individual means of production accounted for?

              It is not.

              Burn it all down and start over.

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              • Good comment.

                One of the most pernicious things I’ve seen is what happens to companies that get bought up by holding firms and other purely financial operations. They tend to get neglected, bled dry, and sold off to some other financial firm. Innovation suffers badly, as do long term projects that flow from the factory folks knowing their product and business inside out. Opportunities are missed. Mind numbingly stupid decisions are made.

                Of course, this can also happen internally. One conveyor company we worked with had the founder retire, and he left the firm’s accountant in charge. The accountant had them build a special pneumatic lift table, and in operation it kept jamming. We found the problem was that his pneumatic cylinders were in such a mechanical bind that their O-rings were being totally destroyed. So he shows up on site and we tried to explain the problem, and he just could see it. He insisted that if we had enough airflow to the cylinder the aerodynamic drag of the air blowing through should cause the cylinder to move. We realized he had no idea how an air cylinder works. And he was designing their equipment. O_O

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                • Sort of like the guy who asked if we could wrap insulation around the high-pressure tank of a pneumatic system to stop it getting so cold when it operated…we told him that doing that was against the law (of physics).

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                  • I was on a job site and got a call from a conveyor engineer (mechanical) from another site, a drug distribution company in Cincinnati. He said that for about a week the conveyor system would just shut off without anybody having hit an E/stop, and that it was currently, and mysteriously, stopped right then. As I questioned him about the symptoms he noted that an orange light on the control panel was lit up. I said “What’s the light say?” He said “low air”. I told him to fix his air leaks, which I could hear hissing in the background. What a genius.

                    But one of the dumbest thing I’ve run across was from industrial engineers at IBM RTP. Our system was spread across two buildings, connected by a long causeway.

                    In one building they’d assemble the kit to build a PC, which was the case, a motherboard (they installed the CPU and memory at this stage), power supply, cards, and I think the keyboard and mouse. Anyway, the parts went into a large tote, the case was bungied on top, and the tote was then placed on a large plastic tray that carried a pre-printed barcode that told us where to route it in the other building for assembly and shipping. That tray would be later used to carry around the assembled PC before it got boxed up.

                    So the tote sitting on a tray went on a conveyor that took it upward through the causeway, which was a couple hundred feet long, into the assembly building where they’d put the parts together.

                    There, once the PC was assembled, it was placed back on the tray, while the now empty tote was put on a return line that would carry the tote back down the causeway into the kitting building for re-use on another PC. Then the PC in assembly was finally boxed up and the box was sent to the shipping system, while the tray that had been carrying it through assembly was also put on the return conveyor that would carry it back down the causeway to the kitting building. The totes and trays used the same return line to get back to kitting, and that return line only carried 60 objects per minute, the same as the identical conveyor heading the other way.

                    I kept telling them that the system couldn’t work as designed because there were only two conveyors in the causeway, one going in and one coming out, and they both ran at 60 objects a minute (which would be 240 feet per minute).

                    They couldn’t understand how the system would fail. I said, “Look. Your sending objects from kitting up the causeway as a tote stacked on top of a tray. We can convey 60 totes on trays a minute.” And they said “Yes, of course.” I said “In assembly you pull the tote off the tray and put it on the return line, and then later you put the tray on the return line.” They said, “Yes, what’s the problem. 60 a minute are going in and 60 are coming out.” I said “No, they’re going in as a tote sitting on a tray and coming back separately as a tote and tray, two objects instead of one. You’re going to end up with all the totes and trays stranded in the assembly building because we can send them up twice as fast as we can get them back.” Going up was 60 totes and 60 trays a minute. Coming back was 60 totes or 60 trays a minute.

                    They still couldn’t see it. They still kept arguing that their initial design was right. I insisted it would become a problem, and they said “Well, if it’s a problem we’ll deal with it later. We’ve found that it’s often quicker to put in a new line than spend the engineering hours designing something we might not need.”

                    About a month later when we started up the system. After about three or four hours their kitting building started running out of totes and trays, holding up production. They said we had some kind of design problem because we weren’t meeting rate. I said “I’ve been telling you about this for months. You’re going to have to use fork trucks to return half the totes and trays.” And in a few minutes the fork trucks started rolling. And they kept rolling – for months and months. They may have rolled till the Chinese closed the doors on the place.

                    Manufacturing engineers, fresh out of college. One of them was an ardent Young Earth Creationist, so I reckon the logical part of his brain got turned off somewhere.

                    The whole place was like that. They installed a $200,000 high speed 2-D barcode scanner at the top of an incline that fed their shipping system (and of course had to purchase a second $200,000 scanner as a backup). The barcode it read was printed at the bottom of the incline, about 50 feet away, and the only reason for the barcode was that they couldn’t get the IBM RS-6000 controlling things at the bottom of the incline to talk to the IBM mainframe controlling the shipping sorter at the top of the incline, less than 50 feet away. Instead of sending a little 30 character message from computer to computer, whether with sockets, DataQueues, an RS-232 port, or even Morse code, they installed a 2-D barcode printer and blew $400,000 on 2-D scanners.

                    Needless to say, after that, whenever I saw those “IBM is Connectivity” commercials, I’d crack up.

                    I normally wouldn’t say anything about all this, but the Chinese bought them and then shuttered the doors. They were probably mumbling “Holy F***!” in Chinese once they figured out how the place actually ran.”

                    Interestingly, our startup date was delayed for two days because the workstations didn’t have Hi-Pot (high potential) testers for the power supplies. Finally, in frustration, the higher ups called an emergency meeting to get to the bottom of the catastrophic delay. It turns out that they couldn’t get Hi-Pot testers because the gray-haired manager in charge of issuing the Hi-Pot testers had the authority not to give them any, and by gosh, he had decided to use that authority – because of something buried in one of those books of production rules.

                    In contrast, when Dell wants a new conveyor line installed, they want it running next week and they don’t seem to care if you have to commit numerous felonies and murder a couple people to make that happen.

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                    • Heh. One time, we had finished using some temporary tooling and decided to cut it up so that it would fit in the dumpster. As it was quite large and mostly wood, we decided that a chainsaw would be the suitable tool for cutting it up, and as it happens we didn’t have one. The shop manager asked the procurement guy for authorization to go to Home Depot and buy a chainsaw, and was told that purchasing of capital equipment and permanent tooling was a central procurement function, thank you, and central procurement would be doing all the buying of chainsaws that might happen.

                      He came back the next day having charged six hours of labor to our budget but without any chainsaws. Apparently, the Home Depot house brand of tools wasn’t on our Program Approved Equipment list and so the procurement guy wasn’t willing to buy any of it without management authorization–and he interpreted the “least cost” regulation to mean that he wasn’t allowed to buy a chainsaw from the brand that was on the list because it wasn’t the cheapest thing in the store!

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            • Dark Matter: The math of it (from hundreds of years of research involving millions of trials across hundreds of countries involving hundreds of thousands of scientists) says that the benefits to the economy are greater than those individual losses.

              I think you exaggerate the scientific studies. ^_^

              No, I’m not exaggerating. We have literally been looking into this for hundreds of years, with hundreds of countries, and so forth. This is one of the best researched topics in economics. The politics has always been ugly so generation after generation of scientists have always had the ability and interest to make a name for themselves by overthrowing the theory.

              When I compare it to the theory of gravity, I’m being serious. It’s *possible* that someone somewhere will win a handful of nobel prizes by overthrowing Free Trade as a Theory (just like with Gravity), but it’s not easy and my expectation is that we’ll see Gravity fall long before Free Trade.

              Free trade means the two parties benefit, not that everyone benefits.

              “Everyone benefits” because resources are allocated in a more efficient manner, and products are made more efficiently and cheaply. Unless you make your own clothing, you benefit from clothing being imported, that’s virtually all households, not “the two parties”.

              The general then rounds up a bunch of villagers and forces them to work in his factory, where their regimented life sucks and they live in bunks in concrete barracks.

              Are you seriously trying to claim life was better for Chinese peasants before trade 50 years ago when starvation was expected and malnutrition was omni-present?

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              • It’s important to keep in mind that all of the phenomena that appear to disprove the theory of gravity end up confirming it after all, with some subtlety about distributions of mass or momentum transfer or small forces acting over long periods that we weren’t previously aware of.

                Like, F = ma is never not true, we’ve just realized that m isn’t constant and a is frame-dependent.

                Similarly, it’s never not true that free trade increases overall wealth. The issue we’re faced with is, as you point out, how and to what degree do we distribute that wealth.

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                • DD,
                  And what will you do when free trade withers on the vine?
                  Can you even contemplate that?

                  And gravity is only constant if you believe in Dark Matter, which is stuff we can’t even SEE. (Yes, I’ve read the counterhypothesis. Published paper)

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                  • “what will you do when free trade withers on the vine?”

                    It won’t. It might not give us the results that we want–free trade doesn’t care if you die, just like gravity doesn’t care if old people have fragile bones–but it won’t “wither on the vine”, whatever that means in this instance.

                    “gravity is only constant if you believe in Dark Matter…”

                    Inconstant gravity is still gravity, though. Mass never does not attract mass.

                    And any solution thus far that “disproves” Dark Matter has been so handwavey and used so many complicated correction factors that it is functionally indistinguishable from Dark Matter.

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                    • DD,
                      Extensive Free trade between countries depends on transportation costs being cheap of course.

                      If oil costs enough, the ships stop moving.

                      Sooner or later, the jobs will come back to America (and some of them are back here already). At least that’s where I’ve put some chips.

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                      • “Extensive Free trade between countries depends on transportation costs being cheap of course. If oil costs enough, the ships stop moving.”

                        That’s not not free trade, though! That is simply trade not being chosen.

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                  • And what will you do when free trade withers on the vine?

                    Like everyone else, I’ll pay lots more for clothing, food, cars, electronics, etc. Anything that has a global supply chain will become problematic, anyone who does business that way will take a big hair cut.

                    Economic activity will take a huge hit that will make the Great Depression look small because our economy is far more trade involved than we were then. We’ll see negative economic growth for a long time.

                    There will be 2nd and 3rd order impacts from making everyone poorer that will also be ugly; we won’t be able to pay for entitlements, we’ll default on the debt, we’ll probably end the dollar as the world currency.

                    So yes, I most certainly can contemplate it, it’s even easy. What’s unclear is how the world reacts politically to something like this… as ugly as what I’m suggesting, politics might drive it to get even worse before it gets better.

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              • So, when Columbians, the Zetas, and the Sinaloans are free to ship crack cocaine and heroin into the US in unlimited quantities, everybody is better off! The Mexican farmers in mass graves are better off. The Americans hooked on crack are better off. The stores getting robbed by drug addicts are better off. The Americans who OD’d on heroin are better off.

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                • Only it won’t be the Sinaloan crime cartel. It’ll be the Altira Group and Monsanto and Johnson & Johnson and Kraft Heinz Co. Or some other above-board entity with the K Street lobbyists, the Wall Street bankroll, and the Wal-Mart quality logistics. They’ll be capable of paying producers more, refining and moving it more efficiently, and if they can operate above board, realizing a higher profit margin at a lower price to the end user than the current state of affairs. The Sinaloans will get squeezed out by the pressure of the competition.

                  The addicts will still be f[ish]ed at the end of the day because of the horrific toll substance abuse inflicts on its victims. We’ve seen the regard that such business entities have for alcoholics and lung cancer sufferers: give just enough money to charity so as to make the P.R. machine work. But there would be less need for street violence to protect turf rights and enforce the terms of extralegal transactions, and possibly higher tax revenues to boot.

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                  • I hate to presume what George was going for there, but seems to me he was mostly taking issue with DD’s statement that “Similarly, it’s never not true that free trade increases overall wealth.” This, of course, posits a theoretical free trade regime that’s never existed. I.e., one that includes an accurate price for negative externalities.

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                    • I think it is salient that Burt is saying something along the lines that there are cartels, then there are CARTELS. That brings a whole other set of negative externalities.

                      Of course I blame part of the drug problem on a pretty awful healthcare market that was distorted decades ago by centralizing medicine production and facilities. Again another set of negative externalities.

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                    • My point was simply that there are easy counterexamples to the idea that free trade always increases well being.

                      Heck, isn’t half the left insistent that Anglo-American corporations and Anglo-American imperialism raped half the planet?

                      Why would they think that if there isn’t a single example of a country that became worse off in some way because of trade? Why are they determined to bring down free trade in African diamonds if it makes the Africans better off?

                      It is also contradicted by the theory of “the curse of resources”, by which a major resource find in a non-Anglo American country, under a free trade regime, results in general impoverishment and some level of tyranny (whether benevolent dictatorship or brutal dictatorship).

                      If you’re unfamiliar with the observation, it holds that a country that was getting along okay finds some cache of resources that have a global demand, such as diamonds, gold, or oil. From a starting point of general economic health and equality, there’s a “_____ rush” where masses of people abandon their productive jobs for a chance to strike it rich. Anyone powerful enough to establish control over a share of the resource find gets a massive flow of foreign income, with which they bribe the masses, buy lots and lots of guns, and pay lots and lots of soldiers or militia fighters to expand their claims. The country becomes an unstable cess pit ruled by a powerful dictator or king, or a succession of warlords or military juntas.

                      Another counterexample is that some African countries refuse foreign aid because it creates poverty by upending their local markets and concentrating wealth in the hands of those who establish control over the distribution of the aid.

                      Basically, free trade doesn’t always happen in a free market, and a free market isn’t always helped by free trade.

                      Humans are complicated, as are their societies. A theory that completely ignores these complexities will have predictive failures.

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                      • “there are easy counterexamples to the idea that free trade always increases well being.”

                        If everyone’s underpants cost fifty cents instead of a dollar, wealth on a whole-economy scale has increased even if the underpants factory moved to China.

                        Remember that I said wealth. I did not say well being. That’s a different measure–and you can certainly argue that closing the underpants factory causes a larger drop in well being than is offset by cheaper underpants, but that isn’t what people are discussing when they talk about the beneficial effects of free trade.

                        “Why are they determined to bring down free trade in African diamonds if it makes the Africans better off?”

                        Considering that their efforts to stop free trade in conflict minerals have have demonstrably made things worse maybe they don’t, actually, know what they’re talking about.

                        “Another counterexample is that some African countries refuse foreign aid because it creates poverty by upending their local markets and concentrating wealth in the hands of those who establish control over the distribution of the aid.”

                        Hey, remember the part where I talked about how “[t]he issue we’re faced with is, as you point out, how and to what degree do we distribute that wealth”?

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                        • Remember that I said wealth. I did not say well being. That’s a different measure–and you can certainly argue that closing the underpants factory causes a larger drop in well being than is offset by cheaper underpants, but that isn’t what people are discussing when they talk about the beneficial effects of free trade.

                          People turn to “well being” arguments only because the math says they’re wrong so they don’t want to use math.

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                • So, when Columbians, the Zetas, and the Sinaloans are free to ship crack cocaine and heroin into the US in unlimited quantities, everybody is better off!

                  Free Trade is what happens when the Law allows trade to happen. The Drug war is an effort to prevent Trade.

                  Drugs in general are issues created via the lowering of world-wide transportation costs to almost zero.

                  No matter what we do Trade-wise (Free, Regulated, or Outlawed), the Drug problems are going to happen independent of that.

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          • More, when we look at trade we’re normally looking at benefits which are very widespread. Everyone in America having their clothing costs reduced sharply and so forth.

            Sure those American textile workers in the south benefited from have cheaper clothes, it just came as the expense of their jobs.

            Speaking of which, the public radio show Market Place had a segment last night about the effect of NAFTA on American textile factories and it wasn’t pretty.

            https://www.marketplace.org/2017/03/20/world/nafta-explained/if-were-going-talk-about-nafta-we-need-talk-about-your-pants-and

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            • Sure those American textile workers in the south benefited from have cheaper clothes, it just came as the expense of their jobs.

              That’s right, they’re the big losers in this one (unless of course they found other work that was the same or better), and everyone knows who they are.

              The winners on the other hand are everyone in the USA who buys clothing… the problem is they don’t understand that they’ve won.

              And of course, putting more money in the hands of everyone in the USA (because clothing is cheaper) also has multiplier effects, some of that money went into buying everything from cars to electronics…

              …and the people who sold that stuff and benefited indirectly really don’t understand that they’ve been helped a lot by FT.

              That’s why the optics and politics of this are terrible, even if the math says it’s great.

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  4. Smith makes it sound like this is the first empirical study of trade – as if trade economists had spent 250 years extolling the virtues of freer trade but hadn’t actually bothered to check before now.

    There is in fact a lot of empirical studies of the effects of trade, and they don’t square with Autor’s paper. Now that doesn’t necessarily mean Autor’s results are wrong but it does mean that, if the paper holds up, its more likely that this paper has identified something anomalous about this particular trade deal or something strange that is happening within part of the US economy.

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    • Exactly. It is quite likely that there was something special about the size and shape of China’s rise to global manufacturing power. It’s not every day that the world’s most populous country dramatically re-orients its economy in the space of about 30 years. It’s not even every century.

      There is something to be learned about the China example, but it certainly doesn’t give us any definitive answers on “free trade” writ large.

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      • Right. The paper itself (PDF) notes that China is sui generis and this didn’t happen when liberalizing trade with other countries, and that this is basically over, since China’s wages have risen to the point that there are no longer huge cost advantages to relocating manufacturing there.

        It’s also important to point out that the conclusion of this paper is not that free trade is bad, but that the adjustment to the shock took longer than expected. Because the effect was local rather than national, a big part of the problem is that workers don’t move:

        The ultimate and sizable net gains are realized only once workers are able to reallocate across regions to move from declining to expanding industries. Establishing the speed of regional labor-market adjustment to trade shocks should capture considerably more attention from trade and labor economists.

        If we’d had free trade with China all along, it’s likely that the shock would not have happened. It’s also likely, as Gabriel notes, that the slack in the labor market from the 2001 and especially the 2007 recessions played a role in hampering the adjustment.

        Furthermore, if you care about the welfare of Chinese workers even a little bit, this is still a huge net win. The gains to Chinese workers utterly dwarf the losses to US workers.

        Note also the chart on page 3 of the paper. The decline in manufacturing as a percentage of total US employment is pretty much a straight line from 1954 to 2009. The paper estimates a million manufacturing jobs lost from the China shock (and another one million non-manufacturing jobs in related industries), which is about 0.65% of the labor force, compared to a decline in manufacturing jobs on the order of about 23% of the labor force since 1954. Even if we look at the period 1999-2011 covered by the study, the China shock accounts for only about a sixth of the reduction in manufacturing employment as a percentage of total employment.

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      • jr,
        Yes, this study seems like it’s entirely missing the point of everything that’s happened in the last few years because it would rather look at trade.

        And I sincerely doubt that it is willing to study the effects of slave labor on the American economy.

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  5. There is the old saying about how government breaks your leg and offers you a crutch. That is much the way I see world economics. I depart often with neo liberalism because the current status of trade isn’t about freedom, but who is granting crutches to who. There is no natural equilibrium, everything is distorted by every social construct that can distort it.

    There has been a slow path dependency form on workers looking to social constructs to provide niches to participate in. This is backwards from the worker defining their subjective preferences in what work is, and how to innovatively apply that to a free market.

    There is no fight for base capitalism. There is just the social constructs herding it’s social sheep, shearing them all the way.

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    • I’m not sure about that. Seems to me that Powerful People often determine the constructs other people must live by. Now, surely at some final residue of analysis those people acceded to those demands, but only because (at that level of analysis) the leverage points worked in favor of acquiescence.

      The Leviathan may be comprised of assholes, but only because power is a real property in the world, irrespective of whether it’s based on a social construct or not.

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        • I’m not quite there yet, Joe. Autor talks about problems inherent (as he sees them anyway) with globalization. Trump rejects globalization and in fact was elected primarily to enforce limitations on both labor and capital “flexibility”. On your analysis, the former mitigates against one construction, the latter mitigates against another. But both are constructions, in some sense of that word. And because of that I don’t think the concept of constructions is a useful analytical tool in resolving this issue since there’s a sense in which both issues reduce to pure (unconstructed) self-interest. Of course, you might respond by saying that all the self-interested views in this political debate reduce to constructions, but at that point I think we need to find a better word to characterize what’s in play, one that distinguishes what we’re trying to highlight here.

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            • Teasing out the distinction between an unconstructed view of policy and governance, and a constructed one. Eg., I happen to think one of the practically necessary and formally legitimate functions of government is to mitigate externalities and maintain social stability. Both of those functions create slippery slopes, of course, even tho each of them can be justified (seems to me, anyway) by pure self interest on my part. I mean, I have to live right next door to these maniacs, right? I don’t want them fucking up MY action…

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              • Well lets start with the first parameter of policy. You have already defined the government as a parameter, so by default I assume you are deploying a force of aggression. When you produce a policy and are using aggression to the ends of that policy, you by default build the armed force of aggression against yourself, the government you built, and the policy. If there aren’t any maniacs messing up your piece of the action, there soon will be.

                so how is that working for negative externalities and social stability, are you getting what you want?

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                • Well lets start with the first parameter of policy. You have already defined the government as a parameter

                  No, I’ve defined self-interest as a parameter. And i’ve asserted, consistently with the view you advocate here – upon pain of contradiction! – that the analytical residue remaining after dismantling constructionism is pure, non-constructed, self interest. And I’ve additionally argued that self-interest entails governance. Not governance of the individual advocating government, of course (lord no!) but against the actions of other bastards who obstruct their freely determined self-interested goals.

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                  • Ah, ok.
                    I still can’t see where you are going with this, because if all social constructs have been deconstructed (including governance) then all you are left with is negotiating policy as individual constructs. Is that your primary concern/parameter is other self serving bastards?

                    I mean to say it’s a good one, and the one most brought up in these discussions.

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                    • There are lots of theories about the origins of “The Law”. One anthropological account I particularly like is from Mircea Eliade iwho argues that enforceable legal norms were established to prevent the reciprocal nature of violence. (I’m also partial to Mancur Olsen’s Stationary Bandit theory, as well, tho I think I’m the only one here who doesn’t think he’s insane.)

                      Which isn’t to say that Enlightenment arguments about enlightened self-interest and the role the State plays in furthering it aren’t compelling, of course. Just that those are more intellectually rather than causally motivated and I’m a sucker for a really good causal account. :)

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                      • What is a law if individual consent is not given to it? A law can be arbitrarily written by various factions, but what meaning does it have if one doesn’t find subjective justice in it?

                        If subjective justice isn’t found in it, then how is it supposed to stop violence?

                        This is why I think justice is more important than law. This is also why I think rule of law is a individual construct.

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                        • What is a law if individual consent is not given to it?

                          It’s the rejection of violence/power as a justification of purely self-interested outcomes. If some people don’t agree and act on that premise they get excommunicated. (Or incarcerated or killed, as the case may be.) Or not, of course (if you’re a barbarian acting that way to Others!!!).

                          I don’t see that as problematic at all, to be honest.

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                          • “It’s the rejection of violence/power as a justification of purely self-interested outcomes. If some people don’t agree and act on that premise they get excommunicated.”

                            I think I know what your saying here, but before I go further I want to make sure what you mean, so we aren’t talking passed each other.

                            Is there a clearer way of stating the above?

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                            • Sure. The idea is that the law (capital L) is a pragmatically justified set of enforceable rules necessary for the stable functioning of individual activity in a social setting. IOW, it’s not derived from apriori principles but from pragmatic constraints on people’s behavior as the consequences of those actions have revealed themselves over time.

                              Now, I’m not suggesting that every law conforms to that premise, of course. I’m making a (whadyacall…) a philosophical point about justifications which are causally grounded in the real actions and responses of people rather than derived from rationalism or a utopian ideology.

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                              • That’s much more clear, many thanks.

                                The first problem I see in the first paragraph is that of enforceable rules, which again leads to escalations of force. Even if that was replaced with something like ‘negotiated rules’ there is still the other problems.

                                I assume this framing is placing society as a/the dominant agent, and that agent is supposedly above the sovereignty of the individual?

                                So everything there meshes with people who, for whatever reason, favor society as the dominant agent.

                                This doesn’t work for people who don’t recognize the agency of society(or one step further ‘agents of society’) and also do not consent to society as an agent being the dominant.

                                So pragmatically speaking, it may be that the humans don’t see things along one homogenous perspective. Now if people are thinking differently on this basic level, is it a good idea to continually inject force of aggression into the conditions?

                                There is the other problem about how the people most wanting power to create and ‘enforce’ rules tend to be well…you know.

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                    • I still can’t see where you are going with this,

                      that may be the problem, Joe. I’m not going anywhere with this. From my pov, correctly or disastrously wrong, this is just my view of the descriptively accurate, empirically justified baseline of what we’re talking about. “Theories” emerge from there, so to speak.

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                        • You just may be built to see that order is the primary thing.

                          But now, you’re literally – like literally – begging all the questions in play. I don’t mean this to sound too antagonistic, since we’re actually having a nice discussion here about some pretty deep issues, but one of my constant beefs with ideologues is that they account for dissenting views by circularly explaining them away by their own ideological premises and terms.

                          So, I’d ask you this: is there such a thing as a non-ideologically-biased description of reality? Something so basic two disparate ideological advocates could agree on as just a basic fact?

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                          • “So, I’d ask you this: is there such a thing as a non-ideologically-biased description of reality?”

                            Outside of political science? Yes.
                            Inside political science? No.

                            “Something so basic two disparate ideological advocates could agree on as just a basic fact?”

                            I assume advocates are only people, so what I think you are saying, is can two individual with different idealogical holdings agree on just a basic fact?

                            Outside of political science? Yes.
                            Inside political science? I’m sure it depends on what the fact is, who created it, and how it is to be used, because facts are the most distorted in the arena of politics.

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                            • But if you believe that, Joe, then there’s no reason for us to discuss this any further since neither of us can be sure the other isn’t speaking from within a political context, a context where reality is defined in terms of political bias.

                              I mean, I’d like to think we both could agree that there’s a conceptual residue under which people just believe things outa pure, non-ideological self-interest or objectivity. But apparently even that minimal level of agreement isn’t possible. Even with a rejectionist like you, Joe. :)

                              (The allure of) Post modernism, 1; objective reality, 0.

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                                • Oh, I hear the raindrops. I just don’t know what they mean. On your view we’re both more interested in promoting our political ideologies than furthering a basic understanding of a shared reality. Or is it a shared conception of subjective experiences? :)

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                                  • Hey man, you were the first to use ‘ideological advocates’ and ‘facts’ in the same sentence.

                                    That and:
                                    ‘under which people just believe things outa pure’

                                    There is a point were I reach for my ‘social objectivity meter’ with one hand and a stun gun with the other.

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                                    • Another reason we shouldn’t continue on with the discussion. At least until we can get clear on what we’re talking about.

                                      Eg., if entertaining the suggestion that the law emerged causally from pragmatics rather than a social construct constitutes a hurdle you just can’t leap then we’re just gonna be talking passed each other.

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                                      • Law as a defensible concept emerged from pragmatics.

                                        However, no individual law can be defended pragmatically; we must turn to social convention to explain why, say, one form of killing is forbidden but another is not; why one form of uncompensated taking is acceptable but another is punished; why it’s okay to eat a pig but not a dog.

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                                        • Agreed on that, DD. There is an overwhelming consensus in the US is that killing another person in self defense is justified but we lack consensus – or any support at all, really – justifying honor killings. If we lived in a different society, we might find ourselves pushing against that one too. Or not.

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      • “Seems to me that Powerful People often determine the constructs other people must live by.”

        The corollary being that you can tell who’s powerful by looking for who’s determining the constructs.

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