4 ms·

The US outsourced its manufacturing to China in the name of comparative advantage. Bob bakes bread, Alice grow apples. Everyone is better off because of specia

The US outsourced its manufacturing to China in the name of comparative advantage. Bob bakes bread, Alice grow apples. Everyone is better off because of specialization. In Thomas Friedman's latest nyt column, he refers to China's manufacturing dominance as a play to de-industrializing other countries. It may just be globalization is incompatible with political realities.

soVeryTired 2y ago
Or… Bob makes bread, Alice grows flowers. Alice needs bread; Bob likes flowers but can go without if he wants to. Who’s going to come off worse if they have an argument?
- chronic7300690 2y ago
  > Who’s going to come off worse if they have an argument? The US. But 4 year election cycles and quarterly earning reports are incompatible with long-term planning.
  - ericmay 2y ago
    On the other hand, long-term planning is susceptible to disruption and unforeseen events, and when we have long-term government plans they have a way of taking on a life of their own and defending themselves even if they have outlived their usefulness. Everything has trade-offs.
constantcrying 2y ago
>Bob bakes bread, Alice grow apples. Everyone is better off because of specialization. America is 300 Million. Europe is almost a Billion. These populations are more than large enough to specialize in everything. >Everyone is better off because of specialization. Why?
- creer 2y ago
  > These populations are more than large enough to specialize in everything. My impression is that population size is not very relevant in the math of trade specialization profit. It's still more profitable to play on relative strengths and weaknesses. You can find other things to worry about like security (from droughts and earthquakes perhaps), or political or strategic desires. In particular, trade is likely beneficial even when local production would be cheaper than remote production - just because there are other things that can be done localy and even stronger (like phone games or advertising-oriented browser feature destruction /s).
  - constantcrying 2y ago
    Why would European population of almost a billion people need to specialize on anything? What would it even specialize on. What does that world need that there need to be 10% or the world working on it? >In particular, trade is likely beneficial even when local production would be cheaper than remote production - just because there are other things that can be done localy and even stronger This only matters if you can not do both. If your population is large the amount of things which it can do especially good can easily be exhausted before you run out of people. I don't even see how you can specialize. What does China specialize in? (Before answering, think about the things which China is not trying to produce or the services it is not trying to perform. Can you name even one?)
    - creer 2y ago
      "Specialize" is not quite the right word. In trade economics (from the very crudest level), trade is beneficial to BOTH parties EVEN when etc etc etc. i.e. higher profit. It's really hard to beat trade. It's not that anyone needs to specialize as in "otherwise it won't work". It's that it's more profitable and so people will tend to prefer that plus some extra money in their pocket. And it's not specialize as in only do wine, cheese and perfume and nothing else. It's systematically favor some things that you are relatively better at than others, and trade for the others (not even 100%, you can export some plastic parts and import some similar plastic parts at the same time). Even if the other country could themselves be better at it. So for France, engineering of all kinds, wine, cheese, perfume, meds, etc but also any manufacturing that by chance has gotten and remained strong (say, like airplanes, some electrical equipment, whatever else that really any other country also could possibly manufacture).
ren_engineer 2y ago
comparative advantage is disproven at this point, because economists are failed math majors who don't account for the innovation flywheel effect and general network effects. Silicon Valley software industry happened because of the proximity to the existing hardware industry there. Same thing for other forms of manufacturing and the US gave it away in the name of short term profits
ajb 2y ago
Ironically to UK probably make that mistake first. A lot of manufacturing moved to Hong Kong, which was a British Territory until 1997. During the reform of the Chinese economy, Hong Kong invested in factories on the mainland. Then of course it was handed back to their jurisdiction.
- hintymad 2y ago
  UK probably made that mistake first by moving lots of manufacturing to their colonies, like North America and later the US. The UK said the same thing the western world said about China: they built low-level low-quality stuff, and we focused on the high-value manufacturing. But guess what? Smart people are everywhere, and ambitious people will not build "low-quality stuff" forever. Sooner or later, those who sweat on factory floors will have more know-how than those who enjoy draw boxes in a cushy office. Indeed, those who know only how to draw boxes will soon find that even their boxes, no matter how pretty, will not be relevant.

soVeryTired 2y ago

Or… Bob makes bread, Alice grows flowers. Alice needs bread; Bob likes flowers but can go without if he wants to. Who’s going to come off worse if they have an argument?

chronic7300690 2y ago
> Who’s going to come off worse if they have an argument? The US. But 4 year election cycles and quarterly earning reports are incompatible with long-term planning.
- ericmay 2y ago
  On the other hand, long-term planning is susceptible to disruption and unforeseen events, and when we have long-term government plans they have a way of taking on a life of their own and defending themselves even if they have outlived their usefulness. Everything has trade-offs.

constantcrying 2y ago

>Bob bakes bread, Alice grow apples. Everyone is better off because of specialization. America is 300 Million. Europe is almost a Billion. These populations are more than large enough to specialize in everything. >Everyone is better off because of specialization. Why?

creer 2y ago
> These populations are more than large enough to specialize in everything. My impression is that population size is not very relevant in the math of trade specialization profit. It's still more profitable to play on relative strengths and weaknesses. You can find other things to worry about like security (from droughts and earthquakes perhaps), or political or strategic desires. In particular, trade is likely beneficial even when local production would be cheaper than remote production - just because there are other things that can be done localy and even stronger (like phone games or advertising-oriented browser feature destruction /s).
- constantcrying 2y ago
  Why would European population of almost a billion people need to specialize on anything? What would it even specialize on. What does that world need that there need to be 10% or the world working on it? >In particular, trade is likely beneficial even when local production would be cheaper than remote production - just because there are other things that can be done localy and even stronger This only matters if you can not do both. If your population is large the amount of things which it can do especially good can easily be exhausted before you run out of people. I don't even see how you can specialize. What does China specialize in? (Before answering, think about the things which China is not trying to produce or the services it is not trying to perform. Can you name even one?)
  - creer 2y ago
    "Specialize" is not quite the right word. In trade economics (from the very crudest level), trade is beneficial to BOTH parties EVEN when etc etc etc. i.e. higher profit. It's really hard to beat trade. It's not that anyone needs to specialize as in "otherwise it won't work". It's that it's more profitable and so people will tend to prefer that plus some extra money in their pocket. And it's not specialize as in only do wine, cheese and perfume and nothing else. It's systematically favor some things that you are relatively better at than others, and trade for the others (not even 100%, you can export some plastic parts and import some similar plastic parts at the same time). Even if the other country could themselves be better at it. So for France, engineering of all kinds, wine, cheese, perfume, meds, etc but also any manufacturing that by chance has gotten and remained strong (say, like airplanes, some electrical equipment, whatever else that really any other country also could possibly manufacture).

ren_engineer 2y ago

comparative advantage is disproven at this point, because economists are failed math majors who don't account for the innovation flywheel effect and general network effects. Silicon Valley software industry happened because of the proximity to the existing hardware industry there. Same thing for other forms of manufacturing and the US gave it away in the name of short term profits

ajb 2y ago

Ironically to UK probably make that mistake first. A lot of manufacturing moved to Hong Kong, which was a British Territory until 1997. During the reform of the Chinese economy, Hong Kong invested in factories on the mainland. Then of course it was handed back to their jurisdiction.

hintymad 2y ago
UK probably made that mistake first by moving lots of manufacturing to their colonies, like North America and later the US. The UK said the same thing the western world said about China: they built low-level low-quality stuff, and we focused on the high-value manufacturing. But guess what? Smart people are everywhere, and ambitious people will not build "low-quality stuff" forever. Sooner or later, those who sweat on factory floors will have more know-how than those who enjoy draw boxes in a cushy office. Indeed, those who know only how to draw boxes will soon find that even their boxes, no matter how pretty, will not be relevant.