Tuesday, October 12, 2010

More Bad Economics

Tom Foley just can't understand why PolitiFact would pronounce Russ Feingold's assertion that free trade deals have cost Wisconsin 64,000 jobs to be half true.

Neither can I. I would call it "false" or, were I given that option and inclined to be more charitable, wholly unsubstantiated.

I would direct Tom to Frederic Bastiat who observed that the difference between a good and bad economist is the ability of the former to recognize the unseen.

Feingold's protectionism is the economic equivalent of young earth creationism. Virtually no serious economist buys it. If jobs are moved to where they can be performed more cheaply, the money that is saved does not disappear. We may no longer build typewriters or pay unionized workers premium wages for turning lug nuts, but the difference is invested and new jobs are created. This is true even if other countries engage in protectionist practices.

Looking at the net gain or loss in manufacturing jobs tells us nothing. The new jobs may or may not be manufacturing jobs and, of course, pacts like NAFTA are hardly the only - and probably not the principal - impact on the growth and decline in these jobs. Manufacturing jobs have been declining from well before the passage of NAFTA.

This is the creative destruction that Feingold and his supporters pretend they cannot understand.

25 comments:

Locke said...

"Feingold's protectionism is the economic equivalent of young earth creationism."

Thank you for that. I've been incredibly confused at the anti-NAFTA stuff spouting from the Democrats and Feingold in particular. Free trade is a decided issue. Protectionism lost. Hell even Sorkin's fictional West Wing characters knew it. Hearing "enlightened" individuals try and argue for trade barriers is just bizarre. Either Feingold is ignorant (which I don't believe for a second) or he's just pandering - grasping at straws because he's desperate. Creative destruction is a well-defined economic term, a concept easily understood by anyone who's taken a basic econ class.

The young earth creationism is just spot on.

gnarlytrombone said...

Looking at the net gain or loss in manufacturing jobs tells us nothing

Actually, it tells us at least one thing. We now have a free global market in skilled labor, but thanks to our stunted immigration policies we don't have a free market in university perfessering. That, in turn, keeps affordable education out of the hands of all those laid off factory workers.

As Mr. Creative Destruction himself said of Frederic Bastiat's wade into economics: "It is simply the case of the bather who enjoys himself in the shallows and then goes beyond his depth and drowns."

Anonymous said...

It's certainly true that Feingold is trying to exploit this issue for campaign purposes, much like candidates are doing across the country on a host of issues (see Ron Johnson, impact of HCR on Medicare).

But trade can hardly be boiled down to creative destruction vs. protectionism -- you either fully accept the former, or you're for the latter. Feingold has laid out a series of criteria, both on his website and in a bill he wrote, that he feels should be included within a trade agreement:

• Enforceable worker protections and the core International Labor Organization standards

• The ability for our country to enact and enforce our own trade laws

• Protection of U.S. public interest laws from challenges by foreign investors in secret tribunals

• Assurances that imported food meets U.S. food safety standards

• Requirements that trade agreements contain the same environmental standards U.S. companies must abide by

• Requirements that trade negotiations and implementation of trade agreements be conducted openly

We can agree and disagree on any of those points, but, of course, just not during campaign season (however, is there another season in politics?).

Dad29 said...

NAFTA may or may not have precipitated the loss of manufacturing jobs in the US--but Clinton's declaration of PRChina as "Most Favored Nation" certainly didn't help those jobs remain here.

Others have observed that denuding the US Government of the ability to establish tariffs against predatory mercantile-States is the equivalent of denuding the Government of the obligation to defend the shores. After all, money is both speech AND weapon.

By the way, large numbers of manufacturing jobs have disappeared due to increasing use of technology on the factory floor.
It's not just cheap labor, no regulations, no taxes, and currency manipulation.

John Foust said...

Why blame it on Foley? Re-read the PolitiFact. Re-Read Foley, for that matter, whose post and conclusion isn't so much about defending Feingold but instead criticizes the lousy analysis in this PolitiFact.

What sort of breakdown would you prefer? You think it's too Gableman-esque for anyone to only quote numbers for half of the sum? You want to show there's a net gain? Go ahead, bring out the facts. You think it's unkind for Feingold to quote estimates of the loss side of the equation? That a Senator from Wisconsin should be unconcerned with the particular type of losses that our major industries might suffer under any proposed national policy change? Is it relevant to consider that Wisconsin might suffer more than Illinois? Sure, we might creatively decimate the dairy industry, but those farmers will just need to re-tool before the snow flies, right?

I thought "creative destruction" described long-term waves of radical innovation, not on instant savings by outsourcing assembly to Mexico or China. But if you like, please go ahead and explain to me why RoJo is a subtle master in the use of economic terms, even though he admits he's unfamiliar with the Constitution. I'm afraid that RoJo thinks "laissez-faire" is French for "get out of the way of my largest campaign contributors and my fellow CEOs". He strikes me as a sort of Senator who would dedicate his time pressing for minor tweaks in tax law that would most greatly please the wealthy.

George Mitchell said...

Proof, once again, that if you type/talk long enough you will say something foolish and demonstrably untrue:

"...[E]xplain to me why RoJo is a subtle master in the use of economic terms, even though he admits he's unfamiliar with the Constitution."

Anonymous said...

What, exactly, are you implying about Young Earth Creationism, Professor? If I didn't know you better I almost thought you were dissing it there for a moment. You're sounding almost, well, liberal.

Clutch said...

We may no longer build typewriters or pay unionized workers premium wages for turning lug nuts, but the difference is invested and new jobs are created.

I missed your empirical evidence that these particular job losses and subsequent savings have created [specific number n] other jobs in Wisconsin. Was this really intended as a rebuttal of Feingold's specific and statistically-based claim, or just as a public profession of faith in the benefits of exporting jobs to other countries?

Looking at the net gain or loss in manufacturing jobs tells us nothing.

Umm. No. It tells you about domain-specific gains or losses; this is valuable information (for those honestly interested in understanding an economy, I mean). And it tells you how badly affected even the best-case overall job scenarios will be by the fiscal and social costs of a transitory workforce and associated upheavals in people's lives. Do you not understand that, or do you "pretend you cannot"? (Speaking of attributing dishonesty to all of Feingold's supporters, isn't it about time for another post lamenting the lowered courtesy of public discourse?)

creative destruction

I think either you do not know what this term means, or you are confused about its potential relevance to the issue at hand.

Anonymous said...

We have become expert in redistributing our manufacturing jobs around the world. Now, if we could figure out how to do the same with lawyers.

John Foust said...

Mitchell, RoJo's grilling by the Rock River Patriots is well-known. "Five or six times" he says he's read it. Here's what RedState had to say. Would you be happier if I linked to HuffPo and NYT stories? I think not. And it's not as if a rural TEA group is likely to have many actual Constitutional scholars, you know, on par with your average Con Law prof. But we don't hear critique of RoJo's Constitutional comments from the conservative law professors, do we?

Dad29 said...

Now, if we could figure out how to do the same with lawyers

Preface: not only is Rick an honest guy, but I do NOT--repeat: NOT--suggest that Rick is part of the 'club' here...

Having said that, let's speculate.

Might it be too cynical to suggest that "licensing" restrictions imposed by Wisconsin (and other States') lawyers are....ahhh.....somewhat anti-competitive?

Why can't PRChina or India-based lawyers work in WI courts at, say 30% of the usual fee-structure?

Certainly, if one believes the "import-all-the-brains" shills, the Indian/Chinese folks are extraordinarily bright and hard-working--far more so than US natives.

So certainly, they could pass the bar, right?

And given that 90% of legal work is not done 'on-site' in courtrooms, and only about 25% is done face-to-face...

Whassamatta that?

John Foust said...

Cheese Louise, Dad29, please stay on topic. Can't defend the Politifact, so you want to start talking about the high price of attorneys? Try doing business without one.

Your Chinese attorney will be in court via teleconference? Or will they live here? What makes you think an excess of attorneys will lead to lower per-hour rates? How low can any professional consultant go, even in unlicensed jobs?

Even if we removed costs such as malpractice insurance, health care, office space, support staff, advertising, CLE, and wardrobe, how low could they go? Why does law school cost so much, if the Professor is getting free lunches from the Federalists and WPRI?

Anonymous said...

Dad29 -

I agree that the free market approach should be applied to law.

If we are striving for justice we should be looking to make the changes necessary to achieve it.

Perhaps, the outside world looking in would help.

George Mitchell said...

Foust claimed Johnson "admits" to being "unfamiliar" with the Constitution. His citations don't justify that claim, one that Feingold lamely put forth in the first debate. Johnson effectively rebutted it. BTW, the Constitution is a complex document. Jurisprudence surrounding it is extensive. If one suggests as much one does not admit to being unfamiliar with it.

AnotherTosaVoter said...

Is either party good at anything? The Dems don't get creative destruction, while your party shows its concern about deficits by supporting $4 trillion in tax cuts and a couple hundred billion in vague spending cuts.

A pox on both their houses, I say.

John Foust said...

George, watch the second YouTube embedded video on the RedState page I linked to. Is that not literal enough? Isn't that what Feingold quoted?

I'd even argue that RoJo was about to say he'd read the Constitution only three times, but then he stumbles and says "five or six times".

No doubt the document as amended is complex and subtle, especially if you study what the courts have done. You think RoJo has enough understanding of it to qualify for the Senate job? Does Feingold understand it better? Isn't that an important part of this job?

George Mitchell said...

"Does Feingold understand it better?"

Most elements of Senator Feingold's signature (and only?) legislative accomplishment have been declared unconstitutional.

John Foust said...

You're chicken, George. You are not willing to admit that RoJo is pretty clueless and/or hand-fed on the Constitution, and that your average lawyer or our experienced Senator knows a bit more. While McCain/Feingold may test the USA's love of free speech, on the whole I'd trust Feingold to understand Con Law issues a hell of a lot deeper than RoJo.

George Mitchell said...

Chicken? :)

One of the things I admire most about Ron Johnson is his candor. Unlike long-term incumbents of all stripes, he talks openly about subjects where he will seek new information and expand his base of understanding. In any event, this election is about the difference between his core principles and those of Russ Feingold.

John Foust said...

Uhm, yeah. Those core Constitutional principles he's visited thre... five or six times.

"I might not know much, but I'm willing to learn" might be a good answer for a wet-behind-the-ears job applicant, but it's not a good response when you're running for Senate.

Anonymous said...

"Where in the Constitution is the separation of church and state?" "You're telling me that's in the First Amendment?" -- Christine O'Donnell

And these people profess to seek to restore us to the principles of the founders? If they take over Congress, "a long dark night of barbarism will descend, unbroken even by a star of hope, unless we conquer, as conquer we must, as conquer we shall." Democrats and independents, thinkers of all parties, arise! We cannot possibly vote Ron Johnson, Sharron Angle, Christine O'Donnell, and their ilk into office! To the phone banks!

AnotherTosaVoter said...

I for one cannot vote a Republican into office until they provide a fiscal plan that does not represent the South Park Gnomes' business plan.

Step 1. Cut taxes
Step 2. ?
Step 3. Balanced Budget!

Plus the reasons anonymous mentions.

What a goddamn joke.

Anonymous said...

Current polling trending toward a Feingold victory renders this discussion mute. It is refreshing to see that Wisconsin voters have seen and heard enough of Ronald Johnson to recognize his empty platform for what it is.

AnotherTosaVoter said...

The article about your candidate in today's paper was thoroughly embarrassing. Blaming the CRA for the housing bubble? Claiming revenues rose under Reagan while ignoring nearly a dozen tax increases during his term? Crediting the economy of the 1990s to Reagan when everyone knows it was the deficit reduction passed by Bush I that led to lower interest rates?

I'm sure he's an intelligent enough guy, but he comes across as someone who knows absolutely nothing about politics or government and agreed to just keep repeating whatever talking points are put in front of him.

Democrats are pretty awful, but I honestly and sincerely see no evidence that your party is serious in any way about governing.

Patrick said...

Skilled manufacturing jobs move, and the value saved from less expensive man-hours is preserved as -those dollars- are reinvested, which therefore guarantees that some kind of menial, part-time, big-box retail/food-service/medical billing/legal paper-pushing/endlessly-lobbying-fringe-concerns-as-Paper-Tiger-finishes-circling-the-drain hours of valuable labor are created. And now lets all hold hands and pretend the value of our currency is necessarily static, determined by something other than collective perception, and absolutely insulated from the harsh and fickle realities of everything from the logistics of limited natural resources, the failure of information economy as the internet turned free-for-all, and, most of all, of course, the crumbling foundations, structural and human, of the one nation hell-bent on blazing the global trail of disgenesis in all forms. Lets all point to the insular language memes of economic theory as though the invisible hand of the market has ever, necessarily, by virtue of the inexorable laws of physics, or elaborate artifice of man, had grasp of some bulwark against the inescapable gravity of entropy. And bonus points if you can do all that while ridiculing young earth creationism, as it was not only a belief central to so many of the culture warriors the purveyors of trickle-down-in-a-realpolitik-vacuum preyed upon, relied upon, and ultimately surrendered to in order to reinvent the right and keep their party alive- it is also the only theory of creation in which sufficient, arbitrary magic exists which might somehow, for some reason, sustain the primacy of a narcissistic, masturbatory empire no longer willing to make or offer the world anything of real, sustained value, and barely able to go through the motions of deceptions and self-delusions which make our shiny, shaking distractions worth their weight in wampum.