It’s unanimous!

It would appear that Tyler Cowen, Greg Mankiw, and Matthew Yglesias all agree with Christina Romer that manufacturing isn’t special. Following the policy of not treating manufacturing as special has led to . . . the US steadily losing manufacturing jobs. But don’t worry, I’m sure it’s not the theory is that’s wrong.

If I had to make the argument that manufacturing was special for a few reasons, I’d argue:

1) From the viewpoint of a nation-state (at this point I’m aware that I’ve lost all mainstream economists, since borders seem "random" to them, but everyone else over the age of 4 should be able to follow this argument – economists may skip to the second point) manufacturing jobs seem to be zero-sum (there may be two jobs in China for every one in the US, or whatever, but some country is getting those one or two jobs and all the others are losing those jobs).

The fact that Steve Jobs creates Apple in California may be positive sum, but once Apple is created, someone is going to make iPhones. It’s either your country or another one.

On a related note, manufacturing jobs may be special in the sense that many many countries are willing to protect and subsidize them.

2) Manufacturing jobs are labor and capital intensive. We want people employed in serious, long-term occupations – not drifting from one Fed-induced bubble job (trading tech stocks to underwriting mortgages to digging for commodities to whatever) to another. I’d much prefer paying slightly higher prices for good and services than paying higher taxes for welfare benefits. Either way, I’m poorer, but the former way at least employs people instead of putting them on the dole. Also, industries that employ lots of people and require lots of capital would seem to be more hindered by regulations than other sorts of industries.

3) Manufacturing seems to be highly path-dependent, in other words new manufacturing jobs may only be viable in locations that currently have related manufacturing jobs. If you starting losing manufacturing jobs today, you’ll lose the manufacturing jobs of tomorrow as well.

Those are the obvious reasons (to me, at least) why manufacturing might be different. Unfortunately, Romer doesn’t consider any of them.

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10 Responses to It’s unanimous!

  1. Simon Grey says:

    “From the viewpoint of a nation-state…”

    I’m reading Fletcher’s most recent book on free trade, and he makes a similar point as well. Really, it’s pretty ridiculous how economists ignore the concept of a nation-state when discussing trade policy. If the nation-state doesn’t exist, then there can be no national/state foreign trade policy. And if the nation-state does exist, then shouldn’t it act in its own best economic interest?

    As to manufacturing, my general belief is that prolonged economic success is largely contingent on making things. Not that services are crap, mind you, but tangible economic are more basic than services, and their appeal is longer lasting, which is why you want to, at the very least, not discourage domestic manufacturing.

  2. 1) So ‘number of manufacturing jobs’ is zero-sum among nation states. But I have no reason to care unless [something else I actually care about] also scales with that number. What is that something else?

    Here’s another zero-sum example: Humans produce a certain, finite amount of waste. So, someone is going to ‘get’ the job of disposing of that waste (however that is done; obviously there are differently-efficient techniques). This, in and of itself, means I should jealously scramble for my nation-state’s ‘share’? Frankly, if some other nation-state were able to dispose of our human waste more cheaply, I’d say great.

    This is only slightly less true when we’re talking about ‘repeatedly assembling shiny black rectangles with silicon wafers inside’ than ‘disposing of human waste for 10 hours a day’; yes one is less distasteful than the other, but it is a matter of degree, not kind. I myself would want neither job, nor would I want it for my children.

    2) What do you mean ‘we’ prefer. Sure I prefer manufacturing jobs to either welfare or Fed-bubble-jobs (actually isn’t a manufacturing job a Fed-bubble-job too, if one has to craft special policy in order to nurture it?). But why is the only other alternative that-straw-man-over-there?

    Now I’d be all for removing the obvious barriers to more manufacturing jobs: minimum wage laws, union laws, regulations, etc. But, these are political non-starters no one is proposing. In practice, the only feasible path to ‘lots of manufacturing jobs’ here would be some sort of huge intentional government subsidy for it to ensure people a near-SWPL salary for doing it. You say that would be worth the extra cost of (EVERYTHING) because ‘we want’ those people employed in ‘serious’, long-term occupations. I’m not convinced by this bargain. I’m not even convinced it wouldn’t be cheaper just to pay those people to sit home playing videogames, like we essentially do in many cases now.

    Even if I were, why ‘manufacturing’? There are many artificial bubble-jobs we could artificially pay such people to do. Arguably, the TSA is such a program. So this need to subsidize long-term/stable work etc., even if true (which I don’t accept) doesn’t even make manufacturing per se special at all in the first place.

    3) Path-dependence: sure. But now you are talking about subsidizing (something wasteful) on the off chance that it opens up some vague, contingent-hypothetical down the road. How much am I supposed to pay for that (probability) x (probability). Meanwhile there are many things that are path-dependent; the internet evolved out of a Defense research project. WD-40 and Post-its were invented accidentally. Concepts in computing developed out of pure math from decades ago. Etc. You can’t uniformly subisidize (immediately wasteful/dumb thing X) merely out of fear that X could have turned out to be a precedent of (good thing Y) on the Technology Ladder of Society, for all X. You have to choose. So we’re back to square one, and nothing singles out ‘manufacturing’ as special to me in this regard.

    Why ‘manufacturing’ and not farming (will it help if I call it ‘agricultural manufacturing’)? Shouldn’t we pay a premium to ensure we have our own rice-paddy capability, and not leave it to the Asians to ‘win’ that zero-sum game?

    Etc

    The least-bad argument I’ve always heard was that ‘manufacturing jobs’ were something (a) reasonably well-paid that (b) you could give to a highschool graduate to do. But, that seems like a static snapshot economic description from a time gone by: they are just not that well-paid anymore, nor should they be, because technology has advanced that they can be done much more cheaply. So, someone doing a ‘manufacturing job’ is just not adding that much marginal value, so the idea that it’s a path to the middle class for Americans is a frozen-1950s-economy idea. It is not the 1950s. So, why should we covet such jobs so devoutly. I do believe in the nation-state and all, but I just don’t get it.

    • stephen says:

      Sonic wins on the zero sum argument, which is not an argument for why manufactoring jobs are special, rather, why we should care if they are.

      Anyway, are they? I really am tossed on this question. I still think so, but cannot back it up with much other than cherry picking the data – china, germany! –
      and some just so story about prosperity at time n being correlated with manufacturing at time 0. So, I still think it matters but am willing to be wrong. Its how I deal with being me.

  3. josh says:

    Manufacturing is an excellent career for the ineducable masses.

  4. Alex J. says:

    US manufacturing output has gone up and up. It’s manufacturing employment that has gone down. If you want more manufacturing employment, lower the (de facto) minimum wage.

  5. DW says:

    #1 doesn’t have anything to do with manufacturing. That’s just arguing against Free Trade. Is that your intent?

    #2 when it’s time to vote with their wallets (as opposed to blog posts), Americans and everyone else in the world vote for cheaper products.

    #3. This argument presupposes something different about manufacturing and does nothing to prove that presumption.

    I’m unconvinced.

  6. Dave says:

    I’m not so much for subsidies for manufacturing as I am against subsidies for Cathedral professions.

    Obama was asked to place an unemployed (manufacturing!) engineer. He “was told” that H1B visas are only used for “needed special jobs”.

    I am an engineer, and honestly it is my perception that in this country there are very few engineering jobs which are not directly or indirectly government positions.

    Yes, there is Silicon Valley – a few thousands. Nearly all the other jobs are defense or construction or direct government jobs.

    Isn’t it interesting that we “need” to import Indians and Chinese to be engineers, but no one is calling to import Chinese teachers (especially lower grades) lawyers or (non-science) professors? Why isn’t there a call to replace federal employees with cheap hard working Indians?

    Why aren’t cheaper Indians generating content for newspapers and the TV?

    Somehow, only the professions which are on the outside of the Cathedral iron polygon are those which are replaceable. Funny that.

  7. These technocrats would be filled with horror at the idea of their jobs/positions/agencies be given to anyone off the street by a literal national lottery because they presumably have a skills base that they would argue could only be acquired after long and hard work, (gently passing over connections, etc)yet they blithely dismiss there is the possibility of a skills base and a tech ecosystem which their foolish and arbitrary decrees are busy clear-cutting on these shores.
    If you have an idea for a new device, you need parts, you need a supply chain, and you need people who have honed their skills for decades. You need clusters of alike businesses that cross hire and develop skills in the whole workforce over time. You need friends who have the ability (exercised hundreds of times at work) who know what not to do and what mistakes not to make using your scarce startup capital for a learning curve. This touches on the path-dependency noted above.

    What it comes to is people with inferior skills and discipline being given the power to make policy and run (and ruin) the lives of people with superior skills and discipline. The smartest industrial technicians could fake the jobs of the technocrats. (Looking at the economy around us you could argue they couldn’t do much worse) The smartest technocrats could not fake the jobs of the technicians; their work would be scrap the first day. There is an honesty to facing the challenges Nature poses that calls out fakers.

    This works on an international level as well. All jobs are NOT equal, and all ways of spending money are NOT equally productive.
    A country that makes poor choices over time declines.

    Once upon a time the Industrial College of the Armed Forces was very particular to maintain mobilization capability in case of a major conflict.
    Perhaps nuclear weapons have made that need obsolete. Perhaps not.
    It is rarely wise to bet your lives on some academic’s theory.

    • asdf says:

      I’ve worked for big private companies, and I’ve worked for the government. One seemed no more efficient then the other, nor the people working at either especially more skilled or hard working.

  8. Dave says:

    The loss of manufacturing jobs is one of the main causes of the disappearance of the working and lower-middle classes in America. Since nobody that matters cares about that, it will continue. More cheap junk, more multinational profits. More average people with no prospects for the American Dream and no stake in a rotten society.

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