Categories: Andrew Coyne, Capital Read, Uncategorized

The Iowa car crop

by Andrew Coyne on Thursday, September 16, 2010 1:48pm - 0 Comments

I’m borrowing this from Mike Moffatt, who got it from Stephen Gordon, who cut-and-pasted it from Stephen Landsburg, who was quoting David Friedman, but it’s precisely relevant to the current discussion about jobs and jets and whether we should build things here or overseas:

There are two technologies for producing automobiles in America. One is to manufacture them in Detroit, and the other is to grow them in Iowa. Everybody knows about the first technology; let me tell you about the second. First, you plant seeds, which are the raw material from which automobiles are constructed. You wait a few months until wheat appears. Then you harvest the wheat, load it onto ships, and sail the ships eastward into the Pacific Ocean. After a few months, the ships reappear with Toyotas on them.

International trade is nothing but a form of technology. The fact that there is a place called Japan, with people and factories, is quite irrelevant to Americans’ well-being. To analyze trade policies, we might as well assume that Japan is a giant machine with mysterious inner workings that convert wheat into cars.

Any policy designed to favor the first American technology over the second is a policy designed to favor American auto producers in Detroit over American auto producers in Iowa. A tax or a ban on “imported” automobiles is a tax or a ban on Iowa-grown automobiles. If you protect Detroit carmakers from competition, then you must damage Iowa farmers, because Iowa farmers are the competition.

…It is sheer superstition to think that an Iowa-grown Camry is any less “American” than a Detroit-built Taurus. Policies rooted in superstition do not frequently bear efficient fruit.

Sometimes economics makes me weep it’s so beautiful.

BONUS MORAL: Moffatt sums up,

“either way, the F-35s will be obtained with Canadian labour. The question is, will it be done directly or indirectly through trade?

And obviously we’d like to do as little work as possible to obtain them, right? Because with the time we save, we can be doing other things. So the notion that we should structure the contract in such a way as to “create” as many jobs as possible has it exactly backward.

Tags: aerospace, F-35, protectionism

More by Andrew Coyne

Jan

You're working overtime proving you're a Con bot. Can you give it a rest – some of us are interested in the subject.
Phil_King

Andrew, you old softy you! LOL

I have to say though that the example really is quite succinct.
alfanerd

That's a wonderful point, thank you for that Andrew.

Of course, the "second technology" doesnt involve bloated unions with overpaid workers, so that's why lefties dont like it.

Robert McLelland: I hear there's a jew somewhere who's not being accused of crimes against humanity – quick quick, go do something about it.

http://intensedebate.com/people/Ottawa_Centrist Ottawa_Centrist

American wheat farmers are subsidized, so i'm sure those dastardly group-think lefties still enjoy parts of the example.

Dot

“either way, the F-35s will be obtained with Canadian labour. The question is, will it be done directly or indirectly through trade?

More likely high tax revenue from out of control oil sands development and high commodity prices, but that would be too economical with the truth.
Style

One problem with that example, of course, is that America doesn't really export as much as it imports…The other problem is that it's a static model, with no learning or industry growth.
Emily

LOL that's hilarious!

You can rationalize anything if you try hard enough.

RagingRanter

Actually it is quite a good explanation of how international trade works, and how protectionist policies don't. But of course that is completely lost on you.

Emily

Actually I'm involved in global trading everyday, but I'm sure that's beyond libertarians like yourself who don't even understand the old system, much less the new one.

ex-canuck

Dear Emily, you are slipping. Your post has no Harper bash. What gives? Have you suddenly got religion?

Style

"we’d like to do as little work as possible to obtain them, right? …So the notion that we should structure the contract in such a way as to “create” as many jobs as possible has it exactly backward."

Exactly – if there's one thing Canadians don't need, it's jobs. There must be a way to make your point that doesn't come across as boosterism for higher unemployment…

RagingRanter

If you can prove that the extra money spent attempting to maximize jobs creates more jobs than it destroys (i.e. that the net benefits outweigh the opportunity costs) then you'd have a point. Since opportunity costs are very real, yet completely unknowable, you don't have one. If creating a job here destroys one there, then you haven't created any net new jobs, plus you've just spent more than you needed to. That's the point he's trying to make.

Style

I think Andrew's point is that we can all have more wheat and cars if we follow our comparative advantage. But, weirdly, he's written it as if he thinks Canadians would prefer to sit home with their beer and popcorn than have paying jobs. I'm not sure why you wrote that opportunity costs are unknowable – they usually are known and are pretty important to the theory of comparative advantage.

Bob

That's a really disingenous way of reading what he wrote.
http://www2.macleans.ca/category/blog-central/national/andrew-coynes-blog/ Andrew Coyne

When I say "with the time we save we can be doing other things," I'm talking about the economy as a whole. The "time we save" is the labour released from one industry; the "other things" is its absorption into others. That's not an instantaneous process, but it's made very much slower and therefore ultimately more wrenching by doomed attempts to trap labour in uncompetitive industries.
You (and other commenters) are mistaking aggregate employment for employment in any particular industry. Aggregate employment is determined by the intersection of monetary policy and labour markets: the Bank of Canada can get unemployment down to its non-inflationary rate, below which it can only be reduced by measures that improve the functioning of labour markets.
Trade policy, on the other hand, has no long-term effect on overall employment, good or bad. It can affect only the quality of jobs: how productive, and therefore how highly paid.

Style

If trade policy has no effect on overall employment, why do people still complain about Smoot-Hawley? Or exchange rate manipulation?
Out There

When I say "with the time we save we can be doing other things," I'm talking about the economy as a whole. The "time we save" is the labour released from one industry; the "other things" is its absorption into others.

Hmmm. Interesting argument. Two questions, which may have obvious answers:

- How easy is it, in practice, to absorb labour into "other things"? In this society, retraining is often the obsolete labourer's responsbility, and may be too costly. Or is the timeframe we're looking at here the time it takes for obsolete workers to become too old to work, and for younger workers, trained in the "other things", to take their place? (One of the not particularly comforting things about larger-scale economic trends is that they often are longer than the average human life span.)

- Are there countries, or regions, that, for some reason or another, just are not capable of developing a comparative advantage in anything? The international trade model seems to assume that everybody's going to wind up good at something, and therefore that everybody wins. It would be wonderful if this were true; I'm not sure it is.

I'm sure there are serious answers to these questions. (I'm not being snarky; I just haven't fully grasped this concept.)
Style

I think you're basically right about the labour point. I don't know if Krugman makes the point in the linked article, but comparative advantage isn't about being good at anything, it's about being less bad as something compared to your performance on other things. Like Steve Jobs might be much better at mowing the lawn than you are, but you suck so badly at conceiving of new technology that we're all better off if he hires you to mow his lawn to leave him more time to dream up new Apple products.
Out There

But Steve Jobs might be better off hiring somebody else to mow his lawn other than me. I might, theoretically, not be good enough even to get hired to do the thing I'm least bad at.

Or, to put it another way: there might be fewer jobs out there than people to fill them.

This is the theme of Kurt Vonnegut's "God Bless You, Mr. Rosewater", as I recall – what happens to people who aren't of any use?
Style

As I recall, you hire them to catch flies with sugar water.

I think this might show the limits of making an analogy between people and countries. What would an "unemployable" country look like? How would protectionism make that "unemployable" country better off?
JustinWordswrth

They die or live off charity.

Two obvious examples would be babies and severely disabled people. Both can survive only at the expense of other people.

We can either make direct payments to these people in the form of charity, or we can set their cribs and wheelchairs next to assembly lines in auto factories, call them employees, and provide them with "earnings" by paying more for our vehicles. The results would be the same, but I find the former option to be much more straightforward.

RagingRanter

No, economists have very few tools to measure opportunity costs, because there is no reliable way to pinpoint just what the next best forgone opportunity was. Even in retrospect, measuring what would have happened if money would have been spent on X instead of Y is a wild guess at best, regardless of how much data the economist has to work with.

Style

Counter-factuals have the problems you point out. Opportunity costs don't really – like you say, you can argue about which forgone opportunity is the right one to reference, but the data's there.
RagingRanter

In a few cases, you might have data. In most cases, the best forgone alternative is just that, forgone. With no chance of measuring or otherwise knowing what would have happened.

Thwim

Except, when push comes to shove, I'd far rather we have one job here than two jobs there.

Cause.. you know.. I live here.

madeyoulook

But you do get that we are talking about uncountable lost jobs here in the opportunity cost column once we have overpaid to have some jobs here, right?

Because you are usually pretty eloquent even when you are wrong, I will assume that you do get that. It is a shame that you failed to consider it in your comment.

Thwim

Would that be like those unreported crimes? The problem is that jobs don't just magically appear simply because of the availability of capital.. that is, once again, the supply-sider's point of view.. and I think the last few years have shown us where that leads.

For jobs to appear, there needs to be demand. People who don't have resources (aka jobs) don't create much demand. Leave the one job here, even though it may not be the most efficient global use of capital, and it means that we're more likely to get *other* jobs here due to the increased demand.
JustinWordswrth

Could all the people saving money on their cars create demand?
Thwim

That's actually a decent question, and I suppose it depends on if the amount of money we save on cars purchased all over the place enables enough demand to be created that the lack of demand present in the specific location of the auto factory is overwhelmed.

Unfortunately, because what we're seeing is a relatively huge loss in demand in one local area, compared to what would be an increase in demand spread out over the nation (the small number of people who were already planning to purchase a car + the number of people who would buy a car that wouldn't have otherwise) leads me to believe that the local effect could cause damage well exceeding the generalized effect.

Kind of like the difference between a rain storm putting a cm of water across a city block and that same volume of water being poured onto a single spot in your garden. Yeah, the widespread effect can help things grow, but your garden is probably completely trashed for the year.

RagingRanter

Except you don't really know if that one job here didn't cost another job or two or three.

madeyoulook

Give up, RR. See Thwim's response to me. He or she took two paragraphs to explain a refusal to get it.
Thwim

And I don't know if aliens are going to land next door, so let's make decisions based on what we do know.
RagingRanter

I believe that is the whole point. We cannot possibly predict the outcome of pursuing any particular industrial policy, so that calls into question the whole practice.
madeyoulook

One must, at least, appreciate Thwim's consistency, I suppose.

JustinWordswrth

If you think wealth is the maximisation of labour performed, why are you stopping at the borders of your own country?

Just think of how rich you could be if instead of outsourcing your milk production to the dairy farmer, your chicken production to the chicken farmer, your clothing production to the tailor, your electricity to the electric company, your gas to the gas company, your manufactured goods to manufacturers, your news to journalists, your music to musicians, your learning to educators, etc., etc., etc., you greedily kept all that wealth to yourself.

You would be rich beyond your wildest dreams because you would have more work to do than anyone in history. Your days would bursting with required labour. I dare say, you'd have more jobs than you'd know what to do with. Never again would you suffer an impoverishing labourless moment. You would forever more be employed at milking your cow, farming your chickens, sewing your clothes, rubbing a balloon against your head for electricity…

Style

To maximize job creation, should I even be outsourcing milk production to the cow? That sounds like a rip-off.

austinso

Hmmm….

How many people does it take to grow the Camry versus building the Taurus? What would be the per capita earnings for those people growing the Camry versus building the Taurus?

s_c_f

Irrelevant. The wheat growers could equally have been jet engine makers or nuclear power plant designers, and the concept is the same.

austinso

Things always look fine _in theory_, don't they?
Thwim

No they couldn't have. Jet engine makers takes a specific degree and type of skill that wheat growers do not have, just as growing wheat takes a specific type of temperament that I imagine many jet engine designers do not have.

The problem with the theory is that it assumes people are interchangeable cogs.

madeyoulook

You missed scf's point entirely. Possibly on purpose, so I will address this to anyone who might get snookered by your rhetoric:

The wheat growers contribute to obtaining the Camry or the jet engine or the nuclear power plant. It is precisely because people are not interchangeable cogs that we should all be doing what we do best to enhance our competitve advantage, and demand for what we do, so we may enjoy the power to trade for the goods and services that other people can provide better than we could.

austinso

Assuming of course that everyone on the planet thinks the same as you.

Then of course, you have a point…:)
s_c_f

Well, not exactly. My point was that Camrys are also created by nuclear power plant designers and jet engine makers. We send jet engines and nuclear power plants to Japan and we receive Camrys. The whole "wheat/Iowa" meme is not needed at all. Anybody sending anything to Japan is building Camrys.

Anything that is exported, in fact anything that is produced for sale, is essentially a car-maker. Cars that are produced by jet engines or nuclear power plants are no less Canadian than cars produced by Canadian car-makers.

But I agree with what you said, and I agree that the theory has nothing to do with whether people are interchangeable or not. The theory makes no assumptions about what people do. All it says is whatever you happen to be doing that is valuable to others is equally adept at producing cars as building the cars yourself.

If anything, Thwim has it exactly backwards. Those that want cars built in a specific location such as Detroit are the ones that are demanding that people are interchangeable cogs. They are the ones demanding that people in a specific location must acquire the exact skills required to build cars, and abandon any and all other skills that they may have acquired. Why should Canadians be forced to learn car-building skills? Why can't they choose to buld jet engines or nuclear power plants or wheat or whatever the heck they want to build? Why does Thwim insist that these people must build cars, that they must acquire car-building skills, as if you can just grab any random group of people and turn them into car experts? Why can't they choose their own path, whether it's jet engines, nuclear power plants or wheat. Beats me.

RagingRanter

The theory doesn't need to assume that workers or skill sets are interchangeable cogs. The theory demonstrates, however, that government is no better at organizing those cogs than the market is, and in fact, is quite a bit worse.

bergkamp

"And obviously we’d like to do as little work as possible to obtain them, right?"

This is not obvious to a lot of Canadians, that's for sure. I live in Guelph, which must be one of the most left wing towns in Canada, so I hear and see all kinds of nonsense. My favourite car stickers are the ones that say "Out of a job yet? Keep buying foreign!" and the like.

"There are two technologies for producing automobiles in America. One is to manufacture them in Detroit, and the other is to grow them in Iowa ……. we might as well assume that Japan is a giant machine with mysterious inner workings that convert wheat into cars."

It is good analogy but I prefer David Friedman father's two minute talk on making pencil. David's analogy only goes so far because the parts that John Deere uses, or the seeds that farmers plant, are likely to come from abroad or other parts of America. Milton's point that trade brings potential enemies together to produce wealth is good one, as well.
http://www.youtube.com/watch?v=d6vjrzUplWU

RagingRanter

True. Milton Friedman's arguments against protectionism are still the best. 50 years on, we've still got perhaps a majority of the population that believes that exports = good and imports = bad, and that a country should strive to maximize its exports while minimizing imports. Friedman asked the very simple question, "What good is the foriegn exchange earned from exports if we cannot then spend it on imports?" Until we actually use that foreign exchange to buy foreign goods, we aren't realizing a net gain in our standard of living.
Mike Moffatt

"My favourite car stickers are the ones that say "Out of a job yet? Keep buying foreign!" and the like."

The best part about these stickers is that they're often found on the Mexican-built Ford Focus.

Oddly enough, you don't see many of those stickers in Alliston, ON.

Mike Moffatt

err.. Ford *Fusion*. (now who is the idiot?)
RagingRanter

Such examples are plentiful. In the 1980s, the NYC council gave a massive contact to John Deere over a better competing bid from Kubota, in order to "support American companies and American jobs." Turned out the John Deere lawn and garden equipment was largely imported, while Kubota manufactured most of theirs in a factory in upstate NY.
bergkamp

"The best part about these stickers is that they're often found on the Mexican-built Ford Focus."

Exactly. As far as I can tell, people with those stickers think CAW/UAW=good=domestic while no union=bad=foreign.

I have tried to explain to some Canadians that American car producers are just as foreign/domestic as Japanese car makers but they don't seem to think so.

TJCook

Or – going out on a limb here – people with those stickers think 'American-based car companies = domestic manufacturing = good' while 'Foreign-based car companies = foreign manufacturing = bad.'

Occam's razor, my friend.

Sheesh, you do like to crank about unions.

Stewart_Smith

Gotta say, the idea of putting the brakes on out of control deficit reduction by building arenas seems a little less wacky now.
Dallan Invictus

At the risk of actually engaging Andrew's argument rather than trying and failing to be a smart-aleck…

We can't ignore comparative advantage and specialisation of labour, no. There is an increased cost to allowing the Ontario car factories to compete with the Saskatchewan car fields or the Alberta car sands. But I don't agree that paying this cost has no benefits worth considering – rather, it's an investment in the diversity of our economy and the flexibility of our work force. It's an effort to cultivate a potential future comparative advantage, to provide employment for people beyond hewers of wood and drawers of water.

This is not to say that full-scale protectionism is the right answer either, only that the case is not as clear cut as Friedman's admittedly elegant analogy makes it seem.
RayK

But what about capital?

What if lowering tariffs on cars causes capital owners–from any country–to relocate their investment dollars from North America to other countries where labour is cheaper thus reducing the productivity of North American workers? We wind up buying cars from Asia at a sligthly cheaper price, but have to spend a much greater number of hours producing wheat in order to buy those cars.

In the fighter jet example, what if setting Canadian industrial requirements attracts significant capital investment to Canada which more than offsets any extra cost we may pay in buying the jets themselves?

Like so much analysis of international trade this little parable ignores that we do not actually live in a perfectly competitive marketplace with zero mariginal profit and an always optimal capital stock.

RayK

In other words, we ought to negotiate a price with industrial requirements and without industrial requirements, then compare the value of the capital investment those requirements would attratc to Canada and compare it to the difference in price. We shouldn't just take fundamentalist free trade theory as an absolute.

Mike T.

That sounds quite reasonable.

John D

Economics works so well in its 101 form.

RagingRanter

Actually it doesn't. What Andrew is stating here is quite a bit beyond 101, which is why so many seem to misunderstand it.

madeyoulook

Actually, it IS pretty simple. The problem is that so many to fail to grasp even this level of simplicity.

Mulletaur

"Policies rooted in superstition do not frequently bear efficient fruit."

Sounds like a fitting epitaph for the near-science of economics.

In any case, given that our economist Prime Minister was about to throw Canada into a 1930's style depression by introducing a deflationary budget during a financial and economic crisis until he was stopped dead in his tracks by the Coalition, it's clear he has about as much faith in economics as he does in Zoroastrianism.

Mulletaur

Meanwhile, Flaherty has plunged Canada into a double dip recession.

RagingRanter

And how is it that the Finance Minister can "plunge" us into anything? Are you saying they aren't spending enough? Oh wait, let me guess, they're not "targetting the stimulus" correctly.

Mulletaur

If the Harper Conservative government is unable to take any effective action to keep the economy growing, why did it spend all of our money on 'stimulus' ? Why was Flaherty chastising his G20 partners for ending stimulus too soon ?

RagingRanter

Because they're politicians, and they'll spend as much of your money as they can get away with in an attempt to buy votes. And they used as justification the same handy myth that you just trotted out.

RagingRanter

Speaking of superstition, the belief that a lack of government stimulus can cause a 1930s style depression is right up there. Funny how you dismiss economics as a pseudoscience, yet support the whole fanciful Keynesian stimulus concept in the same sentence. Much of economics is indeed a pseudoscience, and that certainly includes Keynesian economics.

Mulletaur

Hey, I'm not the one who spent all that money, 'Diamond Jim' Flaherty is. Ask him and Harper what they were thinking, if anything at all.

RagingRanter

As I stated above, they were doing what politicians always do. Spending your money in an attempt to buy your vote. That they managed to convince themselves that this was somehow good for the economy doesn't make it any more so. My whole point, in fact, is that they shouldn't have spent all that money. It did little good, and it certainly won't plunge us into depression when they turn off the taps. We might very well be on the verge of a depression, but it won't be because government isn't spending enough. As you yourself admit, they're spending a whole helluvalot. Debt is the real enemy now, Krugman's musings notwithstanding.

Mulletaur

To be fair, there was an expectation in the business community that there would be increased government spending. If this didn't materialize, it would have affected business confidence adversely at a time when things already appeared to be going south very quickly, and could have triggered a collapse. Governments, being prudent, spent money to ensure that this didn't happen, no matter how remote a possibility it was. So 'stimulus' was purely psychological, but that does not mean that it had no effect. The real question is : how much worse would it have been if governments did nothing, or introduced deflationary budgets, like Harper was set to do ? We can still argue over whether they needed to spend as much money as they did, or whether they spent the money in the most effective way possible.

RagingRanter

They were thinking of surviving as a government. Buying votes with your money. Politics as usual. Did you think it was something else?

Mulletaur

They were willing to throw our politics into crisis when they decided to introduce a deflationary budget at the same time they cut public funding to political parties. There was no reason, therefore, why the Harper Conservatives shouldn't have asked the GG to drop the writ when they were forced by the Opposition to reconsider their plans if they truly believe that 'stimulus' was useless. In any case, they didn't buy my vote with my money, so I feel like I was cheated twice.
RagingRanter

You and me both.
RagingRanter

Also, there is no such thing as a deflationary budget. Deflation is the boogieman used to scare people into accepting the need for stimulus. You're assuming that inflation/deflation are the result of fiscal policy. They aren't.
Mulletaur

Coyne often makes the same argument. What is the evidence that fiscal policy has no effect on aggregate demand ?
RagingRanter

I never said it doesn't affect aggragate demand. I said it has no effect on inflation/deflation, which are not products of aggragate demand, but of money supply and interest rates.
Mulletaur

So oil price shocks have no effect on inflation, Milton ? Let us not be dogmatic ; instead, let us search for truth.
http://ragingranter.blogspot.com Raging_Ranter

Oil price shocks are supply side shocks. And if central banks reacted by tightening monetary policy, they could easily eliminate the inflation threat. And I'm not a monetarist, so you can drop the Milton references. Monetarists spend a lot of time focusing on the velocity of money, which has been shown to be so erratic that it is useless.

Emily

Well, that's your problem. Maybe you should look for another line of work.

Style

The line of work that involves me in organic chemistry, physiology and physics is living. I think I'm qualified. How is it you're involved in global trading?

Emily

Ahhh. LOL

Global trade deals are what I DO for a living. At the moment I'm working on something in Taiwan.

RagingRanter

Which leaves you with plenty of time for posting on these forums apparently.

Emily

Much like you.
RagingRanter

I am posting here today, because, in fact, I do NOT have anything more important to do. Certainly I'm not in the midst of negotiating an international trade agreement.
Emily

Then stop complaining about me.

You guys waste more time worrying about other posters…..
DPT

all day long everyday, LOL.
Emily

That could be anybody on here, including you.

http://worthwhile.typepad.com StephenGordon

You know, disliking an idea is not really the same as rebutting it. It's certainly not the same as understanding it. There's something about international trade theory that makes it especially difficult to understand; see Paul Krugman's "Ricardo's Difficult Idea."
http://web.mit.edu/krugman/www/ricardo.htm

Style

Of course, Paul Krugman brough returns to scale into international trade and grudgingly accepts the need for industrial policy. Isn't it possible to accept and understand comparative advantage and still believe there's a role for government intervention to develop a country's industrial capacity?

http://worthwhile.typepad.com StephenGordon

Do you really think that's the case here?

What Krugman showed – actually, he'll tell anyone who listens that he borrowed heavily from UBC's Jim Brander and Barbara Spencer – that it is possible to imagine cases where govt intervention can be justified. He has since gone on to recognise that those conditions are rarely met in practice. If you think that this is one of those cases where they are, then you should explain why.

http://www2.macleans.ca/category/blog-central/national/andrew-coynes-blog/ Andrew Coyne

Exactly. First, assume a good with enormous economies of scale in production. Second, assume these lead to a worldwide monopoly in the good in question for the company that gains the early competitive upper hand, and therefore extraordinary profits for Canadian shareholders. Third, assume we can identify and target these industries with a precisely timed and just-sufficient subsidy such as to give our firm(s) that advantage. Fourth, and most important — assume this same strategy does not occur to any other country.

Style

I think Krugman's defence of industrial policy is actually first, and most important, assume this strategy will occur in other countries. Second, determine the least costly and ineffective way to counter that distortion.

Dot

But the underlying assumption in your arguments and Coyne's (and economics in general) is that everyone's objective is to maximize wealth. If that were the case, politics wouldn't exist. So, it's not surprising to me on a political blog, people with differing pespectives would dislike an idea, comparative advantage notwithstanding.
Style

I don't know if it's the case here or not – even if it were, I'm not confident I could demonstrate it. My point is far humbler than that: it is possible to understand comparative advantage and still believe there's a role for government intervention to develop a country's industrial policy. The arguments for that might be complicated and the work involved to establish when and how it should be done may be arduous, but does that make it untrue?

http://worthwhile.typepad.com StephenGordon

No, it doesn't make it untrue. It makes it an unsupported assertion about something that is generally known to have been inconsistent with the data in almost all other contexts.

The burden of proof is on someone who would make that case.
hardmouth

This would be a great argument if Canada didn't currently have a trade deficit…. perhaps indefinitely since the manufacturing sector has been totaled. At this point our only comparative advantage is sucking oil out of the tar sands.

Furthermore, governments themselves can often create comparative advantage where non existed. As Clyde Prestowitz, former trade negotiator for Reagan, notes in a recent article here at Macleans.ca:

American jobs are being lost not only to low-wage competition from emerging economies, but to strategic policies by foreign governments to dominate critical sectors of the economy, or to keep their currency values low to promote exports.“Other countries recognize the importance of economies of scale and promote the development of certain industries, whether solar panels, or semiconductors, and we don’t,” says Prestowitz.
Mike T.

I think it's safe to say that while pure economics can show the benefits of eliminating market distortions, in the real world everyone is just fighting for the distortion most advantageous to them.
hardmouth

Well said!
RagingRanter

Indeed, well said. That is precisely the case. However, far from negating the need for a pure economic perspective, this state of affairs only increases the need for examining these issues from a purely economic standpoint.
Orson Bean

Personally, I think it increases the need for examining these issues from every relevant standpoint, not just the classical economic one.
madeyoulook

Then maybe we should free up businesses to find more comparative advantages… that, say, do NOT include sucking on the government teat.
RagingRanter

The evidence that industrial policy does not work, on the other hand, is plentiful. Personally, I always find the story of the origins of Honda and Toyota to be instructive. Anecdotal to be sure, but what an anecdote!
Orson Bean

We certainly have our share of failures in that regard — a lot of money that was poured into Atlantic Canada via federal programs, for example.
RagingRanter

Every country has its share. I can't think of a single country that is exempt. Yet we persist, as does every other country.
Andre

http://en.wikipedia.org/wiki/Leichenstein
http://ragingranter.blogspot.com Raging_Ranter

Are you citing Lichenstein as an example of a successful industrial policy? Because I'm pretty sure their status as a tax haven has a lot more to do with their high GDP-per-capita than any industrial policy they might have cooked up.
Andre

"their status as a tax haven has a lot more to do with their high GDP-per-capita"

Vice versa, actually; and building a tax policy favoring corporate entities is a form of industrial policy, like eating anything other than fast food as a form of dieting.
Style

I agree, and it's a heavy burden. People who believe governments can design such programs effectively don't necessarily reject comparative advantage though. The industrial policy of Korea looked very good for a very long time, and wasn't undermined by a failure to appreciate comparative advantage. Latin America, of course, offers plenty of counter-examples.
http://ragingranter.blogspot.com Raging_Ranter

That's true. And I wouldn't go so far as to say that it's the wrong thing every single time. There might well be cases where industry policy has lead to a far superior outcome than the absence of said policy would have. However, given the slim odds of any such policy actually creating a better scenario than would otherwise have existed, and the even slimmer odds of government being able to accurately assess which times this would be the case, I would much prefer governments learn not to tread down that road. The law of unintended consequences is not an absolute, but it's still relevant.
Style

I wish people like Stephen and Andrew were more agnostic about these things – yes, it probably won't work and will end up costing a bit of money, but it could work and mean significant gains. You can design an intervention with a good exit policy that doesn't force the government to specify which firms it will subsidize and maybe help the Canadian economy. It's true you can design bad policies and introduce new, worse policies to prop them up when they fail, but it's not sensible to say "there are gains from trade, therefore we should never invest public money to help restructure the Canadian economy".

Crit_Reasoning

Thanks for the Krugman link.

Tony

Yeah, no doubt, this is good stuff
http://ragingranter.blogspot.com Raging_Ranter

Krugman used to be such an awesome thinker. This was the work he for which he was awarded the Bank of Sweden Prize in Economics in Memory of Alfred Nobel a few years ago. Unfortunately, the Krug has become so immersed in macroeconomics, and consequently, so frightened of the deflationary boogieman, that he's just not that interesting anymore. Occasionally you see flashes of the old brilliance. He had some dynamite articles in the NYT skewering Bush's plans for Social Security "reforms" a few years back, for example. But those flashes are pretty rare nowadays. He's just another Keynesian talking head now, and a fairly extreme one at that.

xiv

An interesting article, however a tad bit frustrating as the target audience is clearly people who know of the problem but need to find a way around explaining it, and not lay people. Each time it would seem he's coming to the point where an explanation over "why it's not so" would belong he'd just move onto the next point assuming the reader knows why it's not so.

Regarding, the foundations of the model, all my qualms seem to come back to not really believing that 'constant employment is a reasonable approximation'. There lying such a wide gulf between western economies and developing economies in terms of cost of living and the west being increasingly reliant in technology and reduction in labor needs to remain competitive, it's easy to imagine a threshold where the items we have a comparative advantage in are all being produced to the capacity the market will bear, and the necessary adjustment in exchange rates to regain full employment is so drastic as to be undesirable (as an aside there's the hypothetical situation where technology reaches the point where the planet's needs and wants are exceeded by production capacity that exchange rates could not fix), potentially motivating industrial policy that would preserve jobs rather than needing wealth redistribution directly managed by the government.

Anon Liberal

Exactly. AC's faith in his ideology is kind of touching though.

Emily

Ideology often bumps into reality.
EFL

That’s why one can’t help liking Coyne, or professors of economics, esp. micro. They are true believers, and the world needs more such idealism ( within limits-in another time & place they would have been enthusiastically explaining the wonders of communism, bemoaning that not everyone accepted its self-evident superiority, with that same charming gleam in their eyes). I only wonder how it is that for generations the mixed economy governments of the world have been filled with highly trained economists whose policy prescriptions, upon surveying reality from a position of real responsibility for human welfare, differ so strongly from what they once were taught, and even espoused, in academia. All the fault of politics and politicians, the professors say. Astonishing that their former students, actually living in the world and holding lives and welfare in their hands, almost always find themselves opposed to them, though, isn’t it? And that so few governments and politicians, so few as to equal zero really, are ever convinced by the profs, or supposing their former students have kept the faith, always refuse their clearly superior advice. The professors remain convinced the only explanation can be the awful politicians (those cynical undereducated rogues!) and that their former students have been ‘captured’ by govt and have lost their onetime clarity of thought and idealism – it’s all about bureaucratic advancement, doncha know?

Still, it is odd, all over the world, in all democratic mixed economy governments, how all these onetime smart idealistic people, politicians & public servants both, always seem to end up saying the same thing, that et ceteris paribus, the world is imperfect and we must live in it, and do what we can to safeguard and promote lives and livelihoods, prisoners of the unending messy dilemmas of reality. It is an extraordinary thing really – all these philosopher king economists, trapped in academia, ignored by the policymakers, just waiting, itching to see the world put to rights according to their shining models of perfection, and all these public servants, everywhere, all the time, cussedly refusing to lead humanity to its great leap forward into the elysian fields of The Supreme Market, all due to their pitiful human falings and short-sighted insistence on the complications and imperfections of the world as it is. If only they could recapture the faith! One day, though, one day the trumpets will blare and the world be set to rights. But for now we can only puzzle over this persistent contradiction between policy-makers and the professors, and look forward to that blessed day when they rise from behind their lecterns, throw off their chalks, and liberate humanity from its imperfect premises and more imperfect conclusions.

Still, it is weird how the Gordons, Coynes & Moffats are so right, and yet so unheeded. How no democratic mixed-economy government ever, EVER, fully takes on their views on foreign investment and industrial policy. That governments always insist that actually other players’ behaviour does rather matter. Odd, that.

Emily

What is odd is your long rant against Harper's profession.

EFL

If you mean economics ( or is it politics?) I could hardly be less opposed to said profession. In case you mean politics, I also greatly respect that occupation.
TJCook

Last time I checked, Harper's professions have included:

1) Political staffer

2) Lobbyist

3) Politician

Harper is an economist the way I'm a biologist – an advanced degree, talks a good game but never worked a single day in the field.

Hey, at least I haven't made most of my money as a government employee /snark

Emily

Well since Harp isn't a PhD, he isn't an economist either, but it sounds good at BBQs even though he's screwed up the economy.
Holly Stick

It's not so much that he lacks a PhD, as that he has never worked as an economist, or been paid on results, or published in the field as far as I know.

wsam

What is odd is thinking politics is about anything other than politics and industrial policy, foriegn investment, etc … is politics.

Even Adam Smith recognized national security concerns means some industries will have to be protected and subsidized. Like ship-building. And national security priorities are set by politicians, especially at times like now when they are not self-evidently clear. Keeping high value added jobs in the country has long been a national priority, here and in the United States.

RagingRanter

Actually, his explanations of why his ideology, such that it is, is the right one, are what make him worth reading. Dismiss it as ideology all you want, but the economic arguments that demonstrate the absurdity of industrial policy are sound.

EFL

Just odd that every government engages in it, and other than Canada, also reviews foreign investment, and always has. Almost as if there other factors to be taken into account, taking a stab in the dark, like imperfection, and human nature, or something like that. But I greatly, genuinely respect all good faith idealism. It takes one to know one. So I also recognise when the premise to conclusion thing has become a bit too all-encompassing. I do it. I'm sure you' re a good chap and do it too. That's the brilliant thing about ideas, they are so exciting. Any decent person takes them seriously, does so, and respects likepsyched people. But also recognises how enthusiasm for an idea, any great idea, can blind one to its seemingly extraneous complications.

RagingRanter

Why is it odd? Governments do all kinds of things we know to be wrong. It's a product of human nature. We evolved in a much simpler world, while we roamed around in the African plains looking for food. We really have evolved very little, if at all, since that time (only 100,000 years ago after all). So it stands to reason that governments, subject as they are to popular opinion, which in turn is dictated largely by human nature, will make economically foolish decisions, and pursue economically destructive policy. It isn't odd, it's expected. I highly suggest reading Nassim Nicolas Taleb's books, The Black Swan and Fooled by Randomness. He offers a great explanation of how and why governments and organizations nearly always take the ruinous path.

Thwim

The relocation of auto investment capital certainly can reduce productivity in the wheat producing sectors:

Even if we assume that when the auto industry leaves Canada new jobs for these people who no longer have money to purchase things magically spring up, there is a time period there during which they need to be supported and retrained. This places additional burdens on our public finance/social services system.

Because social services go up, taxes to pay for them go up. Because taxes go up, farmers need to produce more of their product to maintain the same level of income. Wait wait.. aren't taxes a disinclination to productivity as well?

As has been said many times before.. for every complex issue there is an answer that is simple, obvious, and wrong.

Really, the underlying assumption is that "We'd rather that we have the jobs than the guys over there."

http://www2.macleans.ca/category/blog-central/national/andrew-coynes-blog/ Andrew Coyne

Oh lord. The notion that productivity in the farm sector would be permanently impaired, and on the scale implied, by the transitory cost of retraining *some* auto workers (not the entire industry), and that this in turn justifies the permanent imposition of an auto tariff, at permanent cost to that same farm sector (both directly, and in terms of opportunity cost) is just … gaga.

Condescending handwaving about complexity is no subsitute for actually understanding the problem.

http://worthwhile.typepad.com StephenGordon

Paul Krugman calls this the "Santa Fe syndrome" in that piece I link to below. People will jump on the most arcane, obscure and complicated model instead trying to understand the basic point.

http://ragingranter.blogspot.com Raging_Ranter

The Italians call it dietrologia. 'Dietro' means 'behind', as in there is always some shady, complex goings-on behind the scenes, and that one should never accept the obvious explanation for anything. One could cite 9/11 conspiracy theorists as an extreme example, though we're all subject to this error in thinking to some extent. It's just human nature.

Thwim

Neither is hand-waving the problem away. What, exactly, would you have these unemployed autoworkers do in the meantime? I realize the libertarian mantra is that they'll all magically find other jobs, but nobody ever seems to explain why in a time of increased unemployment employers would be hiring more staff for less demand.

madeyoulook

That is supposed to convince our grandkids that we got value-for-their money by having these workers produce something nobody wanted. Gotcha.
JustinWordswrth

Because in a time of increased unemployment, the supply of labour is up and, therefore, the market price of labour is down. Employers are not set on hiring a certain number of employees, they care only that they make a profit on the marginal employee. If wages can come down (something certain groups work very hard to prevent), more people can be (profitably) hired. Then again, if wages could come down, maybe the auto plant would never have had to close in the first place.

Andre

"It is sheer superstition to think that an Iowa-grown Camry is any less “American” than a Detroit-built Taurus."

You are comparing Pink Lady apples to Granny-smiths apples and as a metaphor of our F35 Jet purchase dilhema, it doesn't work. First of all the American Taurus is not built with the specifications as the Japanese Camry, so the Camry might entirely satisfy all the wants and needs of the American Market. On the other hand the F35 built in the US would be the same F35 built in Canada… minus shipping costs.

At the very least your metaphor demonstrates that the F35 SHOULD be built here since labour, material, taxes, real estate, and security costs are all lower than the the USA's costs.

Emily

I drive a Canadian car….a Hyundai.
RagingRanter

If it were so much cheaper to build them here, they would be built here with no incentives from government required, no?

Emily

You keep confusing political and economic systems.

Economically it's cheaper to build things in China, Korea, Japan, Malaysia etc…..politically this is suicide in NA.

RagingRanter

I'm not confusing one for the other, I'm ignoring one of them (the political), as it has no place in the argument, other than to explain why the wrong economic decisions are repeatedly made.

Emily

It is precisely that kind of nonsense that has made a mess of things.

Andre

Canadian lumber was cheaper by a wide margin but they still imposed a tariff as a protectionist measure… so no, the Americans don't always go for the cheaper alternative.

http://ragingranter.blogspot.com Raging_Ranter

The Americans more often than not shoot themselves in the foot with various idiotic protectionist measures. Hardly an example we should be emulating.

Andre

Except in the case of the F35s it wouldn't be a protectionist measure. It would be a cost saving measure.

http://nottawa.blogspot.com Mark

This analogy is flawed.

Neither the Iowa grown cars, nor the Detroit built ones are being purchased by the government. They are being purchased by individual consumers – private individuals who are presumably free to spend the fruits of their labour as they see fit in a competitve marketplace.

How is that in anyway comparable to a state sovereign purchasing aricraft in an untendered and uncompetitve arrangement with tax dollars which come exclusively from subjects of that state's tax system?

Not necessarily disputing your conclusion – but the analogy is a weak one.

madeyoulook

Think "deliberately insisting on paying a higher price than necessary" as you wonder how comparable a scenario might be.

http://nottawa.blogspot.com Mark

Except that "price" is an artifical indicator when we're talking about redistributing tax revenue back to the people who paid it – by employing some of them, purchasing their goods, and recirculating that money internal to the state that collected the tax revenue in the first place.

Mathematically speaking, paying $1.01 for a domestically produced good or service is actually a better bargain than paying $1.00 for it elsewhere, whether paid for in corn, wheat, dollars or widgets – at least when it's state procurement we're talking about. Because the state (as purchaser and tax collector) will see more than $.01 of its pruchase price filter its way back to government coffers via the tax system.

That's where the straigh up comparison to a private consumer purchasing an automobile is flawed.

Emily

Well we'd better make up our minds what we're doing, because Mulroney caused a firestorm when he picked a Quebec firm over Bristol in Winnipeg…a British firm.
M_A_D_world

First rule of economics is that it doesn't conform for extended periods to rules thus being more of an art than a science. You'd have to remove emotion and other chaos variables before having something beyond a working theory.

RagingRanter

That's the first rule of economics? That would be the first I've heard of it. If you're saying that economics is more of a philosophical undertaking than a scientific one, then I whole-heartedly agree. Economics has been taken hostage by pseudo-mathematicians over the past 50 years, and it hasn't been for the better. I'm not dissing all economists, nor am I dismissing the need for mathematic modelling. But, economists have put way, way too much faith in their mathematical calculations, particularly in the area of macroeconomics, and it has been to the detriment of the entire field.

madeyoulook

The more I think of economics as a branch of human psychology, the more things make sense.

http://ragingranter.blogspot.com Raging_Ranter

I've recently taken an interest in behavioural economics, and evolutionary psychology as it pertains to economics. Some seriously fascinating stuff. Not only that, but it makes economics actually fun and interesting again, long after I thought they had killed by turning it into a mess of worthless calculus. Mises and Hayek always argued that economics was not a mathematical pursuit, but a philosophical one, and that all the social sciences should be tied together. I believe they called it praexology, but I probably spelled that wrong. When you start reading behaviour papers by Amos Tversky, or any evolutionary psychology, you start to see what they were talking about. I only wish I had more time to immerse myself in this stuff.

Emily

The one thing forgotten is all of this….

In the end, it all comes out even financially….but Japan has the technology…and the US has farming.

Which country is doing better?

http://ragingranter.blogspot.com Raging_Ranter

They're both in the dumps economically speaking. Japan went through a decade-long recession, and they're right back in it now. The US looks like it might be barely two years into a decade long slump. Japan's debt is well over 100% of GDP, and the US's debt will be there soon. And both are tripping all over themselves to dream up new deficit-financed stimulus schemes, because the last deficit-financed stimulus schemes worked so well. Do we have to pick one? I'd say it's a coin toss.

Emily

Focus….if one country has the technology, and the other has farming….which country is further ahead?

It doesn't matter if it's Japan or Korea or China….it's technology.

http://ragingranter.blogspot.com Raging_Ranter

A small correction to my above post, their national debt is now closing in on 200% of GDP. I just looked it up.

Obviously their technology is not making them better off, or their economy would be performing better. Are you suggesting that the US – and Canada – should imitate the Japanese and pursue "technology" regardless of the costs of doing so? And somehow that will automatically make us better off? If that's your argument, you're going to have to find a better example. Japan isn't going to do it for you. I don't deny their technological edge, but they've obviously paid far too high a price for it.

Emily

Sorry….you are too fixated on Coyne's mention of Japan to discuss this.

There are many Asian countries.

The answer remains: technology.
http://ragingranter.blogspot.com Raging_Ranter

Once again, the content of your post fails to justify the supercilious tone with which you deliver it.

And once again, I've been Emilied.

You'd think I'd know better by now.
madeyoulook

Every so often, I would run at Lucy's football myself expecting this time to be different. I have (with occasional relapses) refrained from the temptation, with vast improvement in my well-being.

Try it for a few days, and see how much better you feel. Avoiding Emily: The dietary fibre of commenting.
http://ragingranter.blogspot.com Raging_Ranter

I've been been doing just that, but fell off the wagon this afternoon. Recently, someone made the point that Emily is the only MacLeans commenter with the dubious distinction of having her name turned into a verb. At the time, I wasn't sure I knew what that meant. As you can see, I do now.

madeyoulook

Well, Japan has the added feature of an accelerated decline in its population of young people, and somewhere around — what's the number — zero immigration. So they'll be an ethnically pure candle self-extinguishing in the coming decades.

Style

It doesn't come out even financially. That's the point of comparative advantage. You're further ahead financially if you use the more efficient technology to build the cars. In this example, cars are made from wheat, you can either not grow wheat in America to make a car or export wheat to Japan to get cars. You get more cars for your wheat by buying the cars from Japan.

RayK

"The scenarios you suggest do not actually make any sense. The relocation of auto investment to other countries can hardly reduce productivity in the wheat producing sectors. So your suggestion that even though cars would be cheaper we would have a harder time affording them is nonsensical."

Of course the relocation of capital from the auto-sector makes the wheat producing sector less productive. Once the capital relocates the workers are still left thus total capital per worker–and productivity–is lower unless there's a corresponding increase in capital in the wheat sector (i.e. other sectors) which is by no means guaranteed. Whether you analyse this issue using a "two good economy" model (cars and wheat) or a more general model (cars and everything else), an overall reduction in capital still leads to an overall reduction in labour productivity because the autoworkers (in this particular example) are still there even if the capital has left.

RayK

"well it doesn't ‘attract’ it, does it? I t requires it, in defiance of economic reality; if such investment were really attracted to Canada it wouldn't need the industrial requirement"

On one level this is just a question of semantics, but more to the point the increase in capital investment produced by an industrial requirement can be disproportionate to the cost of the requirement. For example, if there's very little difference in cost to the manufacturer of locating a parts plant in Canada rather than the US a company could decide to satisfy its industrial requirement to Canada by locating a massive high-tech factory here. That capital could then produce far more than just parts for F-35 contract that lead to its location in Canada thus–assuming it of higher than average productivity to begin with–increasing overall productivity. Benefit can be disproportionate to cost because investment decisions are made at the margin.

RayK

“But the costs are not just the higher price of the jets. They're the opportunity costs: the other uses to which the same labour and capital might have been put had they not instead been shoehorned into aerospace.”

Yes and no. It’s not the same capital. If the capital were going to be investment here anyway then industrial makes no difference–positively or negatively. The labour obviously would be attracted away from other industries in Canada but only to the extent that the jobs created in aerospace were more productive and higher paying than the alternative. This is why I added the comment about comparing the additional cost of the contract to the value (i.e. increased productivity) produced by the capital investment.

RayK

“As in so many other comments, the underlying assumption is that Canada must be in aerospace, or cars, or whatever other industry somebody has decided is "strategic" or otherwise fit work for an advanced economy such as ours. This divine dogma is usually expressed in the same breath as a profession of disdain for ‘ideology’ or ‘free trade fundamentalism.’”

I’m not assuming anything. I’m saying a comparison has to be made between the total cost of imposing industrial requirements and the increased productivity that can be produce due to increased capital investment that would otherwise flow to another country. It has nothing to do with arbitrarily designating certain sectors as “strategic”, it is simply a function of using leverage and market power to increase overall capital investment in Canada.

ColdStanding

What? You say they have no cars to trade? Then let them trade wheat, said Marie-Coyne Antoinette.

Doesn’t of the economist that came up with the argument and the people that are now propagating it know that agricultural production in NA is a form of industrial production? Are they not aware the improvements in agricultural production have made redundant many people that were formally farmers? How am I, those people I know, people that I don't know but are my neighbours supposed to get our portion of the annual wheat crop to obtain the “American” Camray? Are we now to become farmers again? How, exactly, is that to happen? Do they even have the slightest clue how much capital is required to enter into the farming game? Don't tell me I am to purchase shares in farming corporations.

ColdStanding

Following their line of reasoning, if NA specializes in industrial agricultural production and not the industrial production that makes finished goods, are we to import the machinery that we require for large scale agri-industrial production? From the one company that makes them, no doubt. You should ask some real farmers how it is going dealing with near-single source suppliers of farming inputs and see how they like that system. Wait, I'll tell you: they don't because it is very difficult to get a competitive bid.
Additionally, this model of trading agricultural goods assumes that we have a surplus of agricultural goods to trade. When it comes to food, my first concern is eating it. I can not eat a Camray and live. If I have to choose between one or the other, then I will choose to eat the wheat.

Not beautiful, Marie. Not at all.

madeyoulook

Ahem, oh Frosty One. It was an example.

Substitute harvested grain with whatever a given economy excels at, at great advantage (and psst — it can be more than one thing), in order to trade for whatever people choose to obtain. Grain for cars. Airplane tail rudders for bananas. Guns for butter. Butter for guns. Baseballs for red wine. Refrigerator coils for crude oil. Magnificent views of waterfalls for computer chips. Money — the currency supported by confidence in its issuer — is the intermediary that acts as an efficient substitute for (or maybe just the measure of) barter. Get the picture?

ColdStanding

Let's work off of your first copy. Must have been doing maintenance.

I realize that it was presented as an example, but I hope you will surmise that I am not much of a believer in the supposed neutrality of the selections people make in forming their analogies. They chose to frame the arguement in terms of wheat, so the entailments of that selection have to be unfolded to test the veracity of the arguement.

madeyoulook

They chose to frame the arguement in terms of wheat, so the entailments of that selection have to be unfolded to test the veracity of the argu[e]ment.

Uh, no, actually. It was an example to cite that wheat from an Iowa farm was a more suitable commodity to obtain a Camry than the establishment of a Toyota factory in Iowa.

Make it crude oil in Saudi Arabia, then. Or clementines in Morocco. Garments in Bangladesh. Worldwide call centre operations in Bangalore. Whatever.

But if you decide to get hung up on where the blades of the John Deere combine came from, you are well and truly choosing to miss the whole point. Unless you are accepting that wherever they came from was the best place for them to come from, etc. See the Youtube video where Milton Friedman describes the thousands of people who created the number 2 / HB pencil in your desk drawer.
Holly Stick

Only if this is just a game where you get to set the rules and nothing acts outside them. But dealing with messy reality is different; wheat is not an abstract thing you can trade, it is a necessity of life to many who will never own a car.
madeyoulook

http://www.projectlearnet.org/tutorials/concrete_…
ColdStanding

So, if it doesn't matter what trade object we are to talk about, why does it matter that I have chosen to press home my point via the example provided? If it doesn't matter, why divert into an extraneous conversation about the supposed insignificance of the example?

At the end of the line in this conversation looms the question: What are we to do when technology advances to the point were the ease with which we produce things makes redundant vaster swaths of workers?
madeyoulook

Those vaster swaths of workers are freed up to do something even more productive and useful.

The market for rickshaw pullers, and horse breeders? decimated by the automobile. Gas-light lighters? Unemployed, the last one of 'em, by electricity. Telegraph operators at train stations? Operators actually flipping switches at a switchboard? Punched-card data-entry clerks at banks and insurance companies? Bucket-brigade volunteers to douse a neighbour's house on fire? Slaves to build a pyramid? Maintenance workers to replace burnt out vacuum tubes in the first computers that occupied three floors of the head office building? Can I stop now?

We're not going back. We don't want to. Worldwide standard of living has been enhanced by competition and free trade, as we keep working hard to come up with ways to achieve as much or more with less.
ColdStanding

But how can they do something more useful when the conditions for the development of something new are actively debased, degraded, derogitorized as unfair interference of the state in the free workings of the market? As a highly relevant example, the only countries where the advancement of nuclear technology is, uh, advancing… are places where there is a significant amount of government involvment, for example SOUTH Korea.

What would be more useful? Writing articles about people that wear meat dresses?
madeyoulook

But how can they do something more useful when the conditions for the development of something new are actively debased, degraded, derogitorized as unfair interference of the state in the free workings of the market?

And exactly what conditions are those? You think an entrepreneur with the next bright idea is helped by government running interference all over the place?
ColdStanding

In previous times, industries and/or entrepreneurial ideas could develop if they found conditions that afforded a time lag between their incubative phase and their competative phase. Now, due to the speed of communication and industrial spying, there are few such time lags available to protect fledgling industries. Ergo the need for special regulations to foster the development of something new.
Additionally, you are speaking about government as if it was of a uniform character. It is not. There are great variations in quality of governments. Both industry and government need to be working in conjunction for the kind of things I would like to see.
Mike T.

there's always a more useful and better job just around the corner.

Just like we'd all take the much much higher paying, more productive jobs we are constantly turning down because progressive taxation makes them unattractive to us.