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12/10/2006

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Richard Mason

Continuing my own train of thought from above... A quadratic Lorenz curve implies a Gini coefficient of 0.33, about that of France or Canada.

However, a Lorenz curve with constant second derivative may not be desirable after all, because at the top end of the income distribution the (constant) reward associated with advancement becomes small compared to the individual's existing income.

If instead we say that the second derivative of the Lorenz curve should everywhere be proportional to the individual's income (i.e. proportional to the first derivative of the curve), then the Lorenz curve should assume the form of an exponential:

L(X) = exp(k X) / (exp(k) - 1) - 1/(exp(k) - 1)

for some choice of growth constant k.

The resulting Gini coefficient is
G = (1 - 2 * (exp(k) - k - 1)/k/(exp(k) - 1))
and can thus be anything depending on the choice of k.

Jeff

this blog is like candy!!! sorry. expect to see me around from now on.

morbo

Jack, you really need to do more research before you post. Just picking an obvious example, you assert:

"That's why EVERY nation has unemployment, a minimum wage law, farm price supports, a progressive income tax and some amount of a "safety net" along with a host of laws about collusion and anti-trust."

Even the most cursory research on your part would have found countries without a minimum wage, countries with a flat income tax, and countries without farm price supports. Your posts are rife with these sorts of errors, I only picked this as an egregious example. I doubt many people take your posts seriously because of these kinds of sloppy errors.

Hesse

You people need a life ....

johnson

Hesse is just jealous becuase Hesse has nothing interesting to say, although I didnt read any of the coments so I dont know how much was actually interesting, but still what a stupid comment. Even dummer than my comment...ha.

Jack

Morbo; Thanks..... should have SPELLED OUT "advanced countries" and/or CMA with "most".

I wrote this in regard the KNOWN (to all but the voodoo set) FLAWS inherent in the capitalist model and would have enjoyed it more IF you tried to rip the heart out of my case rather than nipping at my ankles. In short would you rather learn from the main current or nit pick the back eddy?

Also would you like to post a bit about what DOES happen in nations having no safety net? or other adjustments to make capitalism work?

Hesse, I enjoyed both Steppenwolf and Siddhartha in my youth and intend to read some of your later works soon. But what sort of "life" do you advise today?

At late brunch today there were a number of people seemingly mesmerized by a guy shouting about a football game on a blaring TV and though they were in groups didn't talk much or exhibit much Christmas cheer, while down the road a Walmart looked packed with those picking up a few last minute gift items mfg by Chinese slave labor and distributed by and army of employees giving up their Sunday to further enhance Walmart's VERY fat bottom line for $70 for the day or so. What do you like to do?

Jake: It's good that you worked hard in your youth, managed to survive and even prevail, but what are your real thoughts on the subject of massive and growing inequality regardless of how hard folks do work? Do you favor a system in which your children too are mired in nut-grinding hardship with 38 million others living in poverty in this great nation due to the productivity increases failing to "trickle down" much below the $100k a year group?

Richard: Loved the Lorenz curve and math but does your unstated conclusion favor a democracy that is highly dependant upon having a strong and sizable middle class using capitalism as a tool for wealth generation and distribution or us being but tools of a "sacred" econ model that produces $45,000 per capits but leaves 38 million poverty with just $10,000 and 45 million working folks not covered by any health coverage other than showing up, half dead, at the ER? Surely the study of "what will be produced, at what price and for whom" amounts to more than a blackboard full of formulas? Jack

Jack

Nelson: Your ideal is interesting and to be sure, by comparison I'm taking "baby steps" from our past policies of "we stole your land by force, but otherwise "fair and square" and screwing Mexico and S-A vigorously and often over the intervening decades, but even bring the focus of the discussion of the "Mexican immigrant problem" below the border and asking that our "diplomats" seek policies beneficial to both is enough to have me labelled "soft on something or other" or "soft in the head" by the fence em off and forget em set.

But! stodgy as it may seem I've reservations as to having no nations and no borders but instead favor a "nations" or groups who can run somewhat differing experiments as we do in the US with different states. For example, I live in Alaska and it takes newcomers quite a while to learn why we might do things differently here, or better example, when our rich salmon fisheries were managed (before statehood) by those in WA DC the resource was wiped out. Today, under Alaskan management it's been restored to the runs of the early 1900's Currently there's a raging controversy over a proposed mining of a huge deposit of copper and gold, but the mining tech used for that type of mine may lay waste to Lake Illiamna (perhaps the largest and best sport fishing Lake in the world) and damage or ruin the huge Bristol Bay Salmon run. I doubt this would turn out well if it were up to a few Congressmen taking 3 day junkets; instead much of the outcome will be decided by those living here, native Alaskans in the region etc.

But more of your post is about the free migration of labor, and I'd agree that where a labor vacuum exists next to a country in labor surplus the vacuum is likely to be filled..... by one means or another.

But! there are concerns here as well. Say one country has sacrificed in some way, say to preserve their rivers, farmlands or the environment in general, while over a century a neighboring nation has laid waste to their natural resources, so when the inevitable famine or disaster strikes them, do they just pack up and move to the "green" country? And try to do the same?

Coming back to the present, fortunately, despite tremendous adversity 99.5% of Mexico's 100 million people chose to stay home each year; they like their country, family and friends. But half of them are under 30 and probably are looking at 30% unemployment in that age group. So the least disruptive policy would seem one that purposely exported some of our labor shortages to Mexico (if need be at the expense of rapidly growing China or India) in hopes of bringing their wages and levels of employment closer to ours.

If we "got it right" 50 or 100 years from now Mexico might play more of a "Canada role" in North America and freedom of choice would seem much easier. Today the problem for both "globalization" and immigration in many parts of the world is simply that the pace is too high.

Haris, also in "free trade" et al it's the pace of change that is far too high and with too many Americans being naively provincial I think we fail to "GET" just how large the labor overhang (unemployed or starving with a "job") is (something like 1.5 billion) and no matter how strong the market of our 5% of the world's population is we can NOT employ (offshore et al) all of them without taking our wages down so far that the living std of the US will be unrecognizable in the very near future.

The economics of "relative advantage" used to speak to the natural advantages one trading nation held over another at similar pay scales not the employment of .50 labor having the "advantage" over the nation of $20 labor.

There are but two choices here (other than ruin) the US has to aggressively find SOMEthing or MANY things to export or adopt policies to dramatically slow our imports. The "free trade" theory is fine but it only works in "the long run" and as Keynes famously said, "In the long run we're all dead". Jack

Frank

Here is my take:

http://www.concurringopinions.com/archives/2006/12/fisking_posner.html

I just don't see why Robert H. Frank's many contributions to this debate are ignored by Posner. If we want to understand the problems caused by rising inequality, we should turn to Frank first.

ben

The economics of "relative advantage" used to speak to the natural advantages one trading nation held over another at similar pay scales not the employment of .50 labor having the "advantage" over the nation of $20 labor.

I can only conclude from this paragraph you are economically illiterate.

a) the usual term is comparative advantage

b) you are confusing comparative and absolute advantage

c) there is no reason why a nation with $20 labor cannot compete with a nation with low cost labor. Workers in high wage economies are much more productive

d) comparative advantage is not invalidated by large differences in the cost of labor.

Jack

Ben sez:

I can only conclude from this paragraph you are economically illiterate.

JJJJJJJJ Please support your thesis.

a) the usual term is comparative advantage

JJJJJ Indeed that is the correct term.

b) you are confusing comparative and absolute advantage

c) there is no reason why a nation with $20 labor cannot compete with a nation with low cost labor. Workers in high wage economies are much more productive

JJJJJJJJ Hahaahahaa! Great stuff! Let's see, China has a growth rate 4-5 times that of the US, we run a couple hundred Billion in trade deficit with them and about ALL that we do sell them are machine tools and complete factories that will further enhance their ability to "compete" with us.

d) comparative advantage is not invalidated by large differences in the cost of labor.

........ Indeed, but using the .50 (which is high) against the $20 of the US your theory would be true, ONLY where the "increased productivity of the high wage economy" is more than 40 times higher. Would you accept a raging growth in our now $800 Billion trade deficit as Exhibit A that such is not often the case? Oh, high tech? That deficit is now some $5 trillion and next year should add another trillion to that.

Let's see Boeing is over there now.

The Three Dams will soon be creating a surplus of VERY cheap electrical energy.

Aluminum is virtualy a DIRT-cheap mineral turned into a solid by using a LOT of electrical energy.

So, Chinese aluminum should be FAR cheaper than that made in the US with oil cartel energy and far more costly labor.

With the stockpile of aluminum at the ready, would Boeing ship it to Seattle so that $40 guys can build the next generation of planes? Or? would they build the planes there using all those engineers and others that China is wisely producing for $2? $5? and then fly them back?

Do you think we can "make it" selling corn for $2/bushel, arms, fighter jets and the few other areas where we have a temporary? advantage?

ben

Jack

What have wage differences got to do with a trade deficit? Please explain. After all, a number of high wage western economies run trade surpluses.

It is precisely my contention that the productivity of a Western worker is many times that of Chinese. The average American worker produces $81,000 of value added per annum, German $80,000, British $55,000, while a Chinese worker adds only $2,900 value per annum. The ratio of productivities there is about 30 (source: Wolf 2004:175). The relationship between these values and wages is proportionate.

All your talk about cheap electricity and aluminum indicates you are still confusing absolute and comparative advantage.

I have no idea what combination of products will let you "make it". The answer to that question requires an economy-worth of information and it changes every day. I just don't think you've even begun to understand the nature of the problems you think you have all the answers for.

Jack

Ben sez:
What have wage differences got to do with a trade deficit?

jjjjjj A lot, and when I was favoring a living min wage and collective bargaining you were the first to warn that we'd not be "globally competitive" though the far higher upper wages and CEO pays seems to be...... "exempt?" from such concern?


Please explain. After all, a number of high wage western economies run trade surpluses.

jjjjj Let's look at them. Are they awash in oil? or have trade policies NOT designed by nation-less corporations?

It is precisely my contention that the productivity of a Western worker is many times that of Chinese. The average American worker produces $81,000 of value added per annum,

jjjjjjj I sure wish you'd trotted out these numbers while claiming that the "productivity" of min wage folk is but $10,000 and unchanged in a decade of productivity increases?

jjjjjjj more seriously if the number were honest we'd not be dealling with a trillion in trade deficits, with econ advisors indicating "the only hope" is that of purposely weakening the dollar, which is a relative drop in our standard of living vs that of the countries whose script is increasing in strength due to their trade surpluses.


German $80,000, British $55,000, while a Chinese worker adds only $2,900 value per annum. The ratio of productivities there is about 30 (source: Wolf 2004:175). The relationship between these values and wages is proportionate.

jjjjjjjjj except the "average" Chinese is growing and selling cheap rice to each other while the export sector is vastly more productive than your numbers would indicate and that by buying chunks of our federal debt and lending us a couple hundred billion of trade deficit dollars so each household can continue to buy $7,500 more abroad than we sell, they artificially prop up the dollar and maintain an extra trading advantage beyond that of slave labor standards and few environmental controls.

All your talk about cheap electricity and aluminum indicates you are still confusing absolute and comparative advantage.

jjjjjjjj Is this a means of ducking a comment on my prediction that they'll end up with much of "our" aluminum production and the products we've held a tech advantage in producing? The most recent Alcoa plant is being built in Iceland to take advantage of a hydropower benefit there, where would you predict the next one will be built?

I have no idea what combination of products will let you "make it". The answer to that question requires an economy-worth of information and it changes every day.

........ Indeed! and we're in a glide path of a trade deficit of 7% of our entire economy. Given that others are gaining (with "our" gracious help and investment) in the more lucrative areas of software, design, engineering, and mfg that are all "more productive" than the textile jobs that left long ago, do you see anything on the horizon that might slow the 20% per year growth of the trade deficit, much less begin to balance out the trillion dollar short fall?


I just don't think you've even begun to understand the nature of the problems you think you have all the answers for.

jjjjjjjj Me? If it's a given that our nationless corps insist on giving China, Japan and India MFN access to our markets while they do not reciprocate, nor adopt civilized work rules and living min wages and environmental standards in their own countries I don't have any answers to how we prosper while remaining fat, dumb, and blissful during the ride down either.

If you do have an understanding of econ principles, just for fun you might run your labor supply and demand graph using a near-infinite supply of labor at all strata from unskilled to engineering, medical, software and computer hardware, and nuclear tech and see what wage you come up with for all but those working on the top floors of "our" nationless corps. Jack, recalling the demise of other civilizations that spent their declining days praying to false gods.

ben

Jack, you haven't explained what wage differences have to do with a trade deficit. "A lot" doesn't help. Please explain.

The rest of your post is one non sequitur after another.

Tom Grey - Liberty Dad

Jack, you're somewhat hogging the thread, but at least you DO respond to everybody.

The 'USA' is not going down in absolute terms; as China and India get richer, the US will also get richer. They MUST have higher growth rates to catch up -- the failure of the EU to even equal the US growth rates (over any recent 5 year period) is why the US is even gaining. But EU 4+ weeks vacation is better living than US 2+ weeks.

Simple Cost-Benefit Analysis of Intellectual Property Rights (=monopoly protection, which is NOT free market) indicates some cost of enforcement, per computer. Meaning the cost goes up with each computer.

I agree that free music/ movies/ software would mean 'less' is produced -- but far more would be consumed/ experienced of both whatever already exists (continually increasing) and the new. And with blogs like this and millions others, there's plenty of new content. With fewer workers 'making money' in those monopoly industries, wages would fall -- mostly for the super rich like Gates or Bono whose income is protected by gov't enforcement of their little monopolies.

The Dems fail to attack gov't support for the super rich -- and you, too, fail (or I missed) documenting how taxpayers subsidize Wal-Mart. But it should certainly stop, such as local gov'ts giving Wal-Mart low-cost land, etc.

As poverty in the world goes down, especially in China and India (first?), the relative importance of the USA will inevitably go down. But these three countries are the ONLY ones over 300 million.

Please consider proposing your own solutions, (or referring to a blog?), and contrasting other solutions to yours, rather than merely objecting/ commenting.

On Mexican immigration: if there's 12 mil. illegals in the US, at least 10 mil. from Mexico: of 100 mil. that's 10%; of some 50 mil. "working age", 10 mil. would be 20% -- so Mexico is failing to provide jobs for too many Mexicans.

Actually, Mexican entrepreneurs are failing, because of terrible Mexican gov't policies. (Including many that might be similar to what Jack wants?) "Mexico" doesn't make decisions, only real people do.

Jack

Ben sez:
Jack, you haven't explained what wage differences have to do with a trade deficit. "A lot" doesn't help. Please explain.

jjjjjjj: Ben your theory appears to be that (chest thump and drum roll) that WE can out produce low wage countries despite our far cost of living and higher wages. How about finding out experimentally? This week 50% of Christmas shoppers visited a Walmart. So perhaps go in there, pick up say 50 products at random, see where they were produced and ask yourself why they were produced in a low wage country if we can out produce them with our wage/cola scale.

For the soaring trade deficit itself just look around. Do you have a competing theory as to why we have a trade deficit? Or any predictions as to whether it's likely to change for the better?

As for "non sequiturs" perhaps it's best if you'd either point out any real or imagined logic errors or not make any unsubstantiated comments? Thanks.

Tom

Tom sez:

Jack, you're somewhat hogging the thread, but at least you DO respond to everybody.

jjjjj Sorry, I don't mean to hog, but perhaps a conversational style or questioning the positions of others is at least as good as tossing out a drive-by theory and traveling on?

The 'USA' is not going down in absolute terms; as China and India get richer, the US will also get richer.

jjjjjj I'm not sure what to use as an absolute, but have noted the lower half of earners have had next to no improvement in purchasing power in 15 years and for most Americans the costs of such semi-"absolutes" as oil, gold, platinum, travel in the rest of the world, housing have soared in terms of hours worked. I don't see any connection with our becoming wealthy vis a vis China as we continue to run a huge deficit buying consumer goods from them and selling them only factories and machinery to enhance their own productivity.

They MUST have higher growth rates to catch up --

jjjjjj I'm all for the poor of the world enjoying higher growth rates and because they can buy and use tech that has had most of its research costs amortized they should be able to play a good catch up gain. But in regard to our being able to soak up the product of the worlds surplus labor and run growing trade deficits, well, a few guys like Bernanke and Gspn deem it "unsustainable", Something about the emotionless way old Greenie says the word is quite convincing to me.

the failure of the EU to even equal the US growth rates (over any recent 5 year period) is why the US is even gaining. But EU 4+ weeks vacation is better living than US 2+ weeks.

jjjjj It's probably pretty difficult to compare the US with the EU as it absorbs E. Germany, has a population aging even faster than the US and that is declining in numbers. BTW a recent study showed that in terms of hours worked, the French worker is more productive than is the US worker. Given our tremendous advantages in resources if a worn out country like France is even in our rear view mirror it's time to check our act.

Simple Cost-Benefit Analysis of Intellectual Property Rights (=monopoly protection, which is NOT free market) indicates some cost of enforcement, per computer. Meaning the cost goes up with each computer.

I agree that free music/ movies/ software would mean 'less' is produced -- but far more would be consumed/ experienced of both whatever already exists (continually increasing) and the new. And with blogs like this and millions others, there's plenty of new content. With fewer workers 'making money' in those monopoly industries, wages would fall -- mostly for the super rich like Gates or Bono whose income is protected by gov't enforcement of their little monopolies.

jjjjj Both myself and the Clinton era anti-trust division agree that Gates is a beneficiary of monopoly power and is not shy about weilding it as in clobbering Netscape and buying up potential competitors while Bono has excelled in one of the most competitive fields on his talent and energy. I don't begrudge him and U-2 their couple bucks per CD or what they make filling stadiums. Given that scalpers buy up the tickets and sell them much higher it's hard to even make a case that he's charging "what the market will bear"

The Dems fail to attack gov't support for the super rich --

jjjjj agreed. Our "democracy" has fallen prey to an "industry" of "reps" dealling in favors that are not beneficial to the vast majority of the citizenry.

and you, too, fail (or I missed) documenting how taxpayers subsidize Wal-Mart. But it should certainly stop, such as local gov'ts giving Wal-Mart low-cost land, etc.]

jjjjjj Don't get me started!!! It's my contention that with FEW exceptions the employer should pay a min wage that is very close to the cost of a basic living standard, and NOT doing so is to short circuit much of what makes capitalism work ie allocation scarce resources to the most efficient users of those resources. Walmart's bottom line is further fatted by their game of 28 hour "part timers" being eligible for the whole alphabet soup of transfer programs that generous American people meant for those truly down on their luck or working for the most marginal of small business. The taxpayer chips in $1.5 billion subsidising the wage costs of the richest corp in world history, while Costco manages to succeed paying twice the hourly pay of Walmart.


As poverty in the world goes down, especially in China and India (first?), the relative importance of the USA will inevitably go down.

jjjjjjj I'm fine with all those countries coming UP without taking us down and with China @ 10% growth or doubling in just 7 years while the US slogs along at 2% doubling in 35 years or growing just 15% while China doubles it's happening VERY fast. Again it is our soaring trade deficit that is at issue.

Good summation of the problem:
http://www.kansascity.com/mld/kansascity/business/16269774.htm

But these three countries are the ONLY ones over 300 million.

jjjjjjj Our trade deficit is scattered pretty widely and its rare for us to run a surplus these days with any trading partner. Probably best to think of the US being but 5% of the 6 billion people of the world that has a billion plus as surplus labor and most offer no market opps or means of balancing our huge trade deficit

Please consider proposing your own solutions, (or referring to a blog?), and contrasting other solutions to yours, rather than merely objecting/ commenting.

jjjjjjj Well the KC article outlines our problem with China and the problem points to the solution which should include "playing fair" with the value of the yuan, beginning their own "New Deal" of civilized work rules and a living wage, with the world insisting on them cleaning up their environmental policies. (Bit hard to do though with Bush riduculing Kyota and doing zip-nada to slow our consumption/wasting of energy.)

On Mexican immigration: if there's 12 mil. illegals in the US, at least 10 mil. from Mexico: of 100 mil. that's 10%; of some 50 mil. "working age", 10 mil. would be 20% -- so Mexico is failing to provide jobs for too many Mexicans.

jjjjjj exactly! And we'd be wise to watch closely the terrorist uprising in Oaxaca:

http://www.indybay.org/newsitems/2006/08/23/18300044.php

Actually, Mexican entrepreneurs are failing, because of terrible Mexican gov't policies.

jjjjjjj Mexico has some terrible policies but our own NAFTA (along with WTO and China MFN and games) have made things MUCH worse in Mexico with wages actually dropping since NAFTA while unemployment has soared. We COULD, as we've done for a century or so say "terrible Mexican gov't policies." .... yawn, what else is new and continue screwing them but there are far better policies especialy since they are right next door and not in Asia or the M/E.

(Including many that might be similar to what Jack wants?)

jjjjjjj Hardly. While our wage-wealth inequality is nearly as bad as that of Mexico the poverty level is FAR more desparate there and it may be in our hands to decide whether we'd like to try to "fence out" a nation starving in poverty engaging in military revolt or find win-win means of using their surplus labor to partially solve our inability to compete in the global market place. We've a $13 trillion economy, theirs is ONE trillion. We buy some $500 billion worth of stuff from China. Which suggests that were we to divert 10 or 20% of that trade to Mexico it would soak up most of their unemployment.

"Mexico" doesn't make decisions, only real people do.

jjjjjjj Indeed that is true and you may have noticed their vote counting flap and people in the streets over the strong arm results plus Oaxaca, while we're "over there" spending billions like it was water on an "optional" "war". BTW if "it" is about oil, Mexico exports more oil than Iran and Iraq combined. Jack

ben

Jack, I suppose it must feel nice to claim the scientific high ground by challenging me to find experimental proof - but I'm not the one making claims about the relationship between wages and trade deficits. That's you. I'm still waiting for your explanation, which quite plainly doesn't exist. Please stop spouting off.

As for my theory, I don't have the first clue about that relationship. I imagine it is extremely complex.

Non sequiturs. Hmmm. Well in your last post you cite going into Wal Mart and finding most things in there are made elsewhere. But a trade deficit does not follow from some retail chains stocking mainly foreign goods, nor does it say anything about relative productive capacity. Non sequitur. (It probably does say something about comparative advantage.)

SANTA

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Jack

Ben: It's really time for you to put forth SOMETHING. You seem complacently content with the status quo of soaring trade deficits and a nation that does business like China having open access to our market under MFN terms.

Now it IS easy to see how our "mid-ocean" corpies can make profits, almost, regardless of what happens to the living standards of American working folk.

But perhaps if you can't or won't do the things you refuse to tackle in your last post; perhaps you could do something else? For example perhaps write a bit on "What American's might sell in the future to slow the trade deficits".

Perhaps a timeline would be good too. Say "Before our 8% of GDP per year becomes, double digits? triple digits?"

Or "Why much of any exportable work would be done in the US given the massive surplus of labor in far lower cost venues which replicate or even exceed the skills of US workers?"

Or pick a topic of your own that might fit, what appears to be, your assumption that all is just ducky and the we are not selling off the inherited wealth of our nation in favor of over consumption of imported goods at the rate of $7,000/household for current consumption while having no clue as to what we might bring to the world's bazaar.... "someday." Thanks, Jack

ben

Thanks Jack, I'm content to ask you to justify some fraction of the material you are putting on here.

I'm not aware of an example of long term harm from trade deficits when those deficits are the product of private (rather than government) spending. Indeed, trade deficits can persist for decades and are often associated with large economic expansions.

If you can provide either a theory for, or an example of, a nation coming to harm as a result of its people producing a sustained trade deficit then I'll listen. Otherwise, I will remain completely unconcerned about it.

As for your concerns about corporations, I suppose some of your concerns about them have merit, but they must be weighed against the benefits corporations provide. Corporations are responsible for the majority of innovation in the economy. Baumol (2002) argues the main reason capitalism alone produces sustained economic growth is because it is the one arrangement that produces oligopolies, and oligopolies - usually populated by large corporations - are where conditions for innovation are optimal. Innovation is important: it is the reason living standards exceed subsistence.

Corporations have emerged as a dominant form of organization in competition with other forms, which gives me confidence that corporations have strong efficiencies in markets where they are dominant.

The concerns about corporations you raise must be weighed against the tremendous benefits those organizations bring.

Jack

Ben

Thanks Jack, I'm content to ask you to justify some fraction of the material you are putting on here.

jjjjj Sorry. If you've specific question that might be OK, but playing any more tennis against a wet blanket won't hold my interest.

I'm not aware of an example of long term harm from trade deficits when those deficits are the product of private (rather than government) spending.

jjjjjjj Reading could make one more aware.

Indeed, trade deficits can persist for decades and are often associated with large economic expansions.

jjjjjj Ha-ha! Ripe! The last time such a case might be made was when we were borrowing in order to build plant and equipment. Today we're 30% or more over capacity, NOT even keeping up with other nations on R&D and borrowing from everyone to finance partying heavily on the cuff.

If you can provide either a theory for, or an example of, a nation coming to harm as a result of its people producing a sustained trade deficit then I'll listen.

jjjjjj Us.

Otherwise, I will remain completely unconcerned about it.

As for your concerns about corporations, I suppose some of your concerns about them have merit, but they must be weighed against the benefits corporations provide.

jjjjjjj They've been weighed and found wanting.

Corporations are responsible for the majority of innovation in the economy.

jjjjjjj Well, No. Unless one counts on them buying up innovators.

Baumol (2002) argues the main reason capitalism alone produces sustained economic growth is because it is the one arrangement that produces oligopolies, and oligopolies - usually populated by large corporations - are where conditions for innovation are optimal. Innovation is important: it is the reason living standards exceed subsistence.

jjjjjjjjj Fiction.

Corporations have emerged as a dominant form of organization in competition with other forms, which gives me confidence that corporations have strong efficiencies in markets where they are dominant.

jjjjj I've not challenged the corporate form though it WOULD be good to remind you and others that a corpy is just a corpy, and NOT a citizen imbued with political rights.

The concerns about corporations you raise must be weighed against the tremendous benefits those organizations bring.

jjjjj Are most of your views equally faith-based and favorable to "our" nationless corps over the welfare of the hard working people of our once great nation?

ben

Jack. It is striking to be accused of not reading enough by somebody who thinks minimum wage and farm price supports are in every country, or who disputes that America's trade deficit has occurred during a large economic expansion.

Are you actually capable of writing a reasoned response or are rhetorical tricks your only game? Simply labeling stuff fiction is useless. Shifting goal posts or raising irrelevant, unrelated points ("30% or more over capacity" or "...citizens imbued with political rights....") is useless. Pretending anyone who disagrees with you is against hard working people is childish.

You want a question. What is the chain of events by which an the average American will be made worse off by the US trade deficit i.e. how does a trade deficit translate to costs for the man on the street? Walk me through step by step the process by which trade deficit translates to problems.

Jack

Ben claims:

Jack. It is striking to be accused of not reading enough by somebody who thinks minimum wage and farm price supports are in every country,

....... I'm assuming other first and second world countries. Is that helpful?

or who disputes that America's trade deficit has occurred during a large economic expansion.

jjjj: I guess that would be me. Take a look: Perhaps the graph shows 2.5% GDP growth from 80 - 2000 and a bit worse after that? And what's IN that post 2000 "growth?" Not only the most massive expansion expansion of the size and cost of government, a tripling of energy costs, but borrowing half a trillion more from the future each year to "spur" a doggy that barely creates a breakeven number of jobs of declining wages; but let's pretend it's a "real" 2.5% growth so we can move along. While you're there take note of the growth from 60 - 80 can we agree it's close to 5%??

Whoops, nearly forgot; with our utilization rate at 70% and housing starts dropping from 2.5 million to perhaps 1.3 million who do you suppose is reaching out to borrow from other countries to facilitate investment in additional capacity here?

http://www.newyorkfed.org/research/epr/02v08n1/0205kahn/0205kahn.html

Now take a look at the trade deficits that accompany each era:

http://www.globalpolicy.org/socecon/crisis/tradedeficit/tables/1101tradedeficit.htm

Do you, perhaps? find the volume of that swimming pool sized area combined with the 60 degree angle of descent a "bit troubling?" as do two recent Fed chairmen? I'd rather not project the continuation of the dowward spiral as, I suppose, it could flatten out as happened from 90-97. Perhaps you might post something indicating why any flattening or a turnaround might take place?

Also, do you really think that this once great economic power must reach out and borrow 6% of GDP in order to fund a rather measely 2.5% growth? a significant portion of which is phony?

"Are you actually capable of writing a reasoned response or are rhetorical tricks your only game?"

jjjj sure! And why is it that you did not opt to write a reasoned response to my questions? Is hiding in the hedges and taking a swipe at passersby your game?

Simply labeling stuff fiction is useless.

jjj Sorry, I'd hoped to challenge you to show something on how oligopolies have been so creative and innovative? One of the medical insurance oli's paid their captain $150,000,000 last year; has the been a lot of innovation in medical insurance recently? or in my lifetime? But I DO agree innovation IS important and wonder why R&D spending is falling despite a host of tax bennies?


Shifting goal posts or raising irrelevant, unrelated points ("30% or more over capacity"

jjjjj Sorry, that's 30% is the closest number I have for our unused capacity. I suspect it is low, as, for example were the demand for computers or electronics to soar, Dell, and Intel and others could add their foreign capacity very quickly and it would take very little effort to ship a few million more WinXP's. I'd assume the housing, mortgage and related industries could easily double production as that's what they done in recent years.

or "...citizens imbued with political rights....") is useless. Pretending anyone who disagrees with you is against hard working people is childish.

jjjjjjjj So show me something?

You want a question.

jjjjjjjj No. I want answers to what I asked this time.

What is the chain of events by which an the average American will be made worse off by the US trade deficit i.e. how does a trade deficit translate to costs for the man on the street? Walk me through step by step the process by which trade deficit translates to problems.

jjjjjjj But, do you have your econ text close by?


Thanks, Jack

ben

Jack, as usual your response here is just off-topic.

That's a great bunch of statistics in responding to economic expansion - does it refute that an expansion occurred during a deficit? No. You also conveniently ignore (or, rather, were entirely unaware of) the 8 years before 2000 when a mainly privately-induced trade deficit existed alongside the largest expansion in the US economy in history. Historically, the US economy expands faster, investment rises, unemployment is lower, and poverty falls, under a trade deficit.

Then you challenge whether oligopolies are innovate by pointing out one firm paid their CEO a lot of money. This may have fairness implications but it has nothing whatsoever to do with whether that industry is innovative.

Also, do you really think that this once great economic power must reach out and borrow 6% of GDP in order to fund a rather measely 2.5% growth? a significant portion of which is phony?

Such breathtaking inanity. The US is close to the wealthiest nation on earth, it is growing much faster than most other first world nations, particularly those in Europe, it is the world's only superpower, and yet you take all that for granted and complain that 2.5% is not enough.

Now I will answer your questions. Are these seriously the questions you are berating me for not answering?

Are most of your views equally faith-based and favorable to "our" nationless corps over the welfare of the hard working people of our once great nation?

Gee, good point. Have you stopped beating your wife yet?

But perhaps if you can't or won't do the things you refuse to tackle in your last post; perhaps you could do something else?

Yes.

Say "Before our 8% of GDP per year becomes, double digits? triple digits?"

There is a question mark on the end of your sentence but I don't see the question.

"Why much of any exportable work would be done in the US given the massive surplus of labor in far lower cost venues which replicate or even exceed the skills of US workers?"

Finally. A substantive question. My answer is that US labor is much more productive than in countries with surplus labor, and in fact data shows the ratio of productivities in countries is almost exactly the ratio of wages. Americans are paid 30 times more, they produce 30 times more per hour. See Wolf 2004 (I don't have a page ref on me). As I have pointed out, even countries with absolute disadvantages in all products must by definition have comparative advantage in some.

For the soaring trade deficit itself just look around. Do you have a competing theory as to why we have a trade deficit? Or any predictions as to whether it's likely to change for the better?

Yes. Americans save less than foreigners (particularly in East Asia) and use inwards investment to pay for imports. The trade deficit is mainly the product of the US's attractiveness to foreign investors and exceptionally high savings rates in Asian economies. Some researchers have pointed out this inwards investment is actually a very positive indicator for the US economy's health.

....... I'm assuming other first and second world countries. Is that helpful?

Yes. And convenient.

Now, my question to you. Jack I know you have no idea why or how a trade deficit can harm Americans apart from some vague idea that households that spend more than they earn will get into trouble some day. But that really has little to do with a trade deficit. I also know you can find the answer on google in 5 minutes and pretend like you knew all along. I also know that when you discover how little you know the complaint will suddenly morph into a series of unrelated statistics that poorly disguise your attempt to cover your entirely uninformed earlier comments.

But what the hell, let's have some fun. My question, again: What is the chain of events by which an the average American will be made worse off by the US trade deficit i.e. how does a trade deficit translate to costs for the man on the street?

Anonymous

thanks all
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