Brad DeLong's Semi-Daily Journal writes on Outsourcing
Over at Brad DeLong's Semi-Daily Journal
Stephen S. Cohen and J. Bradford DeLong have been thinking About Outsourcing
and have posted a first rough cut "Our Outsourced Future" Draft 1.3"
It is well worth the read, so go read it, or my comments may not make sense.
I agree with much of what they say, but I think they, as economists are wont to do, over complicate the obvious. When the supply of available labor exceeds demand, the value of labor falls. I think that's fairly simple. When women entered the work force, the nearly doubled the available labor, and real wages have been stagnant ever since. Now we have globalization, which will increase the pool of labor enormously, so expect wages to stay stagnant, and probably fall in real terms, for the next generation.
The other problem I see with their argument is that it appears to isolate the effect of outsourcing from productivity gains resulting from improved technologies. And, I think that is why they can write it in such a non-alarmist fashion. When the cost of capital is cheaper than the cost of labor, business invest in machines not workers. I think that when you add the future gains in productivity, just from improved technologies, with the increased competition from a world wide labor pool, you should become alarmed. If the market pursues this direction unchecked, the only people that will make money are those who already have enough money to invest.
Third, this transition will not be easy regardless of what policies we put in place, but I think one place to start changing the focus of education on preparing the student to enter a work force in a job, to one where the student is prepared for a life time of entrepreneurship. Those have been, are and will be the best skills for success. But, that still leaves us in a Darwinistic mess of only the strong will survive. Which many may find acceptable, but I personally do not like the idea of billions of people starving and shut out of the economy.
I have no final ideas on the subject, but I do think my post Rogue Analyst
: "It's your information, WHY SHOULDN'T YOU GET PAID?!!", which is in the archives from Feb 2, '04, is a valid approach to some sort of transition vehicle.
And on a lighter note, if you haven't read it yet, my attempt at satire from 12 March '04 in the archives about here: BLOGGER :: Manage Posts
: "A Modest Proposal: A Solution to the Problem of Poverty in America". It should be relatively easy to find, as it's the only one that I've gone back and put a title to from that period.