Posted by: graemebird | June 3, 2008

Dumb Economists Part II/Post-Industrial Economy AKA The Information Economy.

There is this completely idiotic idea going around in taxeaterland, and with our court-economists. And this is this idea that a developed society forsakes its ability to make stuff. To manufacture stuff and export these manufactures.

There is very little I can say about this topic and so this threadstarter as of necessity will be a short one. Because there is simply nothing in economic theory that could justify this stupidity. I cannot even argue against this because the people who put this stuff forward have not made a case that I can get a handle on at all.

I’ve looked around for some sort of justification for this nutty idea and I’ve come up blank. And yet you hear people putting forward this stupidity all the time. Keith Suter puts this drivel forward. But he’s no economist. Steve Kirchner and others as well. In fact I’d be hard put to find an economist who doesn’t believe this but as I keep telling people our economists are dummies who do not understand economics.

In this make-believe economics debt doesn’t matter. This is regardless of the reason for the debt and regardless of context. In this gone-native economics if two countries have free trade with each-other , one must get nearly all the manufacturing and the other must get  virtually all the advanced and clever services. All the creative stuff. As if poor people cannot be creative and as if highly capitalised countries aren’t supposed to be able to make anything.

In this thief-economics, economic output is strangely divided by country and sector. The sectors are split up into primary (agricultural and extraction industries) secondary (manufacturing) and tertiary (services). And these sectors are supposed to be dealt out like a hand of cards, with some countries pulling virtually all of one and not much of the others.

How such stupidity could infect our economists and public sector intellectuals more generally is a mystery. 

Now David Ricardo came up with the idea of comparative advantage. And this proved that any two countries had gains to be made through trading even if country (A)was better at doing pretty much everything than country (B). This is true and good theory. And it is almost the direct opposite of these idiotic notions of the service economy that no longer can manufacture stuff. Mises (and no doubt others) have shown that Comparative advantage actually exists between two regions, two cities, two anything all the way down to two individuals. And still we draw a blank on this idiocy of the “post-industrial society.”

Thats about all there is to say about this topic. There are these idiotic notions going around and no valid economics theory to back them.

Thats about all there is to say about this topic except to mention the obvious: That us losing our relative manufacturing power is simply the result of bad policy. And perhaps here we see how these ideas came about. The dumb bastards have foisted the bad policy on us and now they seek to justify it. ITS ALL ACCORDING TO PLAN they might say. ITS ALL RIGHTEOUS AND ACCORDING TO HOYLES they seem to believe.

One thing I object to about our economists is that they lack culture and education. And I don’t mean that in some sort of small way. I mean that in a really big way. These are not people that face the constant harassment of being repetitively referred to as “renaissance men.”

If I read in history that the Byzantine Empire had to outsource its defense shipping industry to the Venetian Empire that for me would automatically ring alarm bells even if I didn’t know the outcome. Now if you were on the ground that might be the rational thing. And you might even be able to make that deal fly, even with the Venetians a strategic competitor and all. But the point is that its a pretty bad omen just the same and the first thing you’d do is wonder whether the property rights climate is conducive to high productive output in Constantinople and surrounds.

Well not our guys. They can cock things up year in and year out, and they are never moved to wonder whether their policies might be lacking.

SUMMARY

THERE IS NOTHING IN THE THEORY OF COMPARATIVE ADVANTAGE THAT SUGGESTS WE OUGHT TO BE LOSING OUR INDUSTRIAL POWER VIA FREE TRADE.

QUITE THE CONTRARY.

TWO COUNTRIES TRADING WITH EACH-OTHER, OUGHT TO BE BOTH INDUSTRIALIZING AND INCREASING THEIR POWER TO MAKE AND BUILD THINGS.

EITHER COUNTRY NOT IMPROVING THEIR PRODUCTIVE POWER IN MANUFACTURING, AND IN OTHER SECTORS AT THE SAME TIME, IS SUFFERING FROM BAD DOMESTIC POLICY. 

THEY ARE SUFFERING FROM BAD DOMESTIC POLICY. BAD DOMESTIC POLICY AND NOT A LACK OF TARIFF PROTECTION, NOR SOME SORT OF SOCIETAL EVOLUTION FORCING THEM TO LOSE THEIR MANUFACTURING AS THE PRICE OF SUCCESS.

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