United States Exports More Services, than it Imports (a.k.a. “Outsources”)

This month a poll by Zogby International for the Foreign Policy Association found that 71 percent of Americans believed outsourcing was hurting the economy.   It also found that 62 percent of American workers believed the federal government should penalize companies that send work offshore.

Now, however, we can add some actual figures to the overheated debate.  The Government Accountability Office has issued its first review of the data, and one undeniable conclusion to be drawn from it is that outsourcing is not quite the job-destroying tsunami it’s been made out to be.  Of the 1.5 million jobs lost last year in ”mass layoffs” — that is, when 50 or more workers are let go at once — less than 1 percent were attributed to overseas relocation; that was a decline from the previous year.

. . .

The data did show that from 1997 to 2002, annual imports of business, technical and professional services increased by $16.3 billion.  However, during that same half-decade, exports of those services increased by $20.5 billion a year.  In 2002 alone, the United States ran a $27 billion trade surplus in business services, the sector in which jobs are most likely to be outsourced.  The G.A.O. correctly stressed that it is impossible to compute exactly how many jobs are lost because of outsourcing, but unless its figures are off by several orders of magnitude, there’s no crisis here.

 

For the full commentary, see:

Daniel W. Drezner.  "Where Did All the Jobs Go? Nowhere."  The New York Times  (Weds., September 29, 2004):  A25.

Paperwork is 31% of U.S. Health Care Costs

. . . ,  a large part of America’s health care spending goes into paperwork.  A 2003 study in The New England Journal of Medicine estimated that administrative costs took 31 cents out of every dollar the United States spent on health care, compared with only 17 cents in Canada.

For the full commentary, see:

PAUL KRUGMAN.  "The Medical Money Pit."   The New York Times   (Friday, April 15, 2005):  A19.

 

Canada may beat the U.S. in this dimension of health care, but they lose in many other important dimensions–for example the wait time to receive ‘elective’ surgeries.  And anyway, isn’t 17 percent still too high?

Free Market Philanthropy

KochClharles.gif Charles Koch.  Source of image:  online version of WSJ article cited below.

 

Mr. Koch’s latest crusade to spread the ideas of liberty has been his sponsorship of a twice-yearly conference that gathers together many of the most successful American entrepreneurs, from T. Boone Pickens to former Circuit City CEO Rick Sharp.  The objective is to encourage these captains of industry to help fund free-market groups devoted to protecting the fragile infrastructure of liberty.  That task seems especially critical given that so many of the global superrich, like George Soros and Warren Buffett, finance institutions that undermine the very system of capitalism that made their success possible.  Isn’t this just the usual rich liberal guilt, I ask.  "No," he says, "I think they simply haven’t been sufficiently exposed to the ideas of liberty."

 

For the full commentary, see: 

STEPHEN MOORE.  "THE WEEKEND INTERVIEW with Charles Koch; Private Enterprise."  The Wall Street Journal   (Sat.,  May 6, 2006):  A8.

“Everybody wants to be like Bill Gates”

Vietnamese university students hoping to see Bill Gates.  Source of image:  http://www.nytimes.com/2006/04/27/world/asia/27vietnam.html?ex=1303790400&en=255d4d4996b1a9a6&ei=5088&partner=rssnyt&emc=rss

 

HANOI, Vietnam, April 26 — It was Lenin’s birthday.  The most important Communist Party meeting in five years was under way. And the star of the show was the world’s most famous capitalist, Bill Gates.

The president, the prime minister and the deputy prime minister all excused themselves from the party meeting on Saturday to have their pictures taken with Mr. Gates, who has more star power in Vietnam than any of them.

When people heard he was in town, hundreds climbed trees and pushed through police lines to get a glimpse of him.  He was the subject of the lead article in the next day’s newspapers.

This is where Vietnam stands today, moving cautiously toward a new version of communism while the people and their leaders lunge eagerly for the brass ring of capitalist development.

"That was very symbolic," said Le Dang Doanh, an official in the Ministry of Planning, speaking of the reception for Mr. Gates.  "It is a very clear sign of the new mood of society and the people.  Everybody wants to be like Bill Gates."

 

For the full story, see:

SETH MYDANS.  "Communist Vietnam Lunges for Capitalism’s Brass Ring."  The New York Times (Thurs., April 27, 2006):  A3.

Note:  the version of the article above corrects an error in the print version that had misidentified the day of Lenin’s birth, and Gates visit as a Sunday (it was a Saturday).

Reagan on the Bureau of Indian Affairs

Source of book image:  http://www.amazon.com/gp/product/0060957573/ref=ed_oe_p/104-5180402-9681554?%5Fencoding=UTF8

 

Michael Deaver, longtime aide to Ronald Reagan, has written an interesting memoir that documents that in most important respects, Reagan was his own boss, worked hard, and had a focused intellect.  

He also documents what most grant:  Reagan was a great communicator.  One element in his success as a communicator is illustrated below:

 

(p. 71)  . . . he would often recount a fictitious yarn of a sobbing bureaucrat he encountered at the Bureau of Indian Affairs.  The man was at his desk, crying into his folded arms when Reagan touched him on the shoulder and asked him what was wrong.  "My Indian died, that’s what’s wrong," came the response.  "What the hell am I supposed to do now?"

 

The citation for Deaver’s book is:

Deaver, Michael K.  A Different Drummer:  My Thirty Years with Ronald Reagan.  Reprint ed:  Harper Paperbacks, 2003.

 

Spontaneous Order in Cockroaches

Even cockroaches manage to make collective decisions that, seemingly by magic, produce an outcome that benefits everyone (except the people whose kitchens they are in).  When roaches decide where to move in, they must balance crowding against protection against predators.  The goal: pack enough roaches into a shelter to provide strength in numbers, but not so much that dangerous crowding results.

When scientists put roaches into a dish containing identical shelters, they thought the roaches would fill one shelter and then use others for spillover.  But the gregarious bugs defied expectations.

When more than half the bugs could fit into one shelter, they divided into two equal groups:  For instance, when 50 had a choice of three shelters, each with a capacity of 40, 25 cockroaches gathered in one, 25 in another, and none in the third, biologist José Halloy of the Free University of Brussels and colleagues reported last month in Proceedings of the National Academy of Sciences.

Dividing up evenly, he says, "spreads benefits and risks among all individuals," rather than having 40 bugs safe and happy while the 10 for whom there was no room at the inn suffer.  But when each of three shelters could hold 70, all 50 cockroaches packed into one.  Each outcome was optimal, producing the greatest safety in numbers without crowding.

Yet no leader assigns lodging. Roaches just check out shelters, with later arrivals deciding that a crowd signifies "this is the place to be."  Overcrowding means "find somewhere else."  A group decision that perfectly balances protection and crowding emerges from dozens of such individual decisions.

For the full story, see: 

Begley, Sharon.  "Buffalo Seek Consensus and Other Tales of How Animals Decide Things."  The Wall Street Journal  (Fri., April 14, 2006):  A11.

Kenyan Lawmakers Nearly Double Their Mercedes Mileage Allowances: More on Why Africa is Poor

  The relatively modest vehicle of Francis Ole Kaparo, the speaker of Kenya’s National Assembly, contrasts with other Kenyan lawmakers’ "Mercedeses, Land Rovers and other typically sleek rides."   Source of photo:   the online version of the NYT article cited below.

 

NAIROBI, Kenya, May 21  —  It has been a trying year in Kenya, one of the worst in decades, as a severe drought killed off crops and cattle and left millions with empty stomachs and uncertain futures.

In such suffering, members of Parliament have been roused to action as seldom before, finding common ground on an issue so pressing that they threatened to stonewall the budget until it was addressed: another big increase in their compensation.

The move last month to reward themselves in a time of crisis infuriated Kenyan voters, most of whom eke out a living on a fraction of what their elected officials earn.  It also reinforced the notion that this was a political drought, one that owed its origins as much to mismanagement in a country that should be able to feed itself as to the vagaries of nature.

. . .

. . . , some say legislators have lost touch with the poor districts they represent.  Per capita income is about $463 a year, which nobody here would expect a lawmaker to survive on.  Minimum wage is $924 a year, still far too little, in most Kenyans’ view, for someone taking care of the nation’s business.

But the base compensation that legislators earn is about $81,000 a year, tax free, plus a variety of allowances and perks, which can effectively double their take-home pay.  That means those public servants earn more than most Kenyan corporate executives and outstrip the salaries of many of their counterparts in the developed world.

"They are behaving like we are rich and as if there’s no famine and poverty in the country," Maina Kiai, the chairman of the Kenya National Commission of Human Rights, complained recently to the newspaper The Daily Nation.  "They want to make as much money as they can."

The latest increase, which cost the country $2.78 million, nearly doubled the mileage allowances that lawmakers receive for their Mercedeses, Land Rovers and other typically sleek rides.

 

For the full story, see:

MARC LACEY. "Nairobi Journal; Crisis Swirls in Kenya, and Politicians Reward Themselves." The New York Times (Mon., May 22, 2006):

 

Hunter-Gatherers Prefer Civilization

Source of photo:  online version of NYT article cited below.

 

(p. A13) The newly arrived Nukak do not provide much detail about why they left.  They just say that "the Green Nukak," a possible reference to Marxist guerrillas, who wear camouflage, told them to leave.

"The Green Nukak said we could not keep walking in the jungle, or else there would be problems," explained Va-di, another Nukak man, whose words were translated from Nukak by Belisario.  "The Green Nukak told us to go where it is safe."

 . . .

In Aguabonita, the scene on a recent day was full of commotion and laughter.  Naked children tugged at the shirts of two foreign journalists, offering big smiles and hugs.  The men quickly welcomed the visitors into a makeshift shelter, where they laughed at some of the questions and, it seemed, wholly innocently at their own odd predicament.

Are they sad?  "No!" cried a Nukak named Pia-pe, to howls of laughter.  In fact, the Nukak said they could not be happier.  Used to long marches in search of food, they are amazed that strangers would bring them sustenance — free.

What do they like most?  "Pots, pants, shoes, caps," said Mau-ro, a young man who went to a shelter to speak to two visitors.

Ma-be added, "Rice, sugar, oil, flour."  Others said they loved skillets.  Also high on the list were eggs and onions, matches and soap and certain other of life’s necessities.

"I like the women very much," Pia-pe said, to raucous laughs.

One young Nukak mother, Bachanede, breast-feeding her infant as she talked, said she was happy just to stay still.  "When you walk in the jungle," she said, "your feet hurt a lot."

The men still go into the jungle, searching for monkeys, a delicacy the Nukak cannot seem to live without.  Monkeys are grilled, dismembered and boiled, then eaten piece by piece.  The women still spend their time carefully weaving intricate wristbands and hammocks, using threads from palm leaves.

All live in shelters now, enjoy constant medical attention and, on weekends, stroll into town to take in the sights.  "Nukak life is hard in the jungle," Dr. Maldonado said.  "You wake up thinking about food and you go hunt, you go search for nuts.  So when they see us they think their food problems are over."

That is not to say the Nukak do not have plans.

Ma-be explained that the idea is to grow plantains and yucca and take the crops to town.  "We can exchange it for money," he said, "and exchange the money for other things."  But first they need to learn how to cultivate crops.  The Nukak say they would like their children to go to school.  They also say they do not want to lose traditions, like hunting or speaking their language.  "We do want to join the white family," Pia-pe said, speaking of Colombian society, "but we do not want to forget words of the Nukak."

 

For the full story, see:

JUAN FORERO.  "Leaving the Wild, and Rather Liking the Change."  The New York Times (Thurs., May 11, 2006):  A1 & A13.

(Note: ellipsis added.)

Capitalist Enclave Celebrates Diversity

Barkeep Jae Hyuk Lee in Dublin.  Source of photo:  online version of NYT article cited below.

 

Ireland is a capitalist enclave, in a Europe infused with high taxes, heavy government regulation, and the welfare state.  Captitalism is sometimes portrayed as inhumane, but it is under capitalism that diversity and tolerance thrive:

Like traditional Dublin pubs, bars catering to immigrants operate according to an Irish barman’s basic principles: drinks served promptly, customers treated with respect and, when the occasion calls for it, readiness to listen to the troubles of the day.

Since members of many other ethnic groups — from Asia, Africa and Eastern Europe — have also opened businesses in the area, Mr. Lee’s short, gritty stretch of Parnell Street feels like a bewildering experiment in diversity. This part of Ireland’s capital is a microcosmic study of how global migration trends can transform a formerly homogeneous city.

One of Mr. Lee’s neighbors displays an array of dangling hair extensions for African women; another sells sausages and bags of pretzels imported from Poland, in three or four different flavors.

The Ice Bar itself has been decorated by an eclectic imagination: Chinese drinking poems are painted on one wall and deer skulls are mounted on another. The patrons are a jumble of students and artsy types, Asian and European, and music fans drawn by Mr. Lee’s policy of letting local D.J.’s and Spanish bands take over the sound system.

Mr. Lee likes the "good balance" and says his customers, in an unspoken gesture of good will, drink each other’s national beers. "We are curious about another culture," he said. "I’m Korean; I want to have a pint of Guinness instead of Korean beer." And Irish patrons tend to order bottles of Asian brews like Tsingtao from China and Chang from Thailand.

. . .

"Life is quite short, and I wanted to have a look all over the world," he said. "That was my plan. But I realized I quite like this place."

 

For the full story, see:

BRIAN LAVERY.  "DUBLIN JOURNAL; Now, the Barkeeps May Come From the Ends of the Earth."  The New York Times (Tues., May 16, 2006):  A4.

 

 DublinThaiDrinkingPoem.jpg "his customers, in an unspoken gesture of good will, drink each other’s national beers."  Source of caption, and photo: online version of NYT article cited above.

Mugabe’s Hyperinflation: More on Why Africa is Poor

 

(p. A1)  HARARE, Zimbabwe, April 25 — How bad is inflation in Zimbabwe?  Well, consider this:  at a supermarket near the center of this tatterdemalion capital, toilet paper costs $417.

No, not per roll.  Four hundred seventeen Zimbabwean dollars is the value of a single two-ply sheet.  A roll costs $145,750 — in American currency, about 69 cents.

The price of toilet paper, like everything else here, soars almost daily, spawning jokes about an impending better use for Zimbabwe’s $500 bill, now the smallest in circulation.

But what is happening is no laughing matter.  For untold numbers of Zimbabweans, toilet paper — and bread, margarine, meat, even the once ubiquitous morning cup of tea — have become unimaginable luxuries.  All are casualties of the hyperinflation that is roaring toward 1,000 percent a year, a rate usually seen only in war zones.

. . .

(p. A11)  Those with spare cash put it not in banks, which pay a paltry 4 to 10 percent annual interest on savings, but in gilt-edged investments like bags of corn meal and sugar, guaranteed not to lose their value.

”There’s a surrealism here that’s hard to get across to people,” Mike Davies, the chairman of a civic-watchdog group called the Combined Harare Residents Association, said in an interview.  ”If you need something and have cash, you buy it.  If you have cash you spend it today, because tomorrow it’s going to be worth 5 percent less.

”Normal horizons don’t exist here.  People live hand to mouth.”

. . .

. . . , Mr.  Mugabe’s government has printed trillions of new Zimbabwean dollars to keep ministries functioning and to shield the salaries of key supporters — and potential enemies — against further erosion.  Supplemental spending proposed early in April would increase the 2006 spending limits approved last November by fully 40 percent, and more such emergency spending measures are all but certain before the year ends.

. . .

Hyperinflation is a cradle-to-grave experience here.  The government recently announced that the price of childbirth, now $7 million, would rise 463 percent by October.  Funeral costs are to double over the same period.

In rural areas, said one official of a foreign-based charity who declined to be named, fearing consequences from the government, even the barest funeral costs at least $6 million, or about $28.50 — well beyond most families’ means.  The dead are buried in open fields at night, she said.  Recently, she watched one family dismantle their home’s cupboard to construct a makeshift coffin.

”I’ll never forget that,” she said.  ”The incredible sadness of it all.”

Critics say that Zimbabwe’s rulers are oblivious to such suffering — last year, Mr. Mugabe completed his own 25-bedroom mansion in a gated suburb north of town, close by the mansions of top ministers and military allies.

 

For the full story, see:

MICHAEL WINES.  "Zimbabwe’s Prices Rise 900%, Turning Staples Into Luxuries." The New York Times  (Tues., May 2, 2006):  A1 & A11.

Omit the Footnotes?

When I was a graduate student at Chicago, Milton Friedman was rumored to have given a presentation on how to write a doctoral dissertation in which he said something like: 

Take everything nonessential, and move it into footnotes.  Then collect all the footnotes into an appendix.  Finally, delete the appendix.

My memory is that Deirdra McCloskey, in her wonderful advice on how to write economics clearly, also advises against footnotes.  I at least attribute this advice to McCloskey (and Friedman) when I pass it on to students.

But sometimes, when I write an article, a misguided referee, or editor, insists that I omit some stuff that I think is really good.  When that happens, sometimes, if I feel strongly, I sneak some of that material back into the paper in footnotes.  Maybe no one will ever read it, but I feel better that it is still there.

And every once in awhile, it may turn out that the footnotes are what matter most: 

It was typical of Schumpeter’s love for theory that he rejected Marshall’s view that the reader could skip the footnotes and appendixes.  If time were short, Schumpeter advised, read them and skip the text!  (p. 7; italics in original.)

In this case, though, I suspect that Marshall was right, and Schumpeter wrong.

 

Source:

Samuelson, Paul. "Compete as an Economic Theorist." In Schumpeterian Economics, edited by Helmut Frisch, New York: Praeger Publishers, 1981, pp. 1-27.