Re: Does Outsourcing Piss you off?

The market works by constantly giving incentives for producers to
supply according to what the market demands. Price rise in one good
over another is a signal to producers to shift from one area to
another. When machines replaced humans, the demand for car assembly
skills in humans decreased and wages decreased to signal to workers to
switch from car assembly skills to something like machine creating
skills. You can assume workers lose their jobs and end the analysis
here and thus conclude that the technology is bad for the economy (as
the Luddites argue). However, if you looked at every issue like this
then any form of technological change, any change in consumer
preference, etc, is bad because workers' wages and maybe even
employment status changes.

Another issue that needs to be address is the assumption that a job
loss is bad. It may not be good if workers lose their jobs permanently,
but what if they lose their job because thier skills are not longer in
demand and they switch to another set of skills that is in demand? In
this case, we should hope there are many job losses as job loss is a
symptom of a healthy competitive market since workers are switching
skills to match that in demand. While the job losses are important, the
job creation is also important. If a high-tech worker loses his or her
job it simply means that his skill is not adequate for the needs of
producers. Whether something is high or low tech is a question of
personal judgment. Instead of the government or any single individual
telling everyone what jobs are important (e.g. high-tech jobs), it is
often more efficient if the market is left to decide which skills are
appropriate. Economically speaking, a worker who lost his job has
skills or characteristics that are unfavorable. The worker modifies his
skills and gets a new job.

If Pizza Hut goes bankrupt because there is a change in consumer demand
for, say, curry then pizza is now obsolete and Pizza Hut workers should
switch to the curry industry, which we assume is expanding now.

Similarly, if the demand shifts from SUVs to fuel-efficient cars, GM
and other automobile manufacturers will not continue to make SUVs in
large numbers. They will simply introduce different models: smaller
cars, more fuel efficient cars, and so on. Individuals are not
unchanging otherwise they will certainly move as the market is dynamic.

Also note that inequality in itself does not mean that the economy
suffers. Rising inequality can occur with increasing economic grwoth.
If everyone were given $10 but rich people were given $11, then
everyone is better off but inequality has increased.

Well, exactly the same you can tell about slavery. If you get 98% of the US
population in slavery and just pay them a bowl of rice a day you actually
can get huge productivity. Is this similar new technology ?

Yes, it is. Slavery can be highly productive. Under slavery though,
slaves have to work even if they don't want to. In a free market all
parties to an exchange consent. What makes slavery horrendous to most
is that a party to the transaction did not consent, thereby going
against American ideals of freedom and choice, etc. If a CEO decided to
hire a worker from Italy instead of the US, the CEO and the Italian
worker consented. The worker being replaced didn't consent to being
laid off but he is simply being rejected. If one party has the freedom
to accept or reject then it follows that someone else is going to be
rejected. Rejection is a necessary part of freedom. If the CEO is
forced to hire the non-Italian worker, to choose labor inputs based not
on business considerations of productivity and costs but instead based
on irrelevant non-business considerations like nationality then this
goes against freedom and choice as the CEO is forced to trade with
someone he didn't want to trade with. From this perspective,
protectionism and slavery therefore have more in common than
globalization and slavery.

nobody said to force A to deal with B and leave C out.
The solution is to prevent A to kick B out of trade. I.E. to >have all 3: A &
B & C prosper not having A looting all the wealth accumulated by >B.

"Looting" is a very negative word. I wouldn't like to think of myself
as a looter if I swtich from an overpriced shop to, say, Walmart or
Woolsworth. A is simply looking for a better deal, something I do for
example when shopping for a car. Suppose B creates a reasonably nice
car for $100,000 and I see another car made by C that is virtually the
same and is only $50,000.

The solution is the prevent A kicking B out of trade? So B tries to
sell me his $100,000 car and C offers the $50,000 car. I suppose I
could buy both cars, but what if I only want one car? If I wanted two
cars and if both cars were the same I would buy two of C's cars.
Anyway, I suppose the best solution would just be to have no
intervention at all. My buying C's car shows B that his cars are too
expensive. B needs to cut costs to stay competitive. So B will go home,
research some cost-cutting techniques, make a new car, and then offer
me a cheaper car. Then B and C are competing against each other. I am
getting cheaper cars and the competition is what is forcing
technological growth as B and C find ways to make their cars better for
cheaper (e.g. the Toyota Prius hybrid car, which is highly innovative
and it arised as a response to consumer demand for greater fuel
efficiency).

.

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