Made in ?, Part II

Contained in the very same Edmunds article you quoted was the following idea from the Level Field Institute: the "American-ness" of an auto company can be determined by the number of jobs per vehicle built – the more jobs, the more American. And I thought efficiency was to be admired.

"The Level Field Institute — a study and marketing enterprise formed by retirees from Chrysler, Ford, GM and their domestic suppliers — conducted a July 2006 study comparing the number of Americans employed by various manufacturers to the number of cars produced, creating a U.S. jobs-per-car ratio. The results are telling.

Despite massive investments by Honda and Toyota, the Japanese companies still lag significantly behind the domestics in their total commitment to the American labor market. According to the survey, domestic automakers currently employ 35 U.S. employees for every 1,000 vehicles sold, whereas foreign companies employ only 13. Despite the latest round of aggressive layoffs by domestic automakers, those numbers are projected to remain almost constant through 2010 due to changes in projected production output."

Mr. Roberts,

You have not answered my point. You claim that country of origin info contains no info. That is absolutely false and you cannot and have not disputed it. Why not admit your error? Are you concerned that doing so will injure your brand name?

You may not care about the made in info. You may think it is of little objective value. Let's assume it is valueless objectively. But others value it subjectively, and thus it is not just info but valuable info whether you like it or not.

As a libertarian, you should be in favor of allowing people to use info however they like to make their decisions in a free market, right?

Can you be honest and concede your error?

Ed,

I stand by what I said. Made in USA or China misleads most people because the statement does not mean what most people thinks it means.

I have no problem with companies volunteering the information. I have no problem with you or anyone mistakenly thinking it means something that it doesn't. But my point is that it doesn't mean what most people think it does. Is that the same as "means nothing?"

When more than half of the value of an iPod comes from the United States and less than 1% comes from China, how would you describe the accuracy of the phrase "Made in China?"

Mr. Roberts,

You are digging yourself deeper.

You say that most people are misled by the labels. Do you have evidence? It has always been clear to me what the label means and what it does not. Consumers are not idiots, they don't assume that the IP in a product made in China necessarily comes from China.

Sure the information is incomplete and imperfect (as is almost all information), but you admit that it is information.

You ask me how I evaluate a made in China label on an iPod. I evaluate it to be perfectly accurate because it means PRECISELY what it says. The iPod is primarily, physically "made" in China. Indeed, the primary dictionary definition of made is exactly "to bring into existence by shaping or changing material, combining parts, etc" Notice that "made" refers to PHYSICAL manipulation? The iPod was invented in the United States. It is "Made in China".

So you say "But my point is that it doesn't mean what most people think it does. Is that the same as "means nothing?" First of all you concede my point as noted above. You admit that a minority of people understand correctly what a made in label means (and doesn't). So it is information to those people and your post is wrong. Moreover, what is your evidence to claim "most" people don't know what the label means? The fact that you do not know the definition and usage of made does not mean that most Americans don't know it.

I can't tell you the number of informational statements by businesses that are misunderstood or incomplete. They are legion. That does not mean they are valueless to those who are smart enough to interpret them.

Why do you hold the American consumer in such low regard? Don't you believe that American's are smart enough to know and assess the value (and limits) of a made in label?

Your other points about whether or not to have voluntary labeling is a different issue and not the one I challenged you on.
That is a more complex debate.

Regards.

Sorry, TheAlbatross, he said no information content not little. He meant no and he confirmed that he meant no. You agree with me by conceding at least a "little". (Did you actually read the language you quoted before defending it?)

I think it is far more than that in many fields. Right now a "made in china" label on a toy is a real liability. And it should be. It reflect substantial information that the toy was made in a country with a low regulatory regime that has resulted in millions of toys contaminated with lead paint. As a consumer, I would be acting quite rationally to buy a toy Made in America instead because I know there is a regulatory regime that is much better at catching lead paint before it gets in toys. This is hardly superficial information.

Please also see my post on the prior thread about the Jetta Wolfsburg Edition versus the Jettas in Mexico. That made in information was very valuable. This was hardly superficial information.

So, I hope you share with your students that you should not make absolute statements unless you can back them up with logic or empirical evidence. Furthermore, the fact that made in labels sometimes don't tell you much doesn't meant that they always or even mostly don't tell you much.

The real story here is that Mr. Roberts demonstrated that he has an ideological agenda and is reading everything to support his view rather than thinking critically. I happen to agree with most libertarian thought, but it like anything else should be tested and be able to survive empirically and logically.

By the way, I was pointing out the absurdity of his position by showing that he is denigrating the intelligence of consumers. Libertarians are always telling people to leave decisions to consumers and I was showing the hypocrisy of his position. Get it now?

Good luck with your class. I hope you teach them to think critically and to test their own biases rather than to think ideologically.

DavidZ,

What are you talking about. I never said everything in Mexico was bad. Jettas made in Mexico were known bad. VW reacted by putting out the Wolfsburg edition. I bought the latter. That made in information was critical. This does not mean everything from Mexico is 'bad.'

Now some people might think that and think so rationally. They might have serious issues with Mexican workers receiving their hard earned money instead of workers in America. I don't, but they may and that could be their most critical buying criteria. In a free market they have the right to decide whether or not to buy on that basis. And the made in label is critical information to them in making that decision.

Here is a new article today on Chinese 'made in' toys. It doesn't mean I wouldn't buy a Lenovo laptop from China. This is not relevant to that (in my personal view). But the made in information as to toys is very relevant. If you have a 2 year old child, it is very very relevant to know the made in information for a toy. You might be willing to take the risk that the incidence in lead toys from China versus other countries is low enough to risk your child's health to save a buck. Or you might not. But it is valuable information for the consumer that wants to make that choice.

Do you understand the concept of risk premium? Your statement that the information could only be relevant if 100% of toys from China contain lead is absurd. A decision to buy a commercial building with sprinklers over one without doesn't require that I experience a 100% chance of a fire. My risk might only be .0001% of a fire. But if I have a $1 Billion project underway in that building, I'd be insane not to spend an extra $10,000 on the building with sprinklers. Risk premium is very very valuable. That is why we have insurance companies.

Game, set, match.

"About 175,000 Curious George Plush Dolls were recalled Thursday, becoming the latest popular toy made in China found to be contaminated with dangerous levels of lead."

http://abcnews.go.com/Politics/wireStory?id=3840041

"What are you talking about. I never said everything in Mexico was bad. Jettas made in Mexico were known bad."

I'm well aware of this. But the fact that the Jettas made in mexico were know to be bad has nothing to do with the fact that the Jettas were made in Mexico.

"In a free market they have the right to decide whether or not to buy on that basis. And the made in label is critical information to them in making that decision."

This seems to be the crux of many of your posts. I don't think anyone here disagrees with these statements. The country of origin contains no information about the product. It does however contain information or confirm biases which people use in their decision making process. I don't think you disagree with this, either.

"Your statement that the information could only be relevant if 100% of toys from China contain lead is absurd."

For starters, that was not my statement. And get over yourself with your self-aggrandizing "Game set match" statements. They add nothing to the discussion. So, back to the discussion.

I'm not sure you quite understand the concept of risk premium, especially in regards to isolated incidences, there is no such thing as "I have a .0001% risk of fire." The statement ".0001% risk of fire" is known, or assumed to be actuarially sound only over a large sample of similar buildings, about any one of which we know nothing except that we believe it to be a member of that class of buildings.

But without getting further bogged down into the risk-premium debate (I'd really rather not carry this one further) I understand what you're saying and I agree that the risks inherent in any products must be weighed against the respective costs/benefits. I think we've gone far enough astray of the topic of Russ' original post – which was about the country of origin information which actually doesn't pertain to the country of origin and gives little indication of same.

I fear we've semantically exhausted the nitty gritty here, so unless you can contribute something substantive, I'll probably be leaving you here. I'm not trying to be contrarian, I've agreed with you on a number of points, I just think we're talking right past one another here.

The topic sentences of Mr. Roberts' post follows:

"Where a product is made has no informational content. It is simply a way for some people to pretend that their well-being and yours is the same thing."

I rest my case on his focus and what he claimed. I just don't have the ability to read someone's mind like you and guess his focus. I sort of go on what people say. Why can't you read and respond to what he said? (He did address a different issue at the very end of the post and I have not discussed it once. He responded to me, somewhat, above and only reiterated his claim in the topic sentences above. He did not say I misunderstood him).

Read the other posts for 1 and 2. I don't have time to do it for you. I have not raised these issues, others have, so you can ignore 1 and 2 for all I care. The point is his claim that made in labels are worthless.

Regards.

Ed,
Of course I read Dr. Roberts words before defending. Did you read all of the original post? Because it looked like you got tangled up in the first sentence. The overarching issue is measuring the trade deficit, and how that is done. “Made in China” is counted one way for the deficit, but, as the post mentioned can mean something completely different in reality. If something says “Made in China,” but the words do not conceptually match to what one would think is made in China, does it tell you anything? You could say the words have no informational content, as they do not accurately describe the state of affairs, as Russ did, or prefer to say they have some informational content (although the term is still unrepresentative of reality), because something has to have happened to the product at sometime in China. I find either means of explanation acceptable, although I prefer the latter. It is a little like arguing that if Brendon Frasier makes a movie in the woods and no one sees it—does it still suck? Either way, the point was the difficulties inherent in measuring the real flow goods and service between nations—something that should be in the back of a decision makers mind whatever his or her ideology.
As for teaching my students to think critically, this is this kind of stuff that actually helps them to do this. They are constantly being told how bad the trade deficit is, or the falling dollar, that this number or that figure is terrible, or how we are going to all be working for whoever it is supposedly buying America this month. They need to understand the context of “Made in China” or the realities of trade deficits, so they know what it means—so they can make a decision for themselves. Also, I don’t mean to be biased or ideological, but if I start teaching about how bad trade between nations is, then I won’t have a job for much longer.

Hey, we agree!

I totally agree with your post as quoted below. I wish more people could engage in such debates and carefully study these issues. Indeed, I think that foreign trade is critical and am thrilled to see other countries exporting products to us. The funny thing is I largely agree with Mr. Roberts on many issues (including foreign trade). I also am pleased to be able to buy products from all over the world (including China!). I just are quote sure that made in labels convey very valuable information and, frankly, would only promote trade. You can be darn sure that the Made in China 'brand' has taken a serious hit and they are going to be incentivized to watch our for lead in toys.

"As for teaching my students to think critically, this is this kind of stuff that actually helps them to do this. They are constantly being told how bad the trade deficit is, or the falling dollar, that this number or that figure is terrible, or how we are going to all be working for whoever it is supposedly buying America this month. They need to understand the context of “Made in China” or the realities of trade deficits, so they know what it means—so they can make a decision for themselves. Also, I don’t mean to be biased or ideological, but if I start teaching about how bad trade between nations is, then I won’t have a job for much longer."

Ed,

First let me get this out of the way: I agree that Russ Roberts original statement, which read "where a product is made has no informational content" is false. This is trivial, since presuming the label is true then, at the very least, the label implies the place where which a product was assembled.

However, when this statement is taken in context, especially with the linked article and study, I think it clear that Russ Roberts did not mean that labels contain no logical content, but rather that they do not have the implications which are often supposed by "protectionists", and imply very little.

In your criticism of Russ Roberts you argue that labels do have great content relative to how people think that economies work. For example, if I think that buying products from "made in China" is a transfer of wealth from the UK to China, then I would consider that label to have important implications.

Of course, this is true, but the point of Russ Robert's argument is that this view is mistaken, and that "made in"-labels do not have the implications which many suppose, but are rather unimportant and of little use when deciding whether to buy a product.

In other words, Russ Robert's post is about the objective fact, irrespective of what people think about it. To confuse the two, I think, is an error which you have made repeatedly.

Regards,
Lee

Ed, country of origin is a consumer preference, like the color. You can't tell which country is economically benefiting by looking at the 'Made in ?' label. THAT is Russ's point, which seems completely lost on you.

Thank you – Albatross, Lee Kelly, and Russ R. for clarifying w/r to Ed. It's not a debating contest, and we're entirely too bogged down in the semantics of one sentence that's only tangentially related to Russ's original post.

John Smith,

The retired GM senior manager might be correct if the destination of profits were the only factor that determines a nation's standard of living. But that's not true, of course.

U.S. consumers spend about $400 billion for new motor vehicles each year. The value they receive for that expenditure is much more important in determining the overall standard of living in the U.S. than is the destination of a few billion dollars in profit.

Investment in motor vehicle plants in the U.S. also exceeds the profits earned by motor vehicle companies. Let's assume that money is invested wisely – in low-cost, state-of-the-art automated plants. That investment in plants in the U.S. should do far more over the long run to increase U.S. standard of living than the few billion in motor vehicle profits.

If Japanese automakers can produce better automobiles for the U.S. consumer, then the U.S. as a whole is better off buying those vehicles.

If Japanese automaker can invest profits more wisely than U.S. automakers, then the U.S. as a whole, and the world, is better off when those profits go to Japanese automakers.

We can argue all day about whether Japanese automakers produce better vehicles and invest profits more wisely. The answers to those questions are in the sales of vehicles and in the R.O.I. achieved.

Ed

A rational and very successful business is spending huge money to explain that their trucks are made in America. Why? Because the completely accurate label is very important to the buying decision of truck purchasers. (my emphasis)

Plainly, your statement is false. Not a single part of that vehicle originated outside the US? Not the design? Not a single piece of the dashboard or chassis or engine? Or the oil in the engine on the day it is sold? Of course they did.

Now, can you imagine anything less interesting than starting a thread with several chapter-long posts that explain from nine different angles why your statement is false? I have not yet seen an example of this gotcha mentality doing any good in any context. Let it go.

Mr. Roberts,

I will leave you with this, though of course I would welcome and respond to any reply if you care to provide one.

You say "my goal in this blog is to educate and entertain" but it is not a "debating contest." Gee, I've always valued the Socratic method of education, which in many ways is a debating contest. Pardon my mistake in taking the comments section as an opportunity to engage you and others in a discussion and debate in order that we all might be further educated and entertained.

Remember too that the scientific method (well at least one version of it, the better in my view) teaches that you should postulate a hypothesis and then do everything in your power to challenge its accuracy. Only if the hypothesis survives this acid test can it be considered a valid premise (at least until later shot down, even if after a very long time held). I try to approach all issues this way and find it very effective in educating myself. As a result I am very often forced to 'concede' an error and come up with a better hypothesis on my way to finding valid truths. I am sorry to see that you don't appear to believe in this system.

The funny thing about your statement about not debating is that I often see absurd statements taken from the comment section — 'libertarians hate the poor!' and the like — and then eviscerated in new posts for the obvious stupidity that the comments contain. Interesting that you are happy to debate straw men in this way, but not well reasoned arguments for which you tellingly have been able to offer no substantive response. Can't your theories survive a challenge from anything other than straw men?

I did not realize in posting my comments that you appear to be more interested in lecturing to doting minions (ditto heads?) than having a reasoned dialogue. Too bad, it would have been interesting had you responded with some substance. I would understand if you are too busy, but your stated reason that you are not interested in a debate is unfortunate.

The only reason I was "obsessed" in your words — interested in mine — to see you concede a point was to test whether you are an ideologue or an educator. Frankly, I find it fascinating to know this about people, particularly those as smart as you making arguments that I largely agree with. Your claim that made in labels are worthless is so objectively and obviously false for the many reasons I offered (without rebuttal) that this generated an interesting opportunity for a test. In my estimation you failed and revealed that you are pushing a belief system much more like a high priest rather than an educator. Moreover, the way in which you deem made in labels worthless — information that no one should use in making buying decisions — is fascinating to me because it is the type of denigration of consumer freedom that consistent libertarians should oppose if they have reached their views through logic. (And for the 100th time to other commentators reading this, I am not talking about mandatory vs. nonmandatory. Just worthless vs. not worthless).

From this exercise, I now sense it would probably be easier to convince an evangelical who believes in the literal word of the Bible that it contradicts itself than to convince you as a high priest of libertarianism that you could be wrong in one of your fervently held beliefs, i.e. that made in labels are worthless.

Our world has seen too much of the damage that true believers (fundamentalist Islam, Christofascists, communists, etc.) can cause because they are not open to reasoned dialogue and the potential for changing their position based on logic and evidence. The sad thing is that I think libertarian thought is logically and objectively much closer to the truth than many other economic theories.

This is also too bad, because I think it undercuts what are interesting and often valid points that you make.

I hope you will reconsider that perhaps, just perhaps, your belief system that made in labels are worthless is objectively false. You might then have to challenge yourself in other areas (an important thing to do with all strongly held beliefs) but I think you would come out stronger and wiser in the end.

Good luck.

Chris: "I'm no macroeconomist, but it seems to me that there are clearly significant negative impacts to longstanding trade deficits."

Chris, I'm no macroeconomist, either. So I'm not going to offer a theory about why our trade deficit is bad or why it is unimportant. But I will make a few observations.

The U.S. trade deficit has persisted for about 32 consecutive years. The U.S. economy has surged to incredibly high levels over the last 25 of those 32 years. This long term trade deficit hasn't had any negative impact so far.

Some argue that it is the current size of the deficit in trade of goods and services that will cause so much problem. They claim that a $758 billion trade deficit is outrageously large. Certainly that deficit was never before as large as $758 billion, the 2006 level. But nominal dollar comparisons seem incorrect to me.

The U.S. deficit in trade of goods and services has averaged 5.2% of U.S. GDP over the past 4 years. From 1984 to 1987 it averaged 3.0% of U.S. GDP. The years 1984 to 1990 – the years before George "Read My Lips" Bush raised taxes – were very good years for the U.S. economy. The years 2002 to 2006 have also been very good years for the U.S. economy. I cannot see how the abnormally high trade deficits in either period caused problems.

The lowest trade deficits of the past three decades occurred in 1981-1982 and 1991-1992. Those were both recession periods.

U.S. trade in goods and services

What was the GDP then?

Chris, I realize you are only providing insights about the theories of others. Do any of the theories explain why small trade deficits occur during recessions and large trade deficits occur during booms?

Most of the issue that Ed argues about is the use of the information presented by a "made in" label. For consumers the label does have some informational content that they may choose to use in forming their subjective preferences. However, Russ's initial post was regarding the usefulness of the "made in" label as a basis for determining trade statistics – for which labels often serve no enlightening purpose. So, for Ed's purposes labels have some value; for Russ's purposes they don't.

Sorry, I meant 'trusted' and not 'discussed' above about balance of trade figures.