No Fetish for Manufacturing

by Don Boudreaux on March 17, 2011

in Complexity & Emergence, Myths and Fallacies, The Economy

Speaking of manufacturing fetishes, I just discovered this superb essay – from Steve Fritzinger, writing for the BBC – on this very topic.  The following quotation is especially worthy ;-) “The value of a dollar’s worth of cloth is exactly the same as a dollar’s worth of web design.  One dollar.”

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{ 11 comments }

John V March 17, 2011 at 10:15 pm

excellent article. I loved the comparisons of the “worrying classes” from yesteryear.

Pete March 17, 2011 at 10:57 pm

I know it seems obvious, but what’s a good answer to the claim that you can’t export web services, and therefore it isn’t as useful? My intuition says that web design and other services allows us to produce some things at a lower price, which in turn means we sell those things for less. Exports go down, but wealth at home stays the same, right?

John Dewey March 18, 2011 at 4:59 am

Pete asked: “what’s a good answer to the claim that you can’t export web services, and therefore it isn’t as useful?”

A couple of answers:

1. Why would anyone argue that web services cannot be exported? U.S. firms are right now exporting $545 billion in information services, engineering services, architectural services, financial services, insurance services, etc. Of the $1.8 trillion goods and services exported by the U.S. in 2010, $545 billion were services.

2. What difference does it make if a particular good or service produced is exported to foreigners or consumed by U.S. citizens? If a good or service I produce is purchased by someone else, why would I care whether the purchaser lives in Des Moines or in Toronto?

Emil March 18, 2011 at 5:32 am

In my work I export services (although not web design) all the time. The production of those services (mostly) takes place in the country in which I reside and the consumption takes place in the countries in which my clients reside. No different than if I were to build cars.

Jake S. March 18, 2011 at 11:37 am

I only wish to add this observation to the excellent answers you’ve already received above, but it’s a simple fact of life that exports matter more to people who view economics (and int’l trade, in particular) as a zero-sum game. Chicken Little (“ZOMG, we have a trade deficit… the sky is falling and our society is on the brink!”) just isn’t how I roll. :-)

An import/export [supposed] “imbalance” can mean something, but it doesn’t necessarily mean anything. And it certainly doesn’t logically follow that we should necessarily take any particular course of action (e.g. direct more [confiscated] national resources toward artificially propping-up the manufacturing sector).

Peter Bretscher March 18, 2011 at 4:00 am

Use value is different

Emil March 18, 2011 at 5:28 am

Peter: user value is by definition subjective and individual. Therefore the variance of the value that different people assign to the same good is likely to similar to variance in the value that different people put into two separate goods with the same market price.

Chris Coyle March 18, 2011 at 10:12 am

This naive view is what led to the gradual decay of British society.
I suppose you are signaling the end of an era. I wish we would figure out how to compete and beat other countries globally instead of blaming our own citizens for the demise of American society.
It is clear that the massive transfer of wealth to the upper class will reduce small business sustainability(as what occurred in Britain in the 70′s and 80′s).I don’t think that Americans are saying that manufacturing is the only way to advance America.I just think they realize it’s the best way to compete globally!
It’s fine for a reporter to claim some kind of knowledge about history but it’s irrelevant. The situation in America is far too complex to be reduced to the simple level you describe.
I think it’s an example of the chronic problem of the modern press.
They have no solutions to offer,
Only criticism of their own people to the foreign press.

Well done Steve………
Way to grow the American spirit………

vidyohs March 18, 2011 at 11:03 am

Actually, Chris, what drove the decay of the British society, the French society, and is driving the decay of the American society is the idea that some how, some way, each individual is owed simply because of surviving birth. In other words the socialist faith is driving the decay.

A society made of of individuals who realize that each has a personal responsibility to provide for himself (and loved ones) and to not blame difficulty or failure on others is what causes a society to become, and remain, dynamic and strong.

How each individual in that society provides for himself, what he labors at, is irrelevant; he and his society will remain dynamic and strong simply because he does for himself.

Steve Fritzinger March 19, 2011 at 9:45 pm

Chris,

I don’t offer any solutions because I don’t think this is a problem. Economies get stronger when people find more productive ways to use their time and to satisfy their wants and needs.

That was true when we mechanized agriculture and farm employment dropped from 85% to 3% of the labor force and it’s true today with manufacturing.

I’m curious. What does your ideal world look like? You want us to make more stuff, obviously. But what stuff? We already make 1/5 of the world’s stuff and we make the lion’s share of the world’s high value stuff.

So to increase our manufacturing base, we’d have to start making a lot more low value stuff.

Making low value stuff doesn’t pay well. So would large numbers of people making straw hats, coffee stirrers and Happy Meal toys grow the American Spirit?

Steve

Russell Nelson March 21, 2011 at 1:34 am

No, the price of a dollar’s worth of cloth is exactly the same as a dollar’s worth of web design. The price is what you have to pay to get the value — which is always higher than a dollar. Otherwise, why would you buy it?

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