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Manufacturing Myths on the March

Posted By Don Boudreaux On September 5, 2013 @ 1:33 pm In Complexity & Emergence,Crony Capitalism,Man of System,Myths and Fallacies,Seen and Unseen,Subsidies,Trade | Comments Disabled

Here’s a letter to MIT Technology Review:

Martin LaMonica uncritically summarizes Suzanne Berger’s case for government intervention to ensure more “domestic production” – that is, for subsidies and other politicized efforts to artificially promote more manufacturing employment in the U.S. (“Suzanne Berger argues for domestic manufacturing [1],” Aug. 21).  Several flaws mar Prof. Berger’s analysis.

For example, she mistakenly presumes that manufacturing output and manufacturing employment necessarily move in the same direction.  In fact, however, a fall in the latter does not imply a fall in the former.  Precisely because of the technological advances (such as 3D printing) that Prof. Berger rightly praises for increasing workers’ productivity, manufacturing output can rise even though manufacturing employment falls – which is what has occurred in America over the past 35 years.

Also questionable is Prof. Berger’s presumption that because (in Mr. LaMonica’s words) “manufacturers and suppliers are smaller today … [t]here are fewer resources to fund research, train workers, and scale up new ideas to commercialization.”  The economic historian Joel Mokyr reports, in contrast, that “the evidence suggests that small firms tend to be superior in the research and development process.  Only in unusual cases are the costs and risks of an innovation so large as to require the resources of a large firm to carry out the work.”*

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* Joel Mokyr, The Lever of Riches [2] (New York: Oxford University Press, 1990), p. 267.

I thank Susan Dudley for the pointer to LaMonica’s essay on Suzanne Berger.

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[1] Suzanne Berger argues for domestic manufacturing: http://www.technologyreview.com/article/517826/making-a-case-for-us-made/

[2] The Lever of Riches: http://www.amazon.com/The-Lever-Riches-Technological-Creativity/dp/0195074777/ref=sr_1_1?s=books&ie=UTF8&qid=1334147334&sr=1-1

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