It’s almost like the last two centuries never happened. Quick recap: During the last two hundred years, living standards exploded even though the distribution of income remained quite unequal. How is such a thing possible? Because total production per person drastically increased. During this era, no country escaped dire poverty via redistribution, but many escaped dire poverty via increased production. And while the effect of moderate redistributive policies on growth is unclear, there is no doubt that populist and socialist movements determined to “tackle the inequitable distribution of money, power and resources” and “change the way that society is organized” sharply retard growth.
Speaking of liberals, both genuine and faux, Alberto Mingardi reviews Edmund Fawcett’s book such.
And speaking of Alberto, he points us to this recent interview with Deirdre McCloskey.
Bob Murphy explains that outsourcing makes us richer. A slice:
To see the relevance of this point, let’s consider exactly how the phenomenon of outsourcing occurs. As the video describes it, US employers realized “about 30 years ago” that they could hire foreign workers to do the same jobs at much lower wages, so they relocated their production facilities abroad. This assertion raises the question: Why didn’t employers just cut US wages down to what the foreigners were asking?
The answer is that US workers won’t take such low-paying jobs because they have better options. For example, suppose Americans are originally employed in a TV factory in Tennessee, making $16 an hour. The owner of the plant realizes he can relocate it to India, where he can hire workers who are half as productive (meaning they only make half as many TVs per hour) but who are willing to work for $4 an hour. He would never bother relocating if the American workers would simply accept a pay cut to $8 an hour. (The American workers make twice as many TVs per hour, remember.) Suppose they won’t do that, because their next-best job option is to work in a warehouse for $10 an hour. In this case, with the numbers I’ve invented, the original factory owner would “ship jobs to India,” not because of some horrible flaw in the labor market, but because American workers had better things to do than make TVs for $8 an hour. It was more efficient for those workers to go into the warehouse sector and for the Indian workers to make the TVs.
