Manufacturing On Planet Economus [Why Christina Romer is wrong about manufacturing policy]

[salvorhardin]

Dave Johnson has a marvelous frisking of Christina Romer's recent op-ed in the NYT. It's lengthy, so here's just the first four paragraphs.

Economist Christina Romer had an op-ed in the NY Times this weekend, Do Manufacturers Need Special Treatment? The question that keep coming back to me is why did she feel the need to write an op-ed to diss manufacturing? Is it just an economist thing? Or is she, like so many economists, from another planet?

In her op-ed Romer claims those of us who argue for a national manufacturing policy do so out of “the feeling that it’s better to produce “real things” than services.” But, she says,

American consumers value health care and haircuts as much as washing machines and hair dryers. And our earnings from exporting architectural plans for a building in Shanghai are as real as those from exporting cars to Canada.

Here is the difference: We can't just keep servicing each other. This "service economy" thing hasn't worked out so well here on Earth, and now we have a huge trade deficit. It is "better to produce real things" because that is what you sell to others to get the money to pay each other for haircuts (and scissors).

Full post (about ~1,700 words): http://www.seeingtheforest.com/archives/2012/02/manufacturing_o.htm

[Liberal_in_LA]

1. k&r

you selling me haircuts and I selling you healthcare means will eventually starve to death

[salvorhardin]

3. I have some minor quibbles with Johnson

He seems to be a bit too focused on the trade deficit, which results in a beggar-thy-neighbor policy just like China, although I'm not familiar enough with his writing on the subject to know if that's what he really intends.

However, I'm with him on 99% of what he's saying. I read Romer's oped this weekend and it was just toxic. She calls herself an economic historian, but what she doesn't say is that her entire career has been focused on fiscal policy. Gee, is it any surprise then that she sees fiscal and not industrial policy as the solution?

[Zalatix]

2. This is what happens when Comparative Advantage meets reality

[img]http://image.shutterstock.com/display_pic_with_logo/62467/62467,1170357496,6/stock-photo-airplane-crash-scene-from-the-movie-2632209.jpg[/img]

[xchrom]

4. Du rec, nt

[FogerRox]

5. Yeah... OK.... but

We dont have the Timber, oil, coal and iron ore we had 70 years ago....... You know when Manufacturing was at its heyday and was over 30% of GDP.

OTOH I can see manufacturing going from 7% of GDP to 12 % real easy.

[salvorhardin]

6. That's bizarre

I don't see a lot of coal-powered wood-framed iron core iPads. Who says manufacturing has to mean Victorian era technology? That's the same kind of basic error that Romer makes.

[FogerRox]

9. We dont have resources like we used to. How is that bizzare?

70 yrs ago we had resources that were relatively untapped. By the early 1970's (iron ore) hematite mines started running out.Vast tracks of timber were wiped out.

[ProSense]

7. Why Manufacturing Still Matters

Why Manufacturing Still Matters

By LAURA D'ANDREA TYSON

As one of a rare group of economists who believe that “manufacturing matters” for the health of the American economy, I was heartened to hear President Obama emphasize manufacturing in his State of the Union address. During the last two years, the manufacturing sector has led the economic recovery, expanding by about 10 percent and adding more than 300,000 jobs.

Admittedly, this is a small number compared with overall private-sector job gains of 3.7 million during the same period, but it reverses the trend of declining manufacturing employment since the late 1990s.

And promising signs are emerging that American companies are shifting some manufacturing production and employment back to the United States. Policies to strengthen the competitiveness of the United States as a location for manufacturing can strengthen these nascent developments.

Though there are economists who do not share my heretical view, I believe that a strong manufacturing sector matters — and deserves the attention of policy makers — for several reasons.

- more -

http://economix.blogs.nytimes.com/2012/02/10/why-manufacturing-still-matters/

[salvorhardin]

8. Excellent!

I wish we could Rec individual comments.