Link to jump to start of content The Seattle Times Company Jobs Autos Homes Rentals NWsource Classifieds seattletimes.com
The Seattle Times STOP: The Seattle Times Opinion Blog
Traffic | Weather | Your account Movies | Restaurants | Today's events



Welcome to STop, the Seattle Times Opinion blog where our editorial writers and editors share their evolving thoughts on a variety of issues. STop is a place where opinion writers and readers can exchange views and readers can learn more about how editorial positions are formed.

The opinions you read below are those of the individual writers, not necessarily views that will become formal positions of The Seattle Times. Respond to STop
(Please be aware that your name and comments may be published here, unless you specify otherwise).

Currently, STop cannot automatically post readers' comments on the blog. However, the editorial staff will regularly post readers' comments. Your comments are sent directly to the individual editor or writer.

space space space

Jim Vesely
space
Jim Vesely
E-mail | Bio


Lee Moriwaki
space
Lee Moriwaki
E-mail | Bio


Joni Balter
space
Joni Balter
E-mail | Bio


Eric Devericks
space
Eric Devericks
E-mail | Bio


Lance Dickie
space
Lance Dickie
E-mail | Bio


Bruce Ramsey
space
Bruce Ramsey
E-mail | Bio


Kate Riley
space
Kate Riley
E-mail | Bio


Lynne Varner
space
Lynne Varner
E-mail | Bio


Ryan Blethen
space
Ryan Blethen
E-mail | Bio


February 19, 2004

Who loses? Who gains?

Gregory Mankiw, chairman of the President’s Council of Economic Advisers, has been flayed for his “gaffe” about outsourcing. Here is what he said:

“The gains from trade that take place over the Internet or telephone lines are no different than the gains from trade in physical goods transported by ship or plane. When a good or service is produced at lower cost in another country, it makes sense to import it rather than produce it domestically. This allows the United States to devote its resources to more productive purposes.”

That’s the economics I learned. It seems to make sense, too. Consider the following case:

An American, A, earns $100,000 creating software for another American, B. In India, C earns $15,000.

Now suppose the American B switches his business to the Indian C, who creates the same software for $25,000. What has happened? Well, A has lost his job. And as long as A is out of work, there is a net loss to the American economy. But most people displaced do find work. Assume that A cannot find another $100,000 job, but finds one at $60,000. Here are the gains and losses for A, B, and C:

A, the American producer: -$40,000
B, the American consumer: +$75,000
C, the Indian producer: +$10,000
The net gain is $45,000, of which $35,000 is in the United States.

These are all made-up numbers. You can make up different ones. But if you assume the American gets another job, it’s pretty difficult to come up with a net loss for the United States-and the lower the wage level of our trading partner, the more difficult it is for America to come out behind.

None of this reasoning makes the process any kinder to A. But let us not forget B and C. They gain from trade more than A loses.

Respond to this posting

 
Posted by Bruce Ramsey at February 19, 2004 12:04 PM



Marketplace

November 2005

S M T W T F S
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30