Paul Samuelson vs. Outsourcing
The New York Times reports that Paul Samuelson has a paper coming out questioning the consensus of economists in favor of outsourcing. "[The] untruth, Mr. Samuelson asserts in an article for the Journal of Economic Perspectives, is the assumption that the laws of economics dictate that the American economy will benefit in the long run from all forms of international trade, including the outsourcing abroad of call-center and software programming jobs."
Neoclassical economists, we are to understand, have fully grasped the importance of methodological individualism. So I find Samuelson's approach to this puzzling: "But doesn't purchasing cheaper call-center or programming services from abroad reduce input costs for various industries, delivering a net benefit to the economy? Not necessarily, Mr. Samuelson replied. To put things in simplified terms, he explained in the interview, 'being able to purchase groceries 20 percent cheaper at Wal-Mart does not necessarily make up for the wage losses.'" Mr. Samuelson may make really cool mathematical models. But personally, I'll stick with Bastiat on this one.
Comments (38)
My problem with any such discussion of trade in a world with fiat currencies that are being inflated or deflated so you literally can't calculate the costs of the service a few months from now entirely separate from the common things that shift prices.
We have a long period with a strong dollar and high interest rates and wonder why jobs move elsewhere.
If the normal correction happens with the trade defecit v.s. the currency, things won't be 20 percent cheaper at Wal-Mart. But the closed factories here aren't going to reopen.
Wouldn't the Mises institute and website be easier to run offshore?
Published: September 9, 2004 3:45 PM
Slashdot.org is also covering the story. Check out interventionism, socialism, economic ignorance, and jeolosy at it's worst.
Published: September 9, 2004 4:04 PM
Paul Sameulson does not understand why trade occurs. Therefore he doesn't even know what trade is. It is patently false that "trade does not always work to all parties' advantage". If it were true that a party to a "trade" would be at a disadvantage then no "trade" occur. Trade (ALL trade) only and always occurs only when both parties benefit from the exchange. This is true when any individual buys anything from Wal-Mart. This is true when any business hires an employee.
Perhaps we can "trade in" his Nobel Prize for a dunce hat on his behalf, against his will, as his statistical messy theories are most likely methodologically flawed in that what he regards as trade involves taking by force or exchange conducted with the threat of force, hidden in an innocuous phrase such as "terms of trade".
Published: September 9, 2004 4:37 PM
Choice quote from a Slashdot comment:
"Also, the majority of people are already discontent. There's a reason you get slow service at your local McDonald's. They know they're getting screwed. They just haven't figured out what to do about it, yet."
Published: September 9, 2004 5:40 PM
Samuelson's statement about buying things 20% cheaper at WalMart not making up for the wage losses betrays his bias - he cannot possibly model this accurately because his models cannot possibly account for all of the changes in behavior throughout the whole economy this causes (nor, probably, can I). But just take one - not only can consumers directly benefit from 20% cheaper prices, but so can entrepreneurs. If they save 20% on their supplies for their small business, that's 20% of that budget that can be redeployed in the business. How can he be certain , for example, that a 20% reduction in the cost of operating thousands of small retail food businesses does not replace the value of the "lost" wages in the economy? He can't.
Published: September 9, 2004 5:43 PM
Whether outsourcing is good or bad on the economy, from the point of view of the macroeconomist, cannot be decided by recourse to statistics, because "statistics" can't feel or evaluate personal gain. The entrepeneurs who cut costs by outsourcing and the consumers who cut costs by making intelligent buying choices are more than capable of making such decisions, and ideally (in the absence of intervention by government experts) they are always free to, and inevitably will, amend their choices as the situation warrants. The powers that be worry too much about "controlling" the economy, and the fact they think they know what to do to influence it is more worrisome to me by far than the outsourcing "drama".
Published: September 9, 2004 6:27 PM
It is patently false that "trade does not always work to all parties' advantage".
If you squint, you can see what is being said here. Since merely having a single example of a trade that does not work to all parties' advantage proves the statement true, "rtr" is claiming that trades are always advantageous to all parties. Perhaps this is not what was intended to be said, but as it stands it's "patently false" (and statements making such blanket assertions frequently are.)
Just a cursory examination of some of the economic consequences of IMF policies and the conditions they've forced on bankrupt countries puts the lie to this assertion. Frequently countries with immature economies have turned to the IMF for a bailout only to find out that their short-term needs are met at the expense of their long-term health. This is not to say that all trade is disadvantageous to some party, but to pretend that trade is always healthy is to worship the economic model and ignore empirical evidence.
Published: September 9, 2004 9:24 PM
So now you are changing the timeline of said trade. I believe that a trade occurs in a short period of time. When I buy a steak, I have an advantage in the trade if my reservation price is higher than what I pay, but if I then have to undergo quadurple coronary bypass surgery, it isn't advantagous in the long run. So I do believe that tz's comment is a correct assertion of economic law; two parties will not make a free trade unless it benifits them.
Published: September 10, 2004 12:55 AM
As far as I'm concerned, who "wins" and who "loses" in outsourcing is not really relevant. All that is relevant to me is the fact that trade restrictions are a violation of my right to trade with whomever, and wherever I want to.
Imposing regulations on businesses owners in order to "save" jobs sounds a lot like socialism.
Published: September 10, 2004 1:54 AM
Steve - Most people do not share your beliefs about morality. They think trade restrictions are OK. Showing them that restrictions hurt them or the economy is much more feasible than changing their entire moral code (which is probably impossible).
People are much more open to discussions of consequences than of morality.
Published: September 10, 2004 3:16 AM
BY DEFINITION: Trade only occurs when both sides to the trade benefit, increase their subjective utilities.
If it were not so, then the trade WOULD NOT EVER occur.
The IMF and various bankrupt "countries" have nothing to do with trade. They have everything to do with taking by force and forcing others to act in accordance with their wishes upon threat of the use of force. When a socialist dictator or a democratic tyranny vote to take your property, your property has NOT been traded. It has been stolen. Those so-called bankrupt countries are comprised of individuals who never conducted any personal trade whatsoever with the IMF. The IMF is funded with the property of individuals who never freely gave their property to the IMF.
If I walk into a store and change the sticker price of item and pay 50% less for the item, that is NOT trade.
Short-term needs and long-term health are SUBJECTIVE concepts the relative importance of which is only determined by INDIVIDUAL subjective valuation.
Trade ONLY AND ALWAYS occurs when *ALL* parties to the trade increase their respective subjective valuations. That is a basic LAW of economics. To claim otherwise is to claim that A is at the same time not A.
Published: September 10, 2004 8:38 AM
The problem with Samuelson's assertion, that outsourcing helps one by hurting another, is one of concepts. All people, all of us, OUTSOURCE SOMETHING. I didn't make my own clothes, I purchase them from someone who can make clothes better than I can. I received a good I needed and benefited from it, and the clothesmaker received his payment which benefited him. Samuelson does not see it this way, but then he is being logically inconsistent: If he does not like outsourcing, then he should lobby to close each state's frontiers so goods cannot be traded between them, lest jobs are outsourced from, lets say, Conneticut to California.
Published: September 10, 2004 10:12 AM
Also note: To claim that the utility gain to "society" is greater by preventing the most marginal increment of free trade whatsoever is to claim that the utility gain of the theif outweighs the utility loss of the victim. If that were to be true, that is an argument for a Hobbesian state of nature war of all against all.
So take a starving individual who steals one apple from a billionaire's apple tree. Is the utility loss to the billionaire greater than the utility gain to the starving individual? That question cannot ever be answered by economics as the marginal utility value of the apple to both the billionaire and the starving individual is SUBJECTIVE. Also say the billionaire steals the starving individual's shoes. Again economics cannot answer whether the utility gain to the billionaire from stealing the starving individual's shoes is greater than the utility loss of the starving individual who has had his shoes stolen.
Any attempt whatsoever at preventing any free trade whatsoever ivolves always and everywhere some form and degree of theft, and involves the loss of someone's property. This is true whether the prevention by force of free trade takes the form of tariffs, government banning of ownership of a substance, or the old fashioned armed taking of another's property.
To say that net "societal utility gain" exists in that situation, when it certain that at least one individual has suffered utility loss, is at the minimum, an argument to set free and encourage and sing the praises of thieves, rapists, and murderers everywhere.
Published: September 10, 2004 10:22 AM
"Outsourcing", "Free Trade", "Globalization", "Delocalization" (the new buzz word in Europe), all these words mean no more and no less than Division of Labor. Being against outsourcing means being against division of labor. Saying outsourcing makes people poorer is saying division of labor makes people poorer. Will this "utilitarian" argument work better than Steven's moral standpoint?
As Bastiat said, anyone in favor of protectionism would, if consistent, have to agree to a petition of Candlestick Makers complaining about unfair competition from the sun and asking that the government
"pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull's-eyes, deadlights, and blinds -- in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat."
Sorry for the long quote, I just love it.
Published: September 10, 2004 11:11 AM
If we must be precise, then we should say that in a free market situation, no trade would ever occur if both parties to the trade did not think that it would be beneficial. Of course, a trade may not be beneficial to other parties, but then the other parties are not directly involved in the trade.
Also, in the name of precision, we may admit that sometimes people are mistaken, and may think a trade is beneficial to them when it is not, but that is not a predominant situation, and thus not significant factor, I think.
Finally, we must admit that we don't really have a free market situation, and thus, people's trading choices have been restricted. Even so, unless they have literally been forced into a trade, at the point of a gun, an enforced monopoly, or threat of imprisonment, it seems likely that people would still not make a trade from the choices that are available to them unless it were beneficial (or rather, perceived to be beneficial, for the nitpickers out there).
Published: September 10, 2004 11:49 AM
Well, with the current American way of life, falling
prices is not enough to make up for falling wages.
When debt is used as a way of life, a decline in wages
is trouble. Not to mention that the current standard
of living is more a creation of the illusionary dollar,
than anything else.
Published: September 10, 2004 12:59 PM
The possibility that a trade that the parties involved think, ex ante, is beneficial to them may, in fact, be wrong ex post, is not an argument for government intervention anyway. If the government has some way to determine that the trade will be regretted, all it has to do is make that information available -- people will quickly come to realize that the information is accurate, and base their decisions on it. If no such information is available, nobody other than the parties involved has a better chance of guessing what will be the value of the trade, so intervention to prevent it (or force it) can only be a net loss.
Published: September 10, 2004 11:52 PM
Of course, there is always the possibility that a problem is seen and the people will ignore it for their short term time benefit.
The masses can only be so foresightful.
Of course with the way our government is designed, it is very unlikely that the people in the government will be more knowledgable than the people in the private sector...
The long term U.S. problem with outsourcing is that companies are investing in developing foreign human capital. There people, once specialized in these industries will later compete with US workers for services to other countries. For someone who believes in free markets this is a net gain for the world as the US worker moves on to their next most profitible job and there is no problem. For people who value US citizens for whatever reason over others in the rest of the world this creates a dilemna.
Published: September 11, 2004 2:41 AM
Professor Chalmers Johnson has written brilliantly clear in his newly released book "The sorrows Of Empire" militarism, Secrecy, and the End of Empire.
The economic meltdown which has occured all throughout Asea (globalization and What happened to it) is well discribed in his book. And the mafia capitalism which was produced from the neoclassic gurus of economics is simular to Russian capitalism. " quoting from professor Chasmers book page 263 paragaph 2 "In short, the few successful economies on earth did exactly the opposite of what the gurus of globalization said they should have done. In places where economic managers had no choice but follow the guidelines of globalization- "free" trade, sell-offs of public utilities, no controls over capital movements, the end of all national preferences- the results have been catastrophic." End Quote.
you will need to read the book to know what those catastrophic consequences are.
Rolf
Published: September 11, 2004 10:14 AM
Rolf, I am just reading a book from J.E.Stiglitz (he likes trade barriers), and as an example of mafia capitalism he gives alluminium cartel endorsed by the government of USA. Now the previous paragraph you have quoted states "they understand, as the americans did not, that a premature introduction of American economic norms was much more likely to produce mafia capitalism than development, as it did in Russia".
He than continues to criticize IMF and monetary system.
In this context the "American economic norms" are cartels and state manipulation of money. Obviously results of these measures are catastrophic.
Published: September 12, 2004 5:37 AM
Andy and Rolf,
I think the problem with such books is that it provides support to interventionists/protectionists, as "catastrophic developments" are viewed as consequences of the free market rather than a result of the interventionism of governments or agencies portayed as free market supporters.
Published: September 12, 2004 6:04 AM
I must write this correction concerning Professor Chalmers Johnsons new book, The Sorrows of Empire. I had an error in the previous post which should correctly read The End of The Republic.
And not read The End of Empire.
Many 10s of millions of people all through Asea have suffered the consequences of so called "Free " markets through the process of globalization. And of course the IMF is but a rubber of the US treasury. And is it not the phy. of the smartest capitalist to fill his or her box first.? That is the foundation stone on which the whole house of sand sits. With a red tide it all washes away.
Published: September 12, 2004 8:12 AM
Rolf, do you call problems caused by fiat currencies, that are issued by state banks, a "free market failure" or "government failure"? Is government support of bad projects a free market failure or government failure?
Published: September 12, 2004 1:28 PM
Andy: The problem with russia was(or is) the introduction of the us system(oligarchy, or plutocratism or whatever you can call it) If rusia truly had the opportunity to get a free market it would prosper relatively fast. I'm afraid that the socialism in Russia has perverted people alot when when it comes to personal responsability etc, so for Russia's economy to become really strong we will have to wait a generation. Anyway, dunno really what I'm arguing here, was it a point in the book that Russia wasnt ready for a free market, or "the US system"(I dont hold these as the same)?
Published: September 12, 2004 3:14 PM
Andy
You well know
Currency is the medium of exchange human societies
have created for some semblence of order betwueen one another. The peoples institution needs control of such to secure it from coruption.
While in VietNam in 1968 I observed the American Military printing what was called MPCs. Military Police Certificates. The American Military flooded
the Vietnamese society with such and changed the curency every few months
By the peoples institution I certainly do not mean any form of military authority.
Published: September 13, 2004 1:43 PM
To prohibit trades which may be regretted would be to prohibit most if not all human action; it would be a death call for lack of existence. The chance of regret is essentially an element of price that only each and every individual can subjectively decide if the trade is worthwhile. As more regret is experienced it will marginally effect price and most importantly enhance information and better inform future decisions. Subjective valuation is always rotating in flux. There is an even a market for those concerned about individuals making bad "regrettable" decisions to offer information for a price (ala Consumer Reports) or free if they want (ala the internet) to lessen the chances of regret much better than government.
Government, the individuals who do the acting in its name, is an extremely small subset of the population at large. As such the accurate information it can process through free market price signals is incredibly limited in comparison to the free market (see Hayek The Fatal Conceit). They have to guess future demand patterns for the entire population and the methodological and empirical evidence of government failure is enormous. It simply is a fatal conceit.
Short term benefit is a subjective concept the importance of which is made by every individual innumerable times every day in countless decisions. Everyone is constantly trading the use of their time. Exercising at the gym for an hour versus watching television for an hour is subjectively ranked and the rank importance between any two choices to an individual can only be observed from what an individual actually chooses. The rank importance of these things are constantly in flux.
If it were true that it is a “problem� that outsourcing develops foreign human capital then IT MUST NECESSARILY FOLLOW that ANY AND ALL outsourcing, division of labor, ALL TRADE WHATSOEVER, between neighbors, or members of the same family, is also a “problem�, on the same methodological grounds. That is a completely false call for total individual autonomy. That conception falsely regards the division of labor, TRADE, as not increasing net productivity.
The only dilemma involved is for those who arrogantly and falsely believe they are entitled to someone’s else’s property that is not freely forthcoming through trade. That may be the essential difference between the murderous thief and the stealthy thief.
Government/mafia/dictatorship has always degenerated to the murderous thief as it is required by its nature to enslave to at least a degree to survive. That is necessarily the characteristic of any politician or individual that holds the value of a US citizen or any arbitrarily defined subgroup of the human population as “more� than what is determined by the free market. It’s necessarily a call to a war of all against all.
“Mafia capitalism� and “neoclassic guru economics� I’m guessing are catchwords mis-used by an author who fails to closely examine the behavior attempted to be observed. Is the action observed “capitalism�? Is it “free trade�? What characterizes action as “mafia�? How and why is that “bad� as it seems to connote? Individuals are either freely trading with one or another or something is hindering that. “Economies� are not some mythical machines that those “in political power� push buttons on and steer like an automobile. The term “Economic Manager� is an entirely socialist concept. To call the removal of such hostile brutishly offensive intrusions that cause real net harm to individuals “catastrophic� is analogous to the rapist lamenting it was “catastrophic� that he did not find a victim that night. All monopolies and lesser forms of state corporatism, or mafia capitalism if you will, are government creations, the abusive use of power to steal from and murder other human beings. The cure to mafia capitalism is not more mafia capitalism, or total mafia capitalism (aka state socialism) but the removal of its enforcement through tyrannical government power. It seems from the quotes given the author laments that there is less of the coercive action of the same nature under “globalization� than existed under total tyrannical state socialism.
In sum, to analyze mafia capitalism and/or socialism, one must look at the actions done. In all cases it is easily and readily observed that some individuals are using force or the threat of force to take property from others against those others’ will.
Published: September 13, 2004 3:29 PM
Just how free is today's "free trade" in the international marketplace? I would say not all that free at all and there is plenty being stolen to advance various interest group's agendas in various nations.
Take for example Japan. The Japanese central bank purchases dollar denominated assets and sells Japanese yen to weaken the Yen (or keep it weaker than it otherwise might be) in order to keep its companies price competitive in the international marketplace. This is a policy of the government of Japan, not a typical, rational, self-interested Japanese citizen who might find something better to do with his/her Yen. The Japanese government, in my mind, is stealing from their citizens by doing this. One must consider then that perhaps indirectly those of us earning income and trading in US dollars are cooperating with this criminal(the Japanese government) by purchasing Japanese-made goods or assets(with our distortedly strong dollars). At the same time while purchasing a Japanese yen denominated good or asset we have passed up the opportunity to buy a good or asset denominated in some other nation's market-floated currency - robbing some other individual somewhere in the world of income.
As we all know, the Japanese government is not the only one to do this. China and India are both good examples of nations stealing from their citizens to advance certain industrial/commercial agendas.
So, my point is that what we think of as international free trade in today's marketplace is hardly that at all and we ought to keep that in mind as trade policies are formulated.
If you are against theft, you might think twice about purchasing from the thief. Samuelson might be on to something here. I can't wait to read his latest work on this topic.
Published: September 13, 2004 4:21 PM
In the last post the author is blending psy. and economics. Subjective experience and economic theory.
Competition forces in the market place of objects
appears no longer in the modern age to be one of so called "Free" markets. The TV has very much become the controling tool of the modern advertizing industry. And subjective stimulus
is of course part of the tool package.
And the selling and marketing is well discribed
in Naome Kliens book "Logos"
Corporations have also been discribed as clincal
Pychopaths. And that very much is a huge problem
with capitalism. At what point in the persuit of profit and wealth do human beings loose their humanity? And once the humanity is gone of what value is the profit and wealth?
There are a finite amount of non renewable resources in the world. Why should a few be alowed to take them for themselves and then make all others pay for them? They belong to all the peoples of the planet earth, no more to one than the other. As the life forms of the oceans are food for all of humanity tragicly now in 2004 almost depeted because a few wanted to get rich at the expence of starving millions.
The enormous resources exployted each year from the soil to be manufactured into machines of death and distruction. Resources extracted and then totally distroyed and made useless. The world community uses more than 850 billion dollars EACH YEAR in the perchase of such. A person does not require a nobel in economics to know the stupidity of that.
And the tragic root of it all is COMPETITION.
www.warprofiteers.com
Published: September 13, 2004 4:50 PM
John,
Your argument sounds like : as long as Japan or China are interventionist, so should the US. As long as markets are not really free, I will favor US interventionism.
First, penalising imports penalises consumers, it also penalises exports and in the end impoverishes everyone, as Austrian economics teaches. Second, if you favor interventionism as long as makets are not really free, how do you hope to ever obtain free markets?
Sorry but I don't believe that "Samuelson might be on to something" and I'll stick with Steven Carson (and Bastiat) on this one. And Rolf, competition is (and will always be) part of human nature, and despite the excesses you describe, it is basically what got humanity beyond the level of subsistence.
Published: September 13, 2004 6:14 PM
You are free to turn off the tv and not view the advertisements. You can change the channel. You can compete with that advertising business model by offering ad free entertainment ala HBO. You can form a voluntary contribution PBS style network. All buyers of such must be voluntarily persuaded to view. You are hardly free to not do what Sadam Hussein or the next Joseph Stalin wannabe or his enforcers say you must do with a 9mm gun pointed at your head. Who's to say socialist dictatoriships would not feature many more commercials praising the most evil person who annihilated his rivals and enlsaved the rest to get into the position of deciding who does what as a loving hugger of children? It might make for an interesting article to compare the "commercials" of the relatively socialst vs relatively free market societies for the last 50 years.
Failure to comply with socialist dictators results in direct objective electrical stimulus to the genitals as opposed to the attempted free market subjective stimulation of tv commercials which may or may not always succeed. And at any rate advertising has always existed and its aim has always been the same as even seen in such ancient works by "pseudo Socrates" complaining of women making themselves to appear better than they are through the use of makeup. Logos? Ever seen the hammer and sickle? Government booty raiders love to parade their flag logos when they go marauding taking life and property from innocents. The Nike "swoosh" must voluntarily be accepted.
No free market corporation can force you against your will to act. Profit and wealth can only come about in the free market by serving the desires of consumers who freely choose to purchase something from the seller. No, clinical psychopaths rise to power under socialist societies (see Hakek The Road to Serfdom "How the Worst Get On Top") and inflict their terror and subsequent lower standard of living for most members of society.
The ocean is as close to a universally unowned/owned by all socialist area that exists today. The lack of individual property ownership is at the root of the same inefficient waste that occurs in all socialist systems. Nobody owns the ocean so nobody cares for it like it would be if it was able to be owned the way land can.
Who is buying those "machines of death and distruction"? Warmongering socialist policy governments that are opposed to free trade including the USA; they are willing and able to employ combat to attain their purposive ends -- the opposite of trade. There is not any "world community" buying that which you describe, but actual mercenary individual human beings with real names and faces who are agents of governments.
Competition turns into armed combat under socialism as people under that system are not freely able to exchange with one another. Competition does not, has not, and would never cease to exist under socialism. Property and life are taken through brutal means, people are enslaved by those in power to do whatever is told, meaningless lip service aside to "all the peoples of the planet earth".
Anyone opposed to free trade, employing the necessary action for such a totalitarian state of affairs to come about, is necessarily a clinical psychopath. The employment of such violent force is necessary to create as near a socialist condition as is possible, as black market trade readily exists and people are always consciously aware that they own themselves, empty proclomations and full violent physical blows from the enforcers of socialist tyrannies aside.
I only respond to such a post for such evil lurks behind the socialist march chant:
"At what point in the persuit of profit and wealth do human beings loose their humanity? And once the humanity is gone of what value is the profit and wealth?"
How has it come about that "profit" and "wealth" have such negative connotations to many? It's likely through the illegitamate garnering of such under the coercive power of state corporatism, preventing free competition and free trade. Human beings loose their humanity when they cease to seek profit and wealth, attain a "higher" better state of material satisfaction, as profit and wealth are voluntarily earned through free trade with others, and individually trading labor with the naturally existing resources, and every instance of trade whatsoever is necessarily an increase of profit and wealth to all parties involved in trade. The derision of profit and wealth is aimed at stirring base jealousy and covetousness to incite perceived just vengeful action. That such chants still ring today is the result of the failure of the champions of liberty to sufficiently criticize the actually existing illegitimate forms of state corporatist "capitalism" enforced through government protectionism, patents, and copyright as forms of socialism. Microsoft would not have 1/10th the wealth it has today if it were not for government protectionism.
Here's some of what what Mises had to say about competition:
msHmA: Part 1, Chapter VI. Uncertainty in paragraph 1.VI.61
Within the frame of a market economy competition does not involve antagonism in the sense in which this term is applied to the hostile clash of incompatible interests. Competition, it is true, may sometimes or even often evoke in the competitors those passions of hatred and malice which usually accompany the intention of inflicting evil on other people. Psychologists are therefore prone to confuse combat and competition. But praxeology must beware of such artificial and misleading equivocations. From its point of view there exists a fundamental difference between catallactic competition and combat. Competitors aim at excellence and preeminence in accomplishments within a system of mutual cooperation. The function of competition is to assign to every member of a social system that position in which he can best serve the whole of society and all its members. It is a method of selecting the most able man for each performance. Where there is social cooperation, there some variety of selection must be applied. Only where the assignment of various individuals to various tasks is effected by the dictator's decisions alone and the individuals concerned do not aid the dictator by endeavors to represent their own virtues and abilities in the most favorable light, is there no competition.
msHmA: Part 4, Chapter XV. The market in paragraph 4.XV.55
The term competition as applied to the conditions of animal life signifies the rivalry between animals which manifests itself in their search for food. We may call this phenomenon biological competition. Biological competition must not be confused with social competition, i.e., the striving of individuals to attain the most favorable position in the system of social cooperation. As there will always be positions which men value more highly than others, people will strive for them and try to outdo rivals. Social competition is consequently present in every conceivable mode of social organization. If we want to think of a state of affairs in which there is no social competition, we must construct the image of a socialist system in which the chief in his endeavors to assign to everybody his place and task in society is not aided by any ambition on the part of his subjects. The individuals are entirely indifferent and do not apply for special appointments. They behave like the stud horses which do not try to put themselves in a favorable light when the owner picks out the stallion to impregnate his best brood mare. But such people would no longer be acting men.
msHmA: Part 4, Chapter XV. The market in paragraph 4.XV.57
In a totalitarian system, social competition manifests itself in the endeavors of people to court the favor of those in power. In the market economy, competition manifests itself in the fact that the sellers must outdo one another by offering better or cheaper goods and services, and that the buyers must outdo one another by offering higher prices. In dealing with this variety of social competition which may be called catallactic competition, we must guard ourselves against various popular fallacies.
msHmA: Part 4, Chapter XV. The market in paragraph 4.XV.58
The classical economists favored the abolition of all trade barriers preventing people from competing on the market. Such restrictive laws, they explained, result in shifting production from those places in which natural conditions of production are more favorable to places in which they are less favorable. They protect the less efficient man against his more efficient rival. They tend to perpetuate backward technological methods of production. In short they curtail production and thus lower the standard of living. In order to make all people more prosperous, the economists argued, competition should be free to everybody. In this sense they used the term free competition. There was nothing metaphysical in their employment of the term free. They advocated the nullification of privileges barring people from access to certain trades and markets. All the sophisticated lucubrations caviling at the metaphysical connotations of the adjective free as applied to competition are spurious; they have no reference whatever to the catallactic problem of competition.
Published: September 13, 2004 8:25 PM
Lawrence
I haven't bought the idea that free trade is good for everyone or even most people all the time. Logically, to accept that would be a stretch. Historicism has been discredited. Just because most nobel prize winners in economics favor very liberal free trade doesn't mean they are correct. And also just because free trade has worked well in the past doesn't mean it always will.
You wrote:
"First, penalising imports penalises consumers, it also penalises exports and in the end impoverishes everyone, as Austrian economics teaches. Second, if you favor interventionism as long as makets are not really free, how do you hope to ever obtain free markets?"
In the case of countries that promote certain commercial/export agendas at the expense of their general population I think retaliatory intervention on our part is not unjustified. I wouldn't be one to go out and embargo these market-interventionist traders, but I would favor policies (including trade barriers/tarriffs) to nudge them to stop their market intervention. If we never took action to challenge this we would risk a cronic situation where narrow industrial export interests groups in those nations could continue to dominate politically in those nations. Trade is not the only thing going on in this world. Egos, interest groups, and others have their agendas and lobby their governments to satify their agendas and most are not free trade idealists at the expense of their own commercial success. After all, aren't the rights of our exporters just as important as the rights of our cosumers of imports? One shouldn't hold prejudicial favoritism of one over the other.
Published: September 14, 2004 12:19 AM
rti
The world community is real.It is Divided and subdivided, alienated from each other and groups of the community
are at war with each other, though it is still one community.
You write that those not in persuit of profits and wealth have no humanity.
Clearly you have not heard of The Doctors Without Borders.
You write that all are free to turn off their TVsets. Such a statement is wrong. The TV is a very addictive light box and subliminal suggestion is a well developed tool of the advertisment industry."Free" is a very misused word. Particularly in the American society.
You have been taught to believe that no one owns the oceans as large numbers of other human beings have been taught to believe such. And it is not your own belief produced from your own thinking but the belief system of someone else which you have only memorized. Since you are producing from material memorized from others, since you have been conditioned from childhood to speak what you have memorized, are you free?
Can you recall one original idea which is truly your own?
America has had many friendly dictators these past 40 years with which American corporations have prefered to do business with.
A large part of those nonrewable resources mined and exployted from the earth and reproduced into machines and material for the sole purpose of Death and Distruction have come from countries which you have called socialist. Chiles democraticly elected president was replaced through assination with "not a socialist" but a military dictator of the extreme right or the extreme conservatives. The American Multi Nationals did not want the nonrewable resources of chile to be nationalized or put another way, to belong to all of the people of Chile. To share the wealth seems by your writing an absurd consept.
Americas Friendly Dictators can be found at this web site: www.thirdworldtraveler.com
Competition: This is not a competitive discussion, this is an exchange of perspectives:
In nature there is some competition though for the most part nature is a cooperative interconnected selfcreating system. Darwin was only aware of a very very small part of the enormous complex structure of which much more has been learned since his proclomation that "All Nature is a survival of the fittest system".
And his belief system of mechanistic thought originated at the same place yours did. Greece.
There has been a time in human history when cooperation was esteemed and competition not excepted It was a time when God was female.
You can learn more about the organic model of all that is here: www.ratical.org/LifeWeb/
I read in your writing that you are a spinner
and you are in a word salad of economic theory that does not account for the more than 100 million human beings murdered by natural resources during the 20th century other than to blame it all on the socialists. That is not only unwise, it is foolish.
Published: September 14, 2004 3:13 PM
John,
Asian countries are not the only ones who practice interventionism or "favoritism" or who "steal from their citizens to advance commercial/industrial agendas". The US and European states do it all the time.
I fail to see how this is an argument against free trade.
Published: September 14, 2004 5:09 PM
Lawrence,
I agree that the US and European governments also steal from their citizens to advance commercial agendas. But either you try to crack open markets or you don't. I don't see how we will get anywhere unless we engage with those we trade with to further open their markets. Being nice and doing next to nothing hasn't got us very far at this point. Doing nothing smacks of isolationism and will NOT help advance free trade or political reform in other nations. In case you haven't noticed, its a tough world out there and just like we have to be competitive commerically, we have to be competitive in negotiations as well....and sometimes that means being tough, real tough.
Published: September 14, 2004 5:47 PM
John,
Being competitive and tough is fine, but my point is that closing our borders to Chinese products to retaliate against their own protectionist/interventionist policies will essentially hurt Americans. After all, if the Chinese are happy to sell Americans subsidized products that American consumers want to acquire, at incredibly low prices, and the Chinese are happy to get a few green paper bills in exchange, why should we stop them? To the best of my understanding, my analysis is based on Austrian economics, with which you have every right to disagree.
Published: September 14, 2004 6:15 PM
Please send me Samuelson's article via email or post me a link to it.
Regards
Gossner
Published: September 20, 2004 2:57 PM
How can an idiot with a nobel prize with some math and models claim that outsourcing, without proof, will help the people? And now reverse his position. How can the government and corporations believe anything unproven and continue creating the huge unstoppable damages to the american economy? Why should they get away with such irresponsibility? Dont they know the money is here where its interrelated and not in some third world country.
Published: October 7, 2004 8:58 PM
Dear sir :
My name is Xiaowen Chan , I am an oversea student of Paul Samuelson , Indeed , I have something wish Mr Paul Samuelson give me some guides , but I haven't Mr Paul's e-mail address , so Dear Sir , can you tell me how to contact Mr Paul Samuelson ?
Thanks
Xiaowen Chan
May 30th ,2007
Published: May 30, 2007 12:46 AM