[extropy-chat] 'Unskilled jobs to go in 10 years'

[Steve Davies]

> --- Hal Finney <hal at finney.org> wrote:
> > To approach it, I think of the simplest possible
> > case: one person.
> > He is isolated and works only for himself, making
> > all his own goods.
> > Now we introduce another person, a poorer person,
> > and allow them to trade.
> > Can this trade make the first person become poorer
> > than he was?
> >
> > I don't think it can, because every trade he makes
> > is done because, from
> > his perspective, he gets more for the trade than he
> > gives.  Therefore
> > each trade increases his net wealth.  If a trade
> > would make him poorer,
> > he wouldn't make it.  He'd just continue to make his
> > own goods instead.
> >
> > Now, does this generalize to two nations?  I'm not
> > sure; generalizations
> > from individuals to large groups are often erroneous
> > in economics.
> > But broadly speaking, if we look at each individual
> > trade between the
> > nations as being on net beneficial to both sides,
> > then I think trade
> > can only make both of them wealthier than if no
> > trade were possible.


Adrian Tymes replied

> The problem is that a nation is not just one person.
> Let's say you have two people, one of whom gets 2
> coins for a unit of wheat, and the other of whom
> consumes wheat at a certain rate.  Now introduce a
> third person, who can provide a unit of wheat for only
> one coin.  Trading with the less expensive wheat
> producer increases the wheat consumer's wealth by one
> coin per unit of wheat, and the less expensive wheat
> producer's wealth by the same - but it decreases the
> more expensive wheat producer's wealth by two coins
> per unit of wheat that would have been consumed.
>
> However, the more expensive wheat producer is now
> free to do something else - like, say, refine the
> one-coin-per-unit wheat into bread worth at least
> three coins per unit, which might not have been
> profitable using two-coin-per-unit wheat but might be
> profitable using one-coin-per-unit wheat.  The
> wheat consumer has an extra coin per unit wheat
> lying around, some of which can go to purchase bread
> instead.  *That* is how wealth is created.  Trade just
> sets up conditions where this can happen, although it
> can often be so important that it gets all the credit.

 Adrian is surely right. Moreover we need to stop thinking about trade and
exchange in terms of nations. Nations do not trade with each other, it is
individuals and corporations that trade. In economic terms an exchange
between somebody living in California and somebody living in New York is no
different to exchange between the person in California and a third one in
Shanghai. As long as trade exists (i.e. we aren't all living in
self-sufficient households or latifundia) the question is not free trade or
protection but rather what is the area of the planet's surface within which
trade will be free and will result in economic integration and a division of
labour? Economic theory and empirical experience all suggest that the larger
the area within which trade is unfettered in terms of both population and
geography, the greater the productivity gains.

 The problem, which is real, are the transitional costs of economic change.
The producer in Adrian's example who switches from wheat to something else
has a transitional period when he's worse off. Also there are psychological
and social costs - it's pretty upsetting to learn that a skill you've spent
many years acquiring is now redundant because you no longer have a
comparative advantage in that area. Also, these problems are typically dealt
with by political communities i.e. nation states or are seen to be the
responsibility of the ruling elites of nation states. Opposition to such
things as outsourcing and free trade is actually opposition to economic
change and growth. That doesn't mean there aren't problems though but it's
important to realise what those problems actually are, then we can try to
work out ways of resolving them. Of course we might arrive at a collective
decision to trade off greater social stability against greater economic
growth - that would be fair enough. Unfortunately many people want to have
their cake and eat it and there's always plenty of politicians around to
tell them they can. SD