Greg Mankiw's Blog: Chinese Competitors
リンク: Greg Mankiw's Blog: Chinese Competitors.
Whenever I preach the benefits of unfettered international trade, I can count on a smart-aleck commenter saying something like, "Okay, Mankiw, let's see you compete in the world market against Chinese-made goods."
Well, it turns out, I already do.
Well, it turns out, I already do.
19 Comments:
Have we been googling ourselves again? :-)
Well...
1) In general, it is hard to compete with Chinese goods not because they are superior, but because labor there is so cheap.
2) Intellectual property like your book isn't at all analogous.
3) Most of the copies of your book in China are illegal anyway, which is an effective way to make them even cheaper.
4) As a result, you're not competing with Chinese goods in nearly the same way that American manufacturing workers are.
Now, that said, I'm generally for free trade. But seeing a clever dig against smart-aleck commenters, I was pressed to respond -- gotta defend your own. : )
Matt, a free-trader will tell you that you have gotten the idea but missed the concept. Comparing apples to oranges is the basis of the economic advantages of free trade, not something to be dismissed. If China is better at manufacturing shoes and we are better at writing textbooks, then we should write textbooks, sell them and use the profits to buy Chinese shoes. Even if one American manufacturing worker is worth two Chinese workers, they have more than a two-to-one population advantage. We cannot out-manufacture them, we have to play to our strengths.
"Matt, a free-trader will tell you that you have gotten the idea but missed the concept. Comparing apples to oranges is the basis of the economic advantages of free trade, not something to be dismissed."
Well, sure. It's a bit awkward for me to be making the anti-free trade "case" here, but I think the main idea is more moralistic than economic. Comparative advantage in textbooks is irrelevant to the (still hypothetical) smart-aleck point that Mankiw should try being in manufacturing workers' shoes. They're still going to lose their jobs, they're probably not going to get new ones publishing textbooks, and the difficulty of marketing intellectual property pales in comparison to the impossibility that is American manufacturing.
Mankiw supports free trade because he is smarter in the qualities that majority of studens and teachers value. He is good at preaching it because he is winner out of it. Isn't is surprising that he supports free flow of labor and he has benefited out of it? When will Mankiw reflect the view of the loosers? Hmmm, perhaps in his retirement or ...?
I think the previous posters missed the point. I don't believe this is a serious post, but just one that's meant to be somewhat humurous and get a small laugh out of us...... we're allowed to relax with the economics ONCE in a while-- it is after all, winter break!
I hate to say this, but I'm coming to the point of view that it might be possible to learn more about economics from how your textbook acts as a product in the marketplace than you can from actually reading it!
Consider this - a few weeks ago, I found that thanks to recent changes in the exchange rates between the US dollar and the UK pound, potential buyers in the UK would be able to snap up your textbook at a discount on Amazon.com as opposed to Amazon.com.uk.
That deal was short-lived, as the price of your textbook on Amazon.com has increased to close the gap (not to mention the arbitrage opportunity.) Pretty nice demonstration of the power of international markets to converge on one price for a commodity.
I had some really excellent Chinese professors in grad school.
When Prof. Mankiw gives up tenure and really competes we can bring down the ridiculous cost of a college education.
Not likely.
Rusty- Perhaps that last post was a bit too harsh. I think Dr. Mankiw's contributions to economics definitely deserve tenure.
But I think the question (posed more appropriately) is an interesting one- Dr. Mankiw, what is your opinion on the process of tenure, itself? Why do college give tenure and does it really serve a beneficial purpose in the "market" for academic knowledge and research?
"When Prof. Mankiw gives up tenure and really competes we can bring down the ridiculous cost of a college education."
I don't see how this would lower the price of top-tier profs.
I'd wager that the market for professors is over-supplied because of the lure of a guaranteed job for life. Take that guarantee a way and a lot of people will run to work in industry instead. (And this is coming from a Ph.D. who almost certainly will be working in industry and thinks tenure is a horrible idea).
RE: Competing with foreign labour. When I was a Ph.D. Econ student at Rochester, 97% of the students were foreign, including me, a Canadian. There is no field where people compete more against developing country labour than a math-based grad program.
The annoying thing was that a lot of the foreign students simply could not do the job due to language issues. They can't TA, they can't teach, they can't grade exams, etc. etc. As an English speaker, you'd get assigned to teach tutorials with two or three other Ph.D's who couldn't speak the language. You got paid for doing 1/3 or 1/4 of the job, but would end up doing 95% of the work. I'd always have 70 people in a 40-person classroom to hear my tutorial, but the other sections would have at most 5-6 people. I had to create all the course materials because the others were simply incapable of writing something undergraduates could understand (even if I do sound like an extra from "Fargo"). I'm told that even 5 years later they're using my materials, because they have no one capable of doing it today.
I enjoyed my time at Rochester a great deal, but I got tired of always feeling like I was exploited. It's one of the reasons why I left economics and went to a business Ph.D. program, where they appreciate communication skills.
If China is better at manufacturing shoes and we are better at writing textbooks, then we should write textbooks, sell them and use the profits to buy Chinese shoes.
While the above is a perfect expression of economics sense, there are two problems with it.
The lesser of the problems is that the Chinese government neither recognizes no respects intellectual property rights. Thus, any textbook written in the US is a textbook published in China without royalties paid to the author in the US.
The greater of the problems is an ignorance of human beings. China isn't better at shoes and we aren't better at textbooks. The US and China each have a bell-curve full of people capable of all levels of performance in any human endeavor. Short-run advantages due to information asymmetry disappear much faster these days due to global information trade and communication technology.
In the long run (which doesn't take very long to reach), no country has an advantage over another country unless it is due to the distribution of natural resources or self-imposed ignorance. Outside of the political realm, don't count on the Chinese to suffer from the latter. In the political realm, both the US and China have their culturally influenced challenges.
Re: Foreign PhD students... 20 years ago when I was working on my PhD in Computer Science at a top-ten school, I was the only US citizen in the theory group. The balance of the students were Chinese, Indian, and Israeli.
Re: Mankiw "deserving" tenure... Let me say that I think tenure is important for maintaining academic freedom. Over a few decades of observing the politics in America, there is no doubt in my mind that professors promoting unpopular ideas would have been removed were it not for tenure. What southern-state university would be teaching evolutionary biology if retention were based on continuing political popularity?
That said, Mankiw's libertarian-based economics philosophy is antithetical to the idea of tenure in any job or industry. By accepting tenure, Mankiw has taken economic freedom away from Harvard. They are not free to replace him with a younger economist who might be better and work cheaper. Indeed, in a very real sense, Mankiw's acceptance of tenure indicates either hypocrisy or intellectual dishonesty, perhaps both. No... I don't think that is a particularly harsh judgement. It is merely using Mankiw's philosophy to measure his own actions -- something only a hypocrit or an intellectually dishonest person would object to.
I am a tenured economics professor who does compete successfully with the Chinese. First, they send many more of their students here to become educated than we send there. Second, and perhaps more persuasive, they have opted to have my B-school, and many others, set up instruction over there in which US based professors travel there to deliver instruction rather than receive their own professors' instruction.
This is one example of a more general trend. We export products that embody much intellectual content and import products that require manual labor. Sounds like a good deal to me
We export products that embody much intellectual content and import products that require manual labor.
Not for long. Intellectual products do not deteriorate as physical products do. They can obsolete, but in a world of free information exchange, those who are educated can remain intellectually viable.
In other words, enjoy the short-term advantage you have now. In ten years time, Chinese business schools will know everything you know. You will be no longer needed. I hope there are enough businesses left in the US creating real products to sustain the demand for B-school professors, otherwise, you might wind up as shift manager at the local fast food joint.
Addendum to my posting above:
I find the "We supply intellectual products; they supply manual labor" arguments to be fraught with short-sighted hubris. Once our intellectual assets have been fully transferred to other countries, they will no longer need our intellectual products. Their b-schools, engineering schools, etc. will be self sustaining and bolstered by and paid for by thriving real-product-producing companies.
Where the US will be in 15 to 20 years? It is not a pretty picture. Having transferred our intellectual assets, outsourced all of our product production, and filled our service industries with illegal immigrants, what will be left? It seems like only decaying universities and the porn industry.
In reality, we will become a second-world nation. Our currency will be valueless because we will no longer be producing anything the world wants to buy. We won't be able to afford to import products. We will have to rebuild our agricutural and manufacturing industries just to supply our own citizens with goods. If our current b-school philosophies still hold at that time, the new 21st-century American business will be a foreign owned durable goods manufacturer supplying only the US. In other words, we'll reverse the current trend. We will onshore manufacturing and offshore profits.
While your discussions are fairly interesting, I hate to point out that the link Prof. Mankiw pointed to is not written by a student in China, instead it is by a student in Taiwan. It just happens that the textbooks in Taiwan are generally writeen in Chinese.
But, still it is true that Prof. Mankiw's textbook is more clearly writeen than other economics textbooks used in Taiwan, and it has a good market share in Taiwan.
anonymous at 4:34 PM: "Having transferred our intellectual assets, outsourced all of our product production, and filled our service industries with illegal immigrants, what will be left?"
How do you conclude we will outsource all production? In 2005 U.S. manufacturing output was at all time high levels. The U.S. leads the world in production of automobiles, aircraft, medical equipment, chemicals, and much more. Our electronics industry is stronger than ever. Despite decades of outsourcing, the U.S. economy still leads the world. The only risk to our continued growth is protectionism.
Re: anonymous at 4:34 PM, "Having transferred our intellectual assets, outsourced all of our product production, and filled our service industries with illegal immigrants, what will be left?"
What about matching theory? what about certification? what about the required knowledge to create new intellectual assets? I think those are the main reasons why the best International students have been attracted to US b-schools so far. Also, consider the cost of the b-programs and the chances to pay them while not remaining in a market labor like US for a while.
You are approaching intellectual assets dynamics as a zero-zum game. Try a look at Easterly's "The elusive quest of growth" especially the chapter about increasing returns
I've read Easterly. I'm not approaching intellectual assets as a zero-sum game. I am merely pointing out that the US cannot presume to always be ahead of the game. We are now because our former economic position. As foreign students study here and return to their own countries (something that wasn't always happening with China and India, but now is), the other countries will gain intellectual parity with the US. When there are a greater number of countries with intellectual parity, our knowledge will not command its current premium. Innovation in advanced technology will be more uniformly spread about the globe and not solely the province of the US.
I will repeat: I find it short-sighted hubris for people to think that the US is somehow superior and will always lead in intellectual products and services. If I am wrong, don't tell me to read a book I've already read and factored into my views. Tell me why the Chinese, Indians, and all others are incapable in the long run of duplicating what we've accomplished. Tell me why any businessman in India or China would look at the United States and stay out of an industry because the US does it better. That hasn't worked so far. We are outsourcing and offshoring more and more of our creative engineering work. Finance is moving that way also -- India is filled with quants just as capable as anyone on Wall Street. Why won't it happen? You tell me.
When thousands of illegals are streaming across the border offering to do *your* job for a tenth of what you earn, then you can state that ivy-league or government economists understand the fears of joe six. Meanwhile please stick to your tower.