Friday, November 11, 2005

How professors can illustrate comparative advantage

My suggestion: have students starch a 100% cotton dress shirt by hand, and based on the time and what local dry cleaners charge, calculate at what wage it becomes worthwhile to have the shirt laundered and starched professionally.

I really hate starching shirts myself. I prefer to do my own ironing so that I know it's done right, like I prefer to change the oil in my car myself. Starching, however, almost crosses the line. Typically I wear wrinkle-free (in reality, mostly so) dress shirts to work, but I love this French-cuffed shirt I just bought, and I want to wear it tomorrow (today) since I'm anticipating something. However, the 100% cotton fabric is exceedingly prone to wrinkling...unless starched. Pity it couldn't be like another 100% cotton shirt I have, which is of a quite remarkable wrinkle-free weave; I find it better than wrinkle-free broadcloth.

Normally I'd have my local cleaners wash and starch it for me, which would definitely be worth the couple of bucks they charge, but I don't have time in the morning before my train leaves, and lately I've been getting home past 7 p.m. when they close. Dry cleaners in the city aren't a option, because when bringing a shirt home on the train, I might not have a place to hang it.

Recently in comments on QandO, I explained a bit about international trade, including comparative advantage:
My job pays substantially more than $9 an hour, yet it's in no danger of being shipped overseas. I'll say briefly here that the U.S. is losing primarily the mundane manufacturing jobs that we shouldn't want to do anyway. Yes, some paid pretty well, but you're forgetting it's offset by products becoming cheaper. How much would, for example, DVD players cost if made by American hands instead of foreign? Do you have a digital camera made in China, like mine? If such things, which are increasingly within reach of working-class Americans, were made domestically, the higher labor costs would make them unaffordable for so many who enjoy them right now.

"But," protectionists counter, "people will make more and be able to afford the higher prices." Then why don't we mandate a high minimum wage for everyone? Never mind $10 per hour; let's start with $100. If you work one hour, you can buy (we won't account for taxes here) $100 worth of goods and services. However, prices for everything will have gone up too, driven by increased unit labor costs. So increasing wages, or maintaining higher wages, is not the key to prosperity. The key is eliminating the tedious work in your life that's of least value, and focus on your specialities of greatest value. There's a reason my job doesn't involve vacuuming the carpet, the same reason I don't weave and sew my own suits or craft my own shoes: my time is more valuable in other endeavors.

By not having to do as much low-grade work (such as basic semiconductor manufacturing or machining bolts that go into Boeing aircraft), Americans can move to jobs of higher value that China, India, et al, could not perform as well. This is Ricardo's principle of comparative advantage. My own blog has a few entries on this and other dynamics of foreign trade, including why it's not a bad thing for jobs to be reallocated among labor-rich nations (like India) and capital-rich nations (like the U.S.). And if Americans won't improve themselves so they can perform superior jobs, perhaps we're not as competitive as we think we are, and we therefore don't deserve our wealth.

Demanding protectionist measures for the sake of keeping jobs domestically is another manifestation of the erroneous idea that people are "owed" jobs. Now, I'm not saying that it's easy for a machinist or call center operator to find a new job after being laid off, but what about others who lose jobs for other reasons? Well, they deal with it as best as they can. Life requires resiliency. It requires competitiveness, and in fact we lose far more jobs to improved technology than we do to foreign trade. China's rapid industrialization means 2 million manufacturing jobs lost each year, and 15 million from 1995 through 2002. The real competition is not between nations, but between man and technology, and it's insanity to suggest cutting back on the technology that only improves our standard of living. That's why the Ba'ku of "Star Trek: Insurrection" are a completely unrealistic society.
I had also left this earlier comment:
French wine? C'est rire!

Unless you're talking a premier cru like Château Margaux, Château Lafite-Rothschild, Château Mouton-Rothschild or Château Latour, I'd rather have an inexpensive bottle of Australian wine. I love Rosemount's shiraz with well-seasoned steak. The U.S. has some excellent domestic wines in the $10-$20 range, but I personally find Australian wines have been the best value in the last few years. I also like New Zealand sauvignon blancs, about the only white wines that really appeal to me.

Australian wine + solid quality + free trade agreement > French wine + decreasing quality + strong euro + whining vintners who engage in domestic terrorism

It's that last part which really tips the scale. We're shocked, SHOCKED (say that in your best Claude Rains voice) at the riots in the Parisian suburbs, but let's not forget the French winemaker terrorists who bomb government offices just because the government won't bail them out of poor business practices.
No offense to my friend Chris Masse, but I find French wines for the last couple of years, because of the euro's strength, are too expensive to be worth the quality. On the other hand, Australia wants free (freer) trade with the U.S., which will encourage me to continue buying Rosemount instead of French and even California wine.


Blogger TKC said...

Have you read this one before?

The Nation That Lost Its Jobs, But Got Them Back
"Once upon a time, there were two hippies, Jerry and Sarah...."

Do we really want those jobs back? When people ask me what the best way to get a shirt clean is I tell them, "Take it to the cleaners."

Friday, November 11, 2005 5:06:00 PM  
Blogger Tim Stay said...

I quoted some of your post in my blog about Comparative Advantage. Thanks.

Monday, November 14, 2005 3:28:00 AM  

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