Comments on: Bill Gates is Wrong

By: Paul

Paul — Tue, 01 Feb 2005 19:39:38 +0000

Jason,
Hayek did talk about information in a lot of ways (the new NYU journal on liberty and something has a good article). But this was one aspect I thought applicable.
Anonymous troll,
The distinction between comparative and absolute advantage is such an elementary one that I am afraid you are unqualified to discuss this matter fully. You are quite correct that haircuts are not manufacturing, but–lo and behold–America is now, and has been for a while, a service industry. The outsourcing of jobs to India has been much ballyhooed, but also much overblown, and in any event we will be better off in the long run for the trade. (After you grasp the intricacies of the Ricardian two-state, two-good model, then we can discuss the distinction between tradable and nontradable goods.)

By: Anonymous

Anonymous — Tue, 01 Feb 2005 17:33:46 +0000

Not so fast, nor so flippant? Instead of comparative advantage try absolute advantage. As to your second point I am at a loss to understand how haircuts got to be considered manufacturing-I had thought them a service job (we aren’t talking about Evan’s wig). Financial services and many other services? Egad! Begin your instruction by inquiry as to the physical location of the excellent English speaking Indians who are increasingly making reply to telephoned inquiries, from India.

By: Jason Kuznicki

Jason Kuznicki — Tue, 01 Feb 2005 00:14:28 +0000

Paul,
You are right in your observation about local demands being inherently difficult to measure, though as I understood it (and admittedly it’s been a while), Hayek’s insight applied to many other forms of economic information as well.

By: Paul

Paul — Mon, 31 Jan 2005 21:35:47 +0000

Well, there’s only two major errors in economic theory here. As for the first, I’ll just say “comparative advantage.” As for the second, may I point out that it has proven difficult to outsource haircuts? (Or, for that matter, financial services, policing, construction…)
Now, the empirical errors, and the minor theoretical errors, could fill a whole post–but look! They already have!

By: Anonymous

Anonymous — Mon, 31 Jan 2005 21:29:03 +0000

Try competing head to head with a firm operating in China and you will tilt towards the Gates analysis. Any product that is made. In the USA the maker of goods faces a 25% cost of government on each item made. Our regulatory stupidity only works in a closed market. Our market has been Open Door for some time now with predictable results to our manufacturing base. Even with the increase in productivity mentioned, try going head to head and see what happens.

By: Paul

Paul — Mon, 31 Jan 2005 06:19:02 +0000

“Supply and demand has fairly little to do with Hayek’s claims about the limits to economic knowledge and their consequences for government planning.”
Jason, I disagree. The preferences of a demand curve, being internalized and local, can’t be known by governments, leading to the road to serfdom; and without the intersection of the curves, you can’t get (real) prices, and prices are a critical market signal.

By: Jason Kuznicki

Jason Kuznicki — Mon, 31 Jan 2005 02:05:53 +0000

Supply and demand has fairly little to do with Hayek’s claims about the limits to economic knowledge and their consequences for government planning.
Fundamental for growth and development are several things that the government must not do–and several things that it should.
First, it must not seek to nationalize or subvert foreign investments. It must curb as much as possible its urge to subsidize, tax, and over-regulate. It must not collapse into revolution or civil war.
Second, government has to guarantee transparency and the rule of law. It must ensure at least roughly predictable outcomes in litigation, currency values, and government fiscal policy. It must allow a significant measure of free trade.
Why is South Korea rich, and North Korea poor? Why is Japan rich (though lacking in natural resources), and Congo poor (though overflowing with them)? A stable government that respects property rights and the rule of law is the single biggest guarantee of economic success. China has improved vastly since the 1950s and 1960s, though it still has a long way to go. And given its eagerness to micro-manage (to say nothing of lingering religious and political dissent), I am not so optimistic about its future.

By: Paul

Paul — Mon, 31 Jan 2005 00:14:28 +0000

Hm. And the Washington Consensus is precisely equivalent to capitalism.
China’s decision to restrict capital mobility has been proven wise by experience. But that is about the best that can be said for their non-market adventures. Are we to say the Three Gorges Dam is the product of sound planning?
In any event, comments like these are the most frustrating an author can receive. It is all right for the commenter to airily declare that so-and-so disagrees with the author; no one expects anything of a commenter, there is no burden on him; but he places one on the author, who has to respond to the criticisms thus made–even if, to be precise about the matter, no real criticism has been adduced, and there is nothing to respond to except the vaguest atmosphere of disagreement.

By: dlw

dlw — Mon, 31 Jan 2005 00:05:50 +0000

I’m afraid that Dani Rodrik at Harvard would disagree with you. the leaders in China did make some smart reforms that wisely went against the Washington Consensus.
The models of supply and demand are not that fundamental for growth/development. There are several things all economies must do, but there are several different ways to go about doing them.
dlw

By: C M

C M — Sun, 30 Jan 2005 23:48:13 +0000

Recently heard about an amazing business going on in China that is as genius as I’ve ever run across. They play people to play MMORPG’s, pay them in yuan of course, and then sell the in-game items they have for dollars on ebay. Freaking genius. Wonder if I can get in on that one.