Saturday, February 14, 2004

Protectionism is rooted in a fundamental disbelief in the basic laws of economics. Here is some anecdotal evidence:
Clinton's policies emphasized job training and education to help the victims of free trade find new work. But a shift is in order, said Gene B. Sperling, the former chairman of Clinton's National Economic Council, since many of the jobs moving to India, such as software writing and computer technical support, are precisely the ones Clinton aides thought unemployed factory workers would get.
Did you spot the command-economy mentality? Sperling thinks the "good" jobs must be in software and tech-support. If these jobs go to India, then he can't imagine what our displaced workers will do. If Sperling really believed in the laws of supply and demand and comparative advantage, then he would know that the net growth in job income in other sectors will exceed losses due to outsourcing. He would know this even if he didn't know in exactly which sectors this growth would occur. Ah, but there's the rub: if you want a government program to retrain trade-displaced workers for "better" jobs, then you have to know which jobs are "better." A Friedmanesqe solution to this would be to give all displaced workers education vouchers that they could use for vocational training in whatever field they wished. The invisible hand would then work its magic.

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