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America's Institutional Health
What Economists Don’t Know About Manufacturing

The decline of manufacturing really is as disastrous as common sense suggests.

Appeared in: Volume 13, Number 5 | Published on: March 29, 2018
William B. Bonvillian is a lecturer at MIT and directs a new MIT research project on workforce education. Peter L. Singer was a senior advisor at MIT’s Washington Office and is a technology policy researcher working on a study of manufacturing institutes. This article is drawn from their new book, Advanced Manufacturing: The New American Innovation Policies (MIT Press, 2018).
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  • AnonymoussSoldier

    Yeah we know it’s not wages. That’s for sure, and it’s not the robots either. In reality, it’s currency policy, including an undervalued yuan (which is also not really freely traded anyway), among others. It’s also barriers to US products with the US unilaterally disarmed with very small tariffs and even no tariffs on lots of manufactured goods. One -way trade is a disaster indeed. This is what it looks like for the visual learners. https://uploads.disquscdn.com/images/ee668d077de3d57aee99e60e804eeb6af53bc812739b90dfb3efcd7c3a35f505.jpg https://uploads.disquscdn.com/images/78ffd99ecdf4f5e3addfabca11553723b16d12f1c13187ec55b32b6f69bdc02b.png https://uploads.disquscdn.com/images/d973da9490cbbd11a8fcc8295a2a84bb92b95111c0517b373a6dc4ddb2f24eed.png https://uploads.disquscdn.com/images/3f2ce4c29b735b486642ae62a761bf3c42dceb766a514f3f858780818fb9bdfd.jpg

  • What a great article. It’s a long read but it hits the nail on the head. Well done.


  • QET

    Excellent. While I am not in a position to evaluate the advanced manufacturing regime prescribed by the authors, I do agree with their refutations of certain dogmas that continue to be held, and tenaciously so. It’s one of the reasons I am not a libertarian, for while I certainly subscribe to some libertarian principles, I have found them to be so unrelentingly dogmatic on economic issues–trade especially–in the face of such overwhelming evidence that their dogmas are wrong, that I find movement libertarians to be somewhat cultish.

    One thing I don’t agree with is the cause-effect suggested by this statement: As labor economist Richard Freeman put it, “inequality is now at Third World levels.”18 It can be traced to the stagnation in college graduation rates since the mid-1970s: Workforce skill requirements kept growing but educational output, as state support of higher education waned, failed to keep up. I am uncertain just what workforce skills the authors imagine to be the province of US colleges. To me it seems that the unrelenting insistence on the economic necessity of a college diploma is more responsible for the absence of necessary workforce skills than is any stagnation in graduation rates.

    Another thing the authors mention that I think requires a somewhat different emphasis is the social harmony-economic growth correlation. I don’t doubt the correlation but I also don’t think economists properly understand the real cause-effect dynamic. To demonstrate this, a thought experiment: do you think that, if the government simply supplied all of the ex-middle class manufacturing sector workers–those in the fat parts of the hourglass as well as those in the narrow middle–with the same incomes they have lost, the same kinds of tolerance, optimism etc. would be present? I think not. Because the income is a necessary but not sufficient condition for these effects. People want as much as income employment they find personally rewarding, that they feel contributes in some way to advancement/improvement/betterment of society. They want to know they have a social place as producers and not only as consumers. Which is why the haircuts & potato chips comparisons are so absurd. Not that there is anything morally inferior about these occupations; it’s just that people who want to provide haircuts and make potato chips will find their own way to these occupations; but when they are all that is available, they will not satisfy those who would rather be doing something else. Speaking personally, I would rather that social welfare be provided by state (taxpayer) support of manufacturing sector employment than by state redistribution of cash or goods. I would rather pay less in taxes and more for certain products in order to sustain those jobs than pay more in taxes that will simply be redistributed and less in consumer prices.

    Finally, I would love to see an analysis like this one augmented with a discussion of the regulatory impediments to growth in productivity and investment. Occupational licensing requirements, workplace safety rule compliance, environmental law compliance requirements, anti-discrimination/”diversity” requirements, unionization–I would like to know how much (if any) these are contributing to the inability to replace jobs lost with innovation-driven employment.

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