Monday, August 17, 2015

Dean Baker is an Idiot

Paul Krugman is not the only idiot in the field of economics, Dean Baker, who writes for the Center for Economic and Police Research, comes out with some statements which can make one wonder if the field is populated entirely by idiots.

On Friday he wrote a piece refuting Steve Rattner, who was deriding Donald Trump’s economic statements. He agreed that Donald Trump is an idiot, but said that so is Steve Rattner in his derision of Trump. As illustration to make his point, he made a couple of statements that lead me to believe he has been spending too much time with Paul Krugman.

First he tells us that, “productivity in manufacturing is not new, but the large-scale loss of manufacturing jobs is.” He does not mean productivity itself, of course, but rather increases in productivity, but that is a form of shorthand used by many businessmen and economists, so I’ll let that go. If by “new”  he means thirty years ago, then I have no real bone to pick with him so far.

He goes on to say that, “in 1971 we had 17,200,000 jobs in manufacturing. In 1997, we 17,400,000 jobs. This is in spite of the fact that there was enormous productivity growth in manufacturing over this quarter century.”

He’s trying to make a point here and not making it very clearly, if at all, because he thinks he is refuting Rattner’s claim that increases in productivity caused the export of jobs. He is, actually, refuting a claim that Rattner didn’t make, because what Rattner said was that efficiency improvements overseas attracted the exported jobs, and Baker is talking about efficiency gains at home.

Baker also omits to mention that the economy and the scale of manufacturing increased dramatically in those years, while the number of jobs increased by barely more than 10%, suggesting that increases in productivity actually does reduce jobs and making a point which is not particularly pertinent to the discussion and which I seriously doubt he wanted to make.

I have written many times that improved productivity is not a friend of the labor force because by definition it means more output from less labor and therefor fewer jobs, and while I agree with Dean Baker that productivity had nothing to do with the export of manufacturing jobs overseas, this is not the way to make the point.

He then delivers the wisdom that, “The big difference between this decade and the prior twenty-six years was the explosion of the trade deficit as jobs were lost to China and other developing countries.”  Just to be sure that he is not making some irrelevant statement which is merely correlation and does not involve causation, he follows up with, “The fact that we would have more manufacturing jobs without the trade deficit is almost definitional.”

Actually, he has it backward, of course; his statements posit the trade deficit as the cause of jobs exports, while reality is exactly the opposite that. The export of manufacturing jobs caused us to import manufactured goods, and it is those imports which result in the trade deficit. His statement should be reversed, “We would not have the trade deficit if we had more manufacturing jobs,”  because the trade deficit is the result of the export of manufacturing jobs, not the cause of it.

Dean Baker is one of the very few economists who talks about the detrimental effects of the trade deficit on our economy, and I have applauded him for that, but then he comes out with a nonsensical statement to the effect that it caused the export of jobs to overseas. Even when economists have a valid point to make, it seems they are utterly incapable of making it in anything approaching a sane manner.

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