Is our emphasis on "manufacturing" as industrial policy in 2012 really folly and based on political pandering? Does it miss the point regarding the changing nature of the modern economy? Yes, I think so. Find out why here...

Is our emphasis on "manufacturing" as industrial policy in 2012 really folly and based on political pandering? Does it miss the point regarding the changing nature of the modern economy?

I think in many ways we are chasing ghosts from the past and not looking to the future. 

The value in manufacturing increasingly takes place in the intellect and creative crevices of the mind, not in the calluses on the hands or sweat of the brow of the laborer. 

Here is an excerpt from a commentary on the topic from The Financial Times (the whole article is below).

When you look at the value chain of manufactured goods we consume today, you quickly appreciate how small a proportion of the value of output is represented by the processes of manufacturing and assembly. Most of what you pay reflects the style of the suit, the design of the iPhone, the precision of the assembly of the aircraft engine, the painstaking pharmaceutical research, the quality assurance that tells you products really are what they claim to be.

Physical labour incorporated in manufactured goods is a cheap commodity in a globalised world. But the skills and capabilities that turn that labour into products of extraordinary complexity and sophistication are not. The iPhone is a manufactured product, but its value to the user is as a crystallisation of services.

Many of those who talk about the central economic importance of manufactured goods do so from an understandable concern for employment and the trade balance. Where will the jobs come from in a service-based economy, manufacturing fetishists ask? From doing here the things that cannot be done better elsewhere, either because of the particularity of the skills they require, or because these activities can only be performed close to home. Manufacturing was once a principal source of low-skilled employment but this can no longer be true in advanced economies.

Video: The Miracle of the Pencil...And everything else...

In posting just before this one I extolled the virtues of the Capitalism and Creative Destruction (by implication) through a high tech device---a Smartphone.  Now, I would like to do the same with a
very low tech device---a Pencil!

Here is a nice video (about 6 minutes long) illustrating the Miracle of the Pencil and how it comes to the marketplace.  Innumerable resources and activities have to be co-ordinated to create such a simple thing at such a low price.  Look at a pencil, then look at EVERYTHING else around you.  Think about the effort it took to get those things within your reach. 

I dont think the word miracle is that far-fetched...

HT: Cafe Hayek and the links from there...

Look at this photo then look at your Smartphone. I see the most environmentally friendly device EVER produced. What do you see?

If you have a Smart Phone take it out. Look at all the things it came pre-loaded to do and all the apps you have added to it. 

Now, think of all the separate "gadgets" you either have or used to have that now your pocket-sized phone can do anywhere you go. This photo below really should be much bigger and have many, many more items in it.

I see a device that saves an incalcuable amount of societal natural resources. Start adding it up! Impossible, isn't it? 

Why can't we give a shout out now and then to an economic system, though it has its faults, that produces goods and services that make our lives richer, better and environmentally better off? 

Just askin'...

Source: Carpe Diem

Eye-Opening video (very short) on Brazils effort to curb destruction of the Amazon Rainforest in order to grow food. Will make you think about your next bite of food!

Balancing the need to grow food for a world that is growing richer and the need to be mindful of the effect on the environment is no easy task.

Here is a recently produced video of Brazil's effort to curb "rogue" farming and illegal destruction of the Amazon Rain-forest.

Eye-opening and makes you think! Worth 4 minutes of your time if you are interested in the topic.

Nice Infographic showing the Income and Wealth of the Characters in "Twilight". Very Walmart family-like...

I am not a fan of this movie series.  Don't hate me for it.

This is a nice example and illustration of people who are "income poor" but asset rich and are considered "wealthy".  We tax income at much higher rates but don't tax physical or financial assets until they are sold (for the most part, anyway, at the FEDERAL level). 

I guess you could say the characters from this movie are kinda like the children of Sam Walton of Wal-Mart fame.  Asset rich, income "poor".   Ok, no jokes about them being retail Vampires.  :)

Source: Business Insider

Taking stock of my own ignorance---a 24/7 task...

"I always try to take stock of my own ignorance in certain subjects before I label someone else as such. That seems only fair and I usually find, upon genuine reflection, I don't really know as much as I thought I did..."

Not an original thought. I have seen variations of it from a variety of philosophers. It is prompted by various postings I see in the blogosphere and on my Facebook newsfeed.

I try to post things (here and on my FB page) that either informs; points out something different to; or makes laugh, anyone who wants to read it.  For me it is fun, stimulating, educational, professional development, a hobby, blah, blah, blah...All good stuff!

Many others post things that mock, demean or other wise plays on the "ignorance" of others, and the comments flow in agreement and then some. Congratulatons: you win the game of intellectual superiorty!  I hope you feel better in your cozy blanket of smugness.  I say you are lazy and ask if you were really as smart as you think (know) you are, why not just forgo the "low-hanging fruit" of judgement and let it pass by? 

I guess (ok, er, I know) I have a thin skin. That stuff bothers me, especially when it comes from people I know and respect OR from people  I don't know but I read and respect.

I will just let John Coffey speak for me.  He says it best and definitively. 

Teachers/Students---Here is a link to a TERRIFIC explanation of the the Pros and Cons of a Carbon Tax OR a Cap and Trade system to reduce Carbon Emissions.

There are two primary ways under consideration for reducing carbon emissions that contribute to climate change---A straight carbon tax on individual consumption of fossil fuels (i.e. gasoline) at the point of sale OR a "cap and trade" system  that affects producers of goods and their use of carbon based fuels/energy/inputs.  Both are designed to make emitting carbon more expensive, either directly for the consumer or the producer. Ultimately, the consumer bears the brunt of either policy in higher prices.

Here (Economics in Plain English) is a terrific and pretty definitive lesson/explanation (complete with graphs!) on the pros and cons of implementing a carbon tax.  It contains MANY, MANY Microeconomics topics and concepts that are covered in class and on the AP Microeconomics test.  If you are interested in the topic, this is a must see!

Economics in Plain English also has a most excellent explanation of the Cap and Trade system HERE.

Read both, ponder them, then decide which would be more effective.

I post this graph just to get under your skin---Graph of EXPORTS of Gasoline to "Fer-in-ners" It may be a domestically produced good but it is priced and sold in international markets.

Exports of Gasoline to international destinations in an annual graph and a monthly graph (for perspective). Record levels of exports.  Good thing, bad thing, or just a thing?



Source: US Energy Information Agency

 

 

Here is a twist---The President lost most of the States that had the HIGHEST new job creation in the last 3 years and won States that had the least. Must see set of graphs/maps that tell an interesting story in politics

President Obama ran a successful re-election campaign on the basis of an improving economy and the creation of 2.6 to 3 million new jobs.  If you look at WHERE most of the those jobs were created you will find politics makes strange bedfellows.

A large majority of those jobs were created in States that the President LOST in the Electoral College and a minority of the jobs created were in States that he won.  See the explanation and graphs below.  It is an interesting lesson in politics and interest groups. 

Unions are a big supporter of the President and vice versa.  However, ironically, the ability to boast about so many new jobs created came in States that are not Union NOR electorally friendly to the President.

The first graph below shows two things.

1. The two bars on the left show the percent of the population that lives in Right to Work States ("R-T-W") and the percent that live in "Forced Union" States. (22 States are classified as R-T-W States and 28 as Forced Union).  61.2% of the US population live in those 28 Forced Union States and 38.8% of the population live in R-T-W States.

2. The two bars on the right show the percent of the overall "jobs created" (appox 2.6 million) from 2009-2012 in the R-T-W States vs the Forced Union States.

So, in the R-T-W States that have just 39% of the US population, 72% of the 2.6 million jobs created in the last 3 years came from those States.  28% of those 2.6 million jobs came from Union States.

Source: Carpe Diem

This next graph shows on a map the R-T-W States (in Red) and the Forced Union States (in Blue)

This last map shows the latest 2012 Electoral College map.  States in blue are states that President Obama won and the ones in red are the ones that went for Gov Romney. 

See any  resemblence?  Yeah, me too...

Nice graph showing US energy consumption by fuel source projected through 2040. We have to figure out a way to "drill, baby, drill" for alternatives...

A reminder to "get real" on energy policy. We must develop alternatives but we have so far to go to get off the "dirty stuff" it is not even funny.

This is a projection out to 2040.  Maybe a major breakthrough will occur in alternatives, but it seems a balanced plan is in order. 

I am pretty sure this "Cavity Search" is not covered under Obamacare...

Good Lord! 33% or respondents are willing to accept a "Cavity Search" in order to fly.

Maybe they think they are actually getting some kind of Dental exam under Obamacare...

Poll: Nearly One Third Of Americans Would Accept ‘TSA Body Cavity Search’ in Order to Fly

A new survey commissioned by Infowars and conducted by Harris Interactive has found that almost one third of American adults would accept a “TSA body cavity search” in order to fly, with a majority of Americans also feeling a law that would make disobeying a TSA agent in any public place illegal is reasonable.

Meanwhile, back in the Economy----Two Graphs that show why the economy may be in an unemployment funk for an extended period of time. Not sure the political system can fix what you see here...

This graph from Carpe Diem shows 2 things. Real GDP (Blue Line and use the scale on the Left Axis) and Employment, those WITH jobs, (Red Lind and use scale on the Right Axis).

At the tail-end, the Real GDP line shows that Real GDP is now 2.2% HIGHER than it was before the recession. So, while we have not made up for lost time, we are back to a little more than even.

Notice the two lines before the recession (gray area). Real GDP and employment track each other pretty closely.  In AP Macroeconomics one of stock phrases we teach is the direct relationship between the production of goods and services and employment----produce more stuff and you need more people to produce it---businesses hire people.

However, look at what happened post-recession.  Real GDP recovers but at a much quicker rate than employment. The two lines separate rather dramatically. 

Bottomline: Businesses are producing MORE goods and services BUT with approx 3.8 million FEWER workers compared to just before the recession.  This succinctly illustrates what a "jobless recovery" looks like. 

Commentary from Carpe Diem (highlights are mine)--

1. Measured by real output (GDP), the U.S. economy has made a complete recovery from the 2007-2009 recession now that real output in Q3 of this year at $13.6 trillion (2005 dollars) was 2.2% (and $290 billion) higher than the $13.32 trillion of real GDP in Q4 2007 when the recession started (blue line in chart).

2. While real output has completely recovered to 2.2% above its pre-recession levels, the current U.S. employment level of 142.4 million jobs in Q3 is still 3.84 million jobs (and 2.62%) below the 2007 peak of 146.27 million jobs (red line in chart), and that translates into the current “jobless recovery.”

3. The recovery of real output to an historically high level that is 2.2% above pre-recession levels with 2.6% fewer employees has also translated into record-level after-tax corporate profits, which are now 30% above pre-recession levels.

4. The recovery of both output and profits to above 2007 levels with 3.84 million fewer workers could explain the sluggish job growth that will probably continue for several more years. If companies can produce more output now than in 2007 with fewer workers and earn record profits, where’s the incentive to hire more workers?

The Great Recession stimulated huge productivity and efficiency gains as companies shed marginal workers and learned how to do “more with less (fewer workers).” The surge in productivity since the recession started has been significant (see chart below of real GDP per worker) and may have long-lasting effects, e.g. an extended period of time with a jobless rate above 7%. With real GDP, real GDP per worker, and corporate profits at all-time highs, we can expect sluggish job growth to continue, but it’s unlikely that we’re on the front edge of a recession right now.

Excellent Infographic that breaksdown what a Home Mortgage is. This the biggest purchase you will make in your lifetime---PLEASE know the in's and out's to save you MONEY and ANGST.

Going to buy a home soon? A very nice infographic for students and teachers alike that breaksdown what a "mortgage" is. It is the BIGGEST purchase you will make in your lifetime so the more information you have the better. I KNOW THAT from experience.

Brought to you by: HomeInsurance.org

ObamaCare casualties as a result, ironically, of Healthcare reform. Low wage workers will see their hours cut and limited full-time work possibilities in the future. This can't be what the law intended, right?

 

Yup.  Wrote about this last week (HERE)  in regards to an IRS ruling outling businesses responsibility in recording hours worked by employess to comply with the provisions of "Obama-Care".

Beware of unintended (not to be confused with unforseen) consequences of major legislation passed in a relative rush with much discussion. 

The devil is ALWAYS in the detail of big legislation and this one is going to harm low wage/entry level workers and they are not even going to know why. There are always costs to "greater good" policies. It is just necessary to acknowledge them.

From The Wall Street Journal

Some low-wage employers are moving toward hiring part-time workers instead of full-time ones to mitigate the health-care overhaul's requirement that large companies provide health insurance for full-time workers or pay a fee.
Several restaurants, hotels and retailers have started or are preparing to limit schedules of hourly workers to below 30 hours a week. That is the threshold at which large employers in 2014 would have to offer workers a minimum level of insurance or pay a penalty starting at $2,000 for each worker.

Sweden--To be Socialist, or not to be Socialist, It is a question of cultural mores and attitude/trust towards govt. Could we use a little (a lot?) of it ourselves???

Here is an interesting (and easy to read) paper on the reasons Sweden, thought by most to be a "Socialist" country, is actually (perhaps) more market-orientated than some countries thought to be "Free Market" (not going to mention any names).

My take away from this: Cultural mores in regards to the use/abuse of social programs and trust towards government. Both of which we lack in the un-named country suggested above.
(HT: Newmarks Door)

The whole thing is worth a read, but here is some of the conclusion I excerpted:

Scandinavian societies have developed a unique culture with a strong work ethic and strong ethical

attitudes regarding the claiming of welfare benefits. There are also high levels of trust and social

cohesion. This social capital, which was built up before the advent of the modern welfare state, has

played an important role in the success of Scandinavian countries.

For many decades, this pre-existing culture, allowed countries such as Sweden to have extensive

welfare systems without the social difficulties, rise in worklessness and other effects that many

would have predicted. Scandinavian countries have also reaped the rewards of relatively free market

policies in some areas of economic life to reach impressive levels of wealth creation.

To characterise the Swedish model either as a social democratic utopia or a failed socialist

experiment is a mistake. Sweden is a successful country in terms of having a low poverty rate

and long life expectancy. However, these factors have much to do with non-government facets of

Swedish society that pre-existed the welfare state.