*Specialization and Trade: A Re-introduction to Economics*

That is the new Arnold Kling book, I very much liked the earlier draft I read.  Think of it as Fischer Black macro for 2016.  Here is Arnold:

The main point of the book is that you need to keep in mind the overwhelming complexity of specialization in a modern economy. Non-economists miss it when they use simple intuition. And academic economists tend to miss it when they build their “models,” particularly of the GDP factory.

Any reader of this blog will be able to follow the book. But what I really want is for everyone who is about to start graduate school in economics to read this book. I want to say to such students, “Don’t get too suckered in by what your professors are going to be showing you about how to do economics. Don’t let them lead you to forget about specialization and trade.”

Comments

I wonder who Edgar is.

So do I. I clicked on his Amazon profile and he seems to like everything he buys!

A man know his preferences. Taleb would be proud.

My guess is many Amazon posters consider it below their dignity to write negative reviews. I, for one, am not about to admit I have wasted multiple hours of my life reading, without compensation, a book that I do not consider to be a five star book, fully enough to write a review about it. Fans of specific authors or genres might have the motive of warning fellow fans off of the second-rate, of course; but the sort of person who writes lots of reviews on Amazon probably considers himself, rightly or wrongly, to have devoted the best intellectual hours of his or her interesting (and they are often right about that) life to the pursuit of the best of the best (the Black Book of Shakespeare, I think Rosenbaum called it - the one play, never put down on paper, the play better written than the Lears and the Hamlets and Rosalindiades, the one play which actually showed what Shakespeare - correctly, for once - thought was really worth saying); and that sort of person looks on the 4 and 3 star reviewers as the Mother Theresas, the unapproachably and inimitably kind and considerate, but hagiographically drab, participants of the reviewing world.

Just another average reader without any claim to knowledge or expertise. I've reviewed less than 1 percent of my kindle purchases. If I Don't have anything good to say, I Don't review. Tend to believe it's as likely my failure as a reader as it is the author's and Don't fave time to worry about it much. I usually only review stuff whose status I hope increases or that I would have appreciated a tip from a friend about.

Of course, the model developed back when developing countries knew their place, when developing countries supplied raw materials and developed countries produced finished goods using those raw materials. The first phase of globalization blew up the model, as firms in developed countries, forsaking their own labor, shifted production to developing countries to take advantage of lower costs, resulting in a huge leap in inequality (not across countries but within countries, especially in developing countries like China), a savings glut, and a big black hole in aggregate demand. That was the first phase of globalization. What will happen in the second phase of globalization, as firms in developing countries design, manufacture, and sell their own goods for their own benefit to compete with goods sold by firms in the developed countries. Don't get suckered in by tales of magic dust.

My (uneducated) guess is that it's back to the future for specialization and trade in this new phase of globalization, as developing countries and developed countries become almost indistinguishable - except for the relatively high level of inequality in the developing countries (as compared to the level of inequality in developed countries). Cowen will still have friends in Singapore.

I have sympathies for Kling, but he's too stubborn to get up to speed on the huge and rapidly growing literature on heterogeneity in macroeconomics. This literature has big theoretical and empirical branches, and it addresses many of his complaints. Like so many other critics of macro, he is criticizing an early 1980s version of the field that has been left in the dust by more recent approaches.

Like so many other critics of macro, he is criticizing an early 1980s version of the field that has been left in the dust by more recent approaches.

Uhhh...citations?

Request for citations seconded.

Read the intro; sounds more like Hayek macro for 2016. Is Hayek a dirty word in economics circles these days? What's going on?

This is a good book, from the Amazon "Look Inside" preview. Coming from Kling, a possible Austrian, and the Cato Institute, a possible libertarian think tank, the message is possibly a watered down strawman as Ryan implies upstream. But, if it indirectly addresses the Cambridge Capital Controversy, and, if it disses' monetarism (hence TC's "Fisher Black" remark), it's worth the $3.99 $3.96!

But specialization does not mean mutual advantage.

In trade, China specializes in paying workers to build new capital to make paying workers to make stuff more productively and then shipping stuff to the US where the speciality is selling old stuff to pay for stuff produced by labor.

But when it comes to Saudi Arabia, very old stuff is plundered and shipped to the US using very little labor and in trade, old stuff is given to the Saudis so they take rents from US workers who burn the old Saudi stuff., paid for by labor if they are lucky, or by government debt. By burning very old stuff, consuming old stuff, and borrowing, the US specializes in idling workers.

No way will the US specialize in being the leader in harvesting free energy because that requires paying too many workers, and paying workers costs too much. The US speciality is not paying US workers, but instead finding ways to get workers elsewhere to ship stuff to the US in exchange for old stuff or promises of workers producing stuff in the future, but then declaring bankruptcy.

Ps, reducing the supply of old stuff creates wealth by scarcity bidding up the price of old stuff - never pay workers to build new stuff because the destroys wealth by driving down prices on old stuff. And never pillage and plunder very old stuff too fast because that drives out the monopoly profits on very old stuff sold for burning.

But don't plunder too slow or Elon Musk will be able to pay workers and compete with burning very old stuff, and that is why immigrants need to be kept out - the US specializes in burning old stuff to put workers out of work.

And yet U.S. GDP is one of the highest in the world, as is manufacturing output

Thanks for the heads up. I just bought it and I'll read it tonight.

Comments for this post are closed