From: popec@unkaphaed.gbdata.com (William C. Barwell)
Newsgroups: alt.fan.rush-limbaugh
Subject: Re: More thoughts on economic illiteracy (d)
Keywords: economics, illiteracy, Clinton, Perot, NAFTA 
Date: Sun, 20 Dec 92 19:12:22 GMT
Organization: Unka Phaed's UUCP Thingy, Houston, TX

depken@rigel.econ.uga.edu (Craig Depken) writes:

> More thoughts...no flames please...see part (a) for disclaimers
> 
> craig.
> 
> 
> d) NAFTA is bad for the economy (Bill Clinton/Ross Perot):
> 
> 	They both displayed such thinking in the second debate. The
> 	fact is that there is no profit maximizing firm that will
> 	move out of this country if it does not pay. To say that firms
> 	are being paid to go out of this country is simply not the entire
> 	truth. The fact is that firms are paid a certain amount of money
> 	by the Federal Government for retraining the labor that is being
> 	displaced by the move. The firm must match these funds and see
> 	that the workers are retrained. Now, why would we want to do 
> 	that. Simple economics, yet no one understands this.
> 
> 	The fact is that if a firm is profit maximizing, which is what
> 	we want all private corporations and small businesses to be,
> 	else we would have socialism, firms must be able to cut costs
> 	if it is profitable for them. If a person is doing a job that
> 	he gets paid $8.00 an hour for, and someone else is willing
> 	to do that same job for $1.00 an hour, then the job is only
> 	worth one dollar an hour.
> 
> 	Wages in a labor force are not like an auction, it is exactly
> 	the opposite. The reservation wage (the wage at which the
> 	labor decides to work, anything less than that they will not
> 	work) can be higher in this country, but that is not the fault
> 	of the firm. Since the firm supposedly has share holders, and
> 	they receive dividends from the firm's profits, if the firm
> 	can find some other labor with a lower reservation wage at 
> 	which they are willing to work, then there is no reason to
> 	deny the firm to do that. 
> 
> 	The problem with our system at the moment, is that organized
> 	labor, amidst doing a lot of good, has driven up the reservation
> 	wage that labor holds out for. The problem is that the job simply
> 	may not be worth the higher reservation wage, and thus it is 
> 	profitable to go elsewhere. This can come from two different
> 	sources: The labor in this country may be over-skilled for the
> 	job that it is doing, and thus demands higher wages, when someone
> 	with less education/training can do the job just as well. Then
> 	the firm moving is not such a bad thing. In fact it STIMULATES
> 	economic growth in the fact that the production possibilities
> 	have been increased due to the fact that the overskilled worker
> 	is no longer wasting his time and production capabilities at the
> 	(truly) low wage job. 
> 
> 	Therefore, the governemnt could do most good by subsidizing
> 	in some form (again not too specific here) the development of
> 	higher skilled production capabilities. This subsidy would move
> 	us to a higher production possibility set (see below), and thus
> 	the firm's move is better for the overall economy.
> 
> 	Note that this is a general result. It says nothing about what
> 	the labor is supposed to do between jobs, but then that is what
> 	unemployment insurance was meant for, right?
> 
>    
> 	So, originally, let's say we have only two goods that the U.S.
> 	makes...cars and butter (overly simplified for the economic
> 	illiterate). Now, the u.s. can produce anywhere along the 
> 	PPFo, which describes all possible combinations of cars and
> 	butter that we can produce.
> 
> 	Now, if we increase our production technology, the value of the
> 	product of labor (i.e. put them in a job that is more valuable
>  	than the 1.00 an hour job they were in before), then our 
> 	production possibility frontier will move out and we can 
> 	produce MORE of BOTH cars and butter. This idea is easily 
> 	generalized to the huge economy of the u.s. and we see that
> 	NAFTA, if it moves low value jobs out of the country may 
> 	actually be an improvement on the economy of the u.s.
> 
> 	|
> cars Ci	|
> 	|\
> 	| \
> 	|  \
> 	|   \
>      Co	|    \
> 	|\    \
> 	| \    \  PPFi
> 	|  \    \
> 	|   \    \ 
> 	|    \    \
> 	|     \    \
> 	|      \ PPFo
> 	|       \    \
> 	|-------------------------------
>                 Bo    Bi	
> 
> 				butter
> 
> 
> Note that Bi > Bo AND Ci > Co.
> 
> 
> 	So NAFTA may not be such a bad thing after all. They only want
> 	to make it sound bad because it is easier than trying to explain
> 	economic theory to people.
> 
> 	Another way to combat jobs going elsewhere is to raise the 
> 	reservation wage of the other labor forces that we are supposedly
> 	going to loose jobs to. Methods would be organizing labor,
> 	restructuring tax regulations so as to make the costs of moving
> 	to another labor source prohibitive. No one should think that
> 	firms making more money is bad, because that money is injected
> 	into the economy through the shareholders, however it is: e.g
> 	consumer goods, capital investment, government bonds, whatever,
> 	it is all positive in the economy.
> 
> 	Guaranteed that if the costs of moving are the same as staying
> 	then the firms will stay. REmember that firms are owned by
> 	shareholders whom we can assume are Americans for the most
> 	part. So, firms will show a bit of national loyalty, as well
> 	as logistic simplicity, by staying here.
> 
> 	Bush passed it, now Congress has to also. Chances are that it
> 	will not go through as it is intended to, but we will see on
> 	that one. It is most likely going to be made worse, i.e. it
> 	will limit our possible gains from this. Our economy has the
> 	most to gain from the NAFTA because we have the highest
> 	productive workforce in the world and they are being wasted
> 	on putting shirts together. There is nothing WRONG with putting
> 	shirts together, it is very valuable in its own right, but if
> 	people elsewhere will do it for cheaper, then let them. Our
> 	labor force is better put to use building computers, steel,
> 	prefab concrete, whatever, that is more valuable.
> 
> 
> 	Merry X-Mas!!
> 
> More to follow.....
> 
> 


Not right.   Clinton merely declined to accept NAFTA as it stood because 
he did not have any true idea what was exactly in NAFTA.  It was a pig in 
the poke at the time.  Furtther more, when this became an issue in the 
campaign, there was a lot of cheap shots at Clinton from the Bush camp 
even tho' they knew he had not had a chance to see what was REALLY in the 
agreement.   Such as truculent claims he was 'wafflimg' on NAFTA since 
Bill declined to sign on to this pig in a poke.  He did not get the 
agreement Bush pklanned to sign until well into September.  All 2000 
pages of it.  And then Clinton's staff found that not all of the facts, 
estimates, statistics and information necassary to understanding NAFTA 
were in this report.  They had been editted out, and the Bush 
administration point blank refused to give them out, especially to 
Clinton.   Would you under the circumstances have signed on 
enthusiastically to this particular agreement.  Thought not!
Give Clinton his due.  He was merely cautious on NAFTA.  As I would want 
ANY presidential candidate or president for that matter to be in such 
cases.  Anything elde would have been worrisome.  You don't want someone 
blindly being for such a potentially far reaching proposal without 
knowing what is in it, or without taking time to reflect carefully on it 
do you?

Your opening remark on Clinton just isn't quite correct. Clinton handled 
this correctly.


Pope Charles  SubGenius Pope of houston    Slack!

--
popec@unkaphaed.gbdata.com (William C. Barwell)
Unka Phaed's UUCP Thingy, Houston, TX, (713) 943-2728
After December 31, (713) 481-3763
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Newsgroups: alt.fan.rush-limbaugh