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Comparative advantage for journalists - Open Knowledge — LiveJournal

Jul. 30th, 2003

02:44 am - Comparative advantage for journalists

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Peter Gallagher explains how to explain comparative advantage so that a journalist understands it.


I usually use...the story about the busy lawyer and her secretary. The $200/hour lawyer types faster and more accurately than her $25/hour secretary. When the pressure is on, she sometimes wonders if she should persist with her secretary or do the work herself.

In all my work with students, business people and even journalists in Australia and in my work for the UN in two dozen countries, I've never met anyone who didn't get the point of that story.

...The problem, I find, is that many people assume the idea doesn't scale. They are afraid to apply the same analysis to global exchange.

If you say: "Now, suppose we are talking about a deal between a rich country and a poor country; do you think that the same rule applies?"... they frequently get cold feet. Suddenly, imports become a threat and (bizzarely) exports become the purpose of trade.

Comments:

From:joe_tofu
Date:July 30th, 2003 12:17 am (UTC)

i don't get it

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I don't get the point of that story. Maybe its an australian thing. What "same rule" applies? Which countries get cold feet and want exports to become the purpose of trade?
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From:someirishdude
Date:July 30th, 2003 06:06 am (UTC)

You have some very interesting posts indeed

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I don't chime in nearly enough, but they're very interesting.

I think I get the point of Gallagher's example, but I also quibble with it a bit.

First, the point is that it's only efficient for the lawyer to do his/her own typing if he/she is 8 times faster than the secretary. If he/she is only twice as fast, it may SEEM like a good idea to to the typing, but it's still a waste of money.

The problem though with simple ideas is that they are...too simple sometimes.

The U.S., as an example, is an innovator. We spend years of R&D to develop products, technology, etc.... This is because we have one of the most educated work forces in the world. Then, once we start producing the better mousetrap, we make the mistake of trying to sell it at the lowest price possible. Eventually, we document the heck out of it to the point that the uneducated and the unskilled can make it cheaper than the orgininating country.

All that work out the window.

Tech jobs are going that way. U.S. and European engineers invented the net and subsequent computer technology. This created a tech boom and tech jobs. Underdeveloped countries had no part in it. But now, 10-25 percent of the support jobs for these companies are going to India, Russia, Ireland etc....while U.S. workers are on the sidelines being laid off.

I'd compare it to Lewis and Clark finding the NW passage. They start charging to take people on the trip. But after a few times, some of the people they take on the trip start mapping the journey. Eventually, they decide to offer the same trip for 1/10th of the price. Lewis and Clark are left, as explorers, to discover something else, or they're out of work.

The simple example, is very simple. Too simple. Does the secretary get any social security? Is she protected by OSHA? If she is hurt on the job, does she get workmen's compensation? Disability? What if she is sexually harrassed or groped? Is there any recourse?

I'm all for imports when other countries do it better. I have more of a problem when they can only do it cheaper.

Of course, I'm probably being quite simple myself. Anyway, good food for thought.
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From:mary919
Date:July 30th, 2003 08:09 am (UTC)

Re: You have some very interesting posts indeed

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Happy Birthday tomorrow! I just had to say that today because I don't know you and may forget you by tomorrow. My birthday is Saturday and you know-- we have to stick together.

And by the way... John Cusack asked me to tell you... don't sell anything, buy anything, or process anything as a career. Don't sell anything bought or processed, or buy anything sold or processed, or process anything sold, bought, or processed, or repair anything sold, bought, or processed. You know, as a career, don't do that.
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From:someirishdude
Date:July 30th, 2003 08:13 am (UTC)

Re: You have some very interesting posts indeed

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Haha!

Thank you for the birthday wishes. And well done on the Say Anything reference. And it was even germane to this conversation!

Nice to meet you.
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From:mary919
Date:July 30th, 2003 07:20 am (UTC)
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Hmmm... I thought the point is that TYPING is only worth $25 an hour... you don't pay $200 an hour for typing.

But I can't make transition to global exchange.... yet... still thinking...
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From:mary919
Date:July 30th, 2003 07:58 am (UTC)
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Okay Okay... I went and read the original article.

The lawyer is the United States paying a poorer country to do her typing for her.

So the point is that we shouldn't feel bad about paying the going price in a poor country for goods we'd have to pay a lot more for here, because the lawyer's time is worth more than the secretary's.

And I agree with that.

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From:joe_tofu
Date:July 30th, 2003 09:50 am (UTC)

so...

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so... this is an argument for why Nike et al should pay their third world factory workers the same amount that they would have to pay for american factory workers? i thought i smelled a communist fish.

what if there was another secretary sitting on the street corner, just as qualified as the current secretary, with a sign "will work for $10/hour"? then what does the smart lawyer do?
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From:mary919
Date:July 30th, 2003 10:04 am (UTC)

Re: so...

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Actually I think it's an argument AGAINST paying the overseas workers what we'd pay the American workers... in fact doing so makes the overseas workers non-competitive because it costs a lot more to manage from a remote location, ship the finished goods here, etc. And so we'd hire American workers here, save money on the other expenses, and the overseas workers would be out of a job.

And that $10 typist... why hasn't she typed herself a nice resume instead of that clunky sign... if she's so qualified, hmmm??
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From:frostbyte
Date:July 30th, 2003 07:24 am (UTC)
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ummm... where do I apply for that secretarial job? I could use a raise like that from my current salary as an IT Professional.

And I can type and file like mad!
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From:chutzpahgirl
Date:July 30th, 2003 11:34 am (UTC)
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So a journalist can understand it.
What does that mean? You best not be condescending to journalists! ;)
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From:crasch
Date:July 30th, 2003 12:10 pm (UTC)
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Perish the thought. Some of my best friends are journalists!

Journalists tend to think in terms of stories, and certainly their readers do. There are lot's of stories about greedy companies relocating businesses overseas thereby causing decent, hardworking Americans to lose their jobs. The lawyer/secretary story is intended to get across why, despite the short term pain, it's better for the U.S. in the long run to export those jobs that can be better done elsewhere.
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