Arnold Kling  

Manufacturing and Reality

Social Security Facts... A Means A, a bit more fleshed ...

Stephen J. Rose gets it right.

The "problem" with manufacturing is mainly productivity growth that permits fewer workers to produce more goods. As workers are freed from having to produce common goods and services, total output expands greatly. For example, in 1947, food and clothing were 43 percent of what we consumed; the comparable figure in 2007 was 16 percent. The productive gains were distributed into other industries, notably health care, education, business services and recreation. This is a win for the consumer and for the economy.

Recall the chart in Solving the long-term jobs problem that shows the recent rise in manufacturing output while employment in that sector remained flat.

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COMMENTS (4 to date)
Chris T writes:

Unfortunately, healthcare and education are also the two sectors that have the least incentive to increase productivity.

Nathan Smith writes:

So the real problem with manufacturing is that even if its productivity gains continue, since it comprises a smaller part of our budgets, that does the economy as a whole less good.

tobe writes:

I feel that it is good for the economy because of the gains that are distributed to other sectors. the only problem is that some sectors are more innovative than others.

Em writes:

I would have to disagree with the statement that manufacturing is a win for both the consumer and the economy. If it was such victory for the economy, both the healthcare and education system would not suffer from massive monetary cuts; forcing consumers to shell out more money for basic necessities. Also, we would not be living in a deficit economy. It is hard to believe that the benefits go to the consumer and the economy. I do not doubt that manufacturing is profitable, the numbers prove it, but where do all the profits go? It is a hard sell to say that they go to education and healthcare.

Perhaps the productive gains from manufacturing cannot cover the demands in the healthcare and education sectors. If this is the case, the consumer still suffers, which in turn causes the economy to suffer as well.

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