GDP and Engineering Layoffs

Wow, when the chief economist at Businessweek is capable of writing a sentence like "if U.S.-based companies are doing their research and product development overseas and their production there as well, it's tough to see how ordinary workers in the U.S. will gain," it's easy to see why this magazine was recently sold off for almost nothing, around $5 million, or around $15k per employee as one article estimated. The ordinary worker gains because they can buy goods for cheaper, it's that simple. It makes perfect sense for companies to cut back on R&D right now as they're struggling simply to stay profitable. Why shouldn't educated workers lose their jobs when they fail to deliver? Using the tiny amount of VC money as a proxy for tech or intellectual spending is just silly. As for training, the unemployed can pay for it themselves, it doesn't necessarily cost much and none of them are starving on the streets. Besides, what alternative do they have, simply keep applying for the same type of job they got fired from in the hopes that something will finally materialize? As for measuring GDP statistics properly, you proceed from the fallacy that the govt needs highly aggregated statistics to properly manage the economy, when the truth is that such aggregate statistics have always been highly misleading and a big part of the reason why such govt action always fails miserably, adding much more waste rather than helping. It's clear such half-baked analysis- the recent cover story on the "lost generation" of young professionals was similiarly ridiculous- is why Bloomberg is about to gut this magazine when they take over in a couple months.

Ajay,
when your basic premise is that government ought not to manage the economy, why use all those other words? :)

To Ajay,

Well, any country outsourcing its R&D overseas will lose edge in the long run and will face disastrous consequences. It starts with people not going for science or engineering degrees, schools losing income and support and talents migrating somewhere else. so in the long run, you will not have people in US afford buying these cheap products from China and India.

CompEng: He must point out at least 3 times that somebody is a moron and that some position is silly or ridiculous, without just saying it 3 times in a row.

CompEng, I made several points about several disparate issues brought up in Mike's article. If you only care about the normative issue of govt management, feel free to skim the rest, some of us think about other issues too.

Joe, how many people in the US work in R&D or science and engineering? I suggest you actually look at the numbers before making such silly claims. The US specialized in manufacturing and R&D but now has to diversify, because the rest of the world is catching up in those sectors. Rather than assuming it's the natural state of the US to always do more in those sectors, you'd be better served finding what services would best capture the talents of those in the US. I suggest that it's unlikely to be R&D, more likely the often more important issues of technology commercialization and finance.

Cm, funny how you see the word moron where it was never used. ;) Perhaps you'd prefer if I repeated myself 3 times but I find that most people prefer 3 times the evidence of stupidity, rather than the same evidence repeated 3 times. :)

To Ajay,

Yeah, then where does the money to buy the cheaper goods come from without jobs? Can't believe how you think.

To Ajay,
Your fellow commenters are failing the Turing test.

I agree with Business Week regarding the R&D going over sees and American workers do not benefit. Certainly, not in the long term. Who cares if goods are cheaper when the American family has no income because jobs are not in the U.S? So to you Michael and Peter, you just don't get it.

“It makes perfect sense for companies to cut back on R&D right now as they're struggling simply to stay profitable.”

But this might even make a verse situation for the company. The reason is that if the company survive the crisis then it won’t be competitive with those companies who didn’t cut down on R&D.

Ajay,

Mostly people who aren't Engineers or in R&D don't realize how much companies have invested in their employees. When cos layoff an engineer or scientist they are writing off a large investment they made in that person. When and if there is a recovery, these same cos will have to reinvest heavily in hiring and training new employees (even ones who have years of experience at other cos) and it could take a year or three before these new hires produce any meaningful revenues. Shareholders will get some relief now at the expense of their long term returns. But maybe I'm being naive in assuming anybody cares about the longterm?

Could anyone tell me where to find the percentage of the GDP that the countries invest on Engineering?
Thanks a lot.

I don't think Ajay has any friends in engineering.

Ajay,

Most of your comments are in fact completely derivative from a fully pro-market, anarchist libertarian stance. The only one I count that isn't (leaving out asides such as the price of BusinessWeek's sale) is "Using the tiny amount of VC money as a proxy for tech or intellectual spending is just silly". Not that I mind. Spend your time as you wish.

It's just that sometimes I wonder what motivates you to write and research as much as you do when you seem to have your mind pretty well made up about how things work.

Hal,

I'm impressed. You apparently know the name Alan Turing.

Khurt, considering I'm an engineer and practically everyone I know is an engineer or programmer, you would be wrong. However, unlike most narrow-minded people, I'm not interested in furthering my particular guild at the expense of everybody else, I'm interested in having better products for all consumers.

CompEng, if I use the best philosophy out there, anarcho-capitalism, to help me figure out the world, I don't see what your problem is or why you feel the need to even bring it up, when you have no point to make beyond that. As for toeing that party line, I don't much care whether you notice or know the points where I disagree with that small faction. What matters is that they're mostly right, far more than any other group, and if you disagree with them much more than I do, you're probably mostly wrong. :) As for why I write about this stuff, it should be obvious, to get these ideas out there, plus it helps to converse about this stuff to help form my opinion.

Ajay,

I guess that's a fair response. It did seem that you could have made your point more elegantly with fewer statements, although that would have been making more demands of your audience.

If I was an atheist, didn't care about anyone else too much, and was completely confident in my ability to take care of myself, come what may, then I'd probably subscribe to anarcho-capitalism myself. It's simple and elegant. It's also true that philosophy is less burdened by the requirement to make the story fit some desired outcome than most. In many ways, that's a great advantage. It's also not a philosophy that asks a lot of one personally. I just don't find that view of the universe emotionally satisfying. It pretty much gives up on what I consider to be the concept of "good" as some goal that ought to be reached for, so I'm looking for a view I could actually live with.

CompEng, considering all the disparate points I raised, I think it was a triumph that I was able to make them all so compactly. I realize that to you it all boils down to the single issue of less govt, but I can't help that you don't care about those separate issues, such as companies ditching R&D spending during a recession making sense. I don't see what atheism, not caring about others, or being extremely self-reliant have to do with subscribing to anarcho-capitalism, as some of its most fervent subscribers are religious, believe that markets are a great way to interact with others, and simply use private mechanisms like insurance rather than hoping some govt body will swing to their rescue someday. I don't see how you reconcile the extreme self-reliance you seem to think anarcho-capitalism requires with your view that it doesn't "ask a lot of one personally." The reason you don't find it emotionally satisfying is either because you don't know what a real conception would look like or have been hoodwinked into some notion of the "greater good" that power-hungry politicians like Obama are always offering, while really stealing ever more from the populace and impoverishing them with lower growth. The fundamental difference between the libertarian or anarcho-capitalist who focuses on liberty is that they would like everybody to choose their "good" for themselves rather than having it imposed on them by people like you, whether by forcing everyone to buy health "insurance" like the current reform or by imposing manufacturing quotas because of mad global climate theories, that the recent email discoveries have further underlined to be the cooked up nonsense they always were.

Ajay,

You made your statements compactly. They just seemed to be obvious, and therefore redundant, to me. But again, I probably wasn't your audience. Don't take that as a criticism: your perspective is largely self-consistent and works for you, which is more than most people ever achieve.

"The reason you don't find it emotionally satisfying is either because you don't know what a real conception would look like or have been hoodwinked into some notion of the "greater good" that power-hungry politicians like Obama are always offering, while really stealing ever more from the populace and impoverishing them with lower growth.". I'd say it's the latter, although I certainly wouldn't take my morality from politicians. Don't get me wrong: I think capitalism is a fine tool for understanding reality. But it's not true in the sense the mathematics is "true". It's closer to to being true in the way that Newton's 3 laws are true: they describe reality under certain conditions.

Imagine you and I are shipwrecked on an island, claim it, and divide its ownership in two. Suppose then a third person is shipwrecked on the island. Would we have the right, if we wished, to kick him off of our island for trespassing, even if he had no where to go? Or perhaps we could lease him the right to live on the island if he'll spend all his spare time gathering coconuts? Is that really fair? What do we do if the new entry refuses to leave?
Ownership is just a contract among a group of people, and does not exist where there is no contract. All of capitalism is based on the idea that the contracts people make with each other are good and fair enough to build a society upon. Often, that assumption just isn't true. Often, ownership, and capitalism, is just a matter of who got there first. It's not a strong enough pillar upon which to base all power within a society, and no, competition does not solve all the problems.

"The fundamental difference between the libertarian or anarcho-capitalist who focuses on liberty is that they would like everybody to choose their "good" for themselves rather than having it imposed on them by people like you". This is the aspect of libertarianism I have the greatest respect for. This is why I favor a relatively small government, and I certainly would not presume to legislate another's beliefs. But I don't think anarcho-capitalism, in particular, lends enough credence to the cases where no good contract can be reached among different people, and what happens then. What happens if those idiots on the island decide not to make any arrangement with the newcomer? Do they just kill each other? Or is there some more basic morality that ought to dictate their behavior that supersedes the basic concept of ownership?

And yes, the more I think about the current healthcare reform, the more I realize what a disaster it's going to be.

CompEng, I'd be happy if all my statements were in fact obvious to you but having corresponded with you before, I'm certain they weren't. :) As for being redundant, you continue to claim some magical foundation to the disparate issues I raised, that neither I nor anyone else can see. As for why you don't find that view satisfying, I'd guess it's a mix of my two proposed reasons, as I doubt you have a real conception of what anarchocapitalism would look like. Just as the word democracy is applied to everything from the current, corrupt Russian system to the mob rule of ancient Greece, there are many varying conceptions of anarchocapitalism and I think you're probably thinking of some other variation than I am. In what sense is mathematics "true"? Mathematics is merely a logical system derived from observations of reality, just like Newtonian physics. I think your entire notion of truth is clouded if you're making such distinctions between mathematics and physics. As for your notion that certain pre-existing conditions are key, that's meaningless if you don't say what those conditions are, beyond your artifical example of shipwrecked sailors on an island.

As for your example, it's extremely flawed as an analogy to life because almost nobody today makes a living by finding new land or material resources. In reality, the main quality that has always mattered the most is your internal development, to what extent you hone your mental processes to best grapple with the complexity of the world around you. All the world's richest people started off with almost nothing and gained huge wealth by dint of their personal qualities of intelligence and hard work. The few who inherited their wealth never hang onto it, I wonder why. ;) However, to answer your island questions, nobody has a right to anything. You and I could try to kick the new guy off our island but I suspect we would find it extremely hard to do so. Rather than wasting our time fighting with the guy, we're much more likely to work together. That's because enforcement of such mad ideas as kicking the guy off or leasing land to him has a cost and in that situation, the cost is exorbitant (Hint: this should remind you of regulation ;) ). I suppose you can think of all ownership as a contract, I think of it as starting as an agreed upon way to avoid conflict, that often takes the shape of a contract. I don't see why those mutually agreed to contracts aren't the best way to build a society, particularly since ownership through getting there first is largely irrelevant. Most ownership is based on assiduous hard work and diligence and that's precisely why it's the best pillar to base all power within a society on. And yes, competition solves all problems.

Anarchocapitalism doesn't claim to get rid of violence, it merely provides much better ways to deal with it. Us idiots on the island might all decide to kill each other, just as some gang in LA or Bosnia is trying to kill some rival right now, despite their local govt. Your hypothetical is not very useful as you seem to be arguing either for a government to step in or "basic morality" that would impose itself in some other yet to be named way, both entirely alien to shipwrecked people on an island. I see no need for either, simply a pragmatic notion that the best way to survive and thrive is to work together, without some outside "authority" imposing its mad notions of the "greater good" on all of us. However, I should note that it doesn't bother me if others want to live a highly regulated life, they're free to move to California or Norway or some such socialist paradise. Yet somehow, they seem to keep trying to impose their crazy ideas on the rest of us, for example by recreating the disaster that mandated health insurance was in Massachusetts by now forcing it on the rest of the country. Funny how the "greater good" always requires ceding power to those chumps in Congress who are always strangely incompetent at everything they do.

Ajay,

All I meant was that your positions seemed obvious based on previous discussions. My agreement with them is a another matter. But it's really not a point worth arguing.

"I think you're probably thinking of some other variation than I am."
Quite possibly. But then, you keep trying to identify support for any form of government with current US democracy: a form of government specifically designed to be ineffective so that it would be less threatening to the populace.

"I think your entire notion of truth is clouded if you're making such distinctions between mathematics and physics".
No, I'm aware of the fallacy of my analogy, but I can;t find a truly good one, apropos as my point is that applied knowledge is by nature specific, not to be universally applied.

"As for your notion that certain pre-existing conditions are key, that's meaningless if you don't say what those conditions are."
That's an incredibly difficult question to answer. It's beyond me to answer that question comprehensively: I have to take it in bits and pieces.

"As for your example, it's extremely flawed as an analogy to life because almost nobody today makes a living by finding new land or material resources."
It's a fine analogy, given that one of the requirements was that it be simple enough for the unimaginative to understand. It could be extended to take into account things like capital accumulation and intellectual property. It also ties nicely into ideas such as immigration and the global integration of the emerging world.

As far as internal development goes, you're right. If you're brilliant, healthy, willing to work hard, and brought up right, you'll do fine under any circumstances. How do you want to deal with the other 95+% of humanity?

"The few who inherited their wealth never hang onto it".
As an aside, that's not really true unless you're simply measuring the elite of financial elite. DuPonts and Rockefellers, generations after there wealth was built, still have no need to work a day of their lives.

"Most ownership is based on assiduous hard work and diligence and that's precisely why it's the best pillar to base all power within a society on"
The mostly true. To the extent that's true, and ethical behavior is enforced, I have no problem with that. But there are important exceptions.

"Your hypothetical is not very useful as you seem to be arguing either for a government to step in or "basic morality" that would impose itself in some other yet to be named way... I see no need for either, simply a pragmatic notion that the best way to survive and thrive is to work together".
You asked where atheism came into it, and this is a good example. Without some notion of God, I would agree with you entirely on these statements. However, if I believe more is asked of human beings than that, then more is required to make it happen. I would argue that it's immoral to bind people to a moral code against their will, but those that accept a moral code should bind themselves to it, with the help of an institution.

Anarcho-captialism doesn't prevent that, but a mystical belief in things like the power of the market (and the lack of any other "good") is often used as a justification for doing stupid things, as excessive greed tends to lead, psychologically, to a short-term perspective. That's why so many a$$-holes are libertarians and conservatives: it gives them justification to believe that whatever they have, they deserve, and no further consideration of the world around them is warranted.

CompEng, I don't recall talking about other forms of govt before but the critique stands for them all: by monopolizing certain services, whether waste removal or legal courts, they are inevitably lazy and do the job badly because they usually disallow competition. I'd in fact argue that US representative democracy is more effective than any other govt as it gives the majority of people mostly what they want, however stupid that may be. Your island example is largely irrelevant because other possibly analogous factors like intellectual property and immigration are largely irrelevant. It's not just the lucky few that are extraordinarily brilliant, healthy, and diligent that do fine: you do well in proportion to however much you cultivate those qualities, even if it's a small fraction of those who do it the most. Asserting that those qualities only matter for those who develop them the most is beyond silly. Of course, you also pay the price for how much your family and society develop those qualities: if you grow up in a backwards socialist country like India or China, you have less to work with around you despite your own qualities.

As for inherited wealth, the DuPonts and Rockefellers have a fraction of the share of total wealth that their forebears earned. If they've managed to maintain a third or less of what their ancestors earned, good for them for bucking the trend a little but it's mostly an artifact of how extraordinarily successful their grandparents were. Almost nobody else started with that large an inheritance or managed to even preserve whatever they started with. As for them not needing to work, as if I care that a few families somewhere don't need to work? That's the luxury that the great intelligence and diligence of their forebears provides, trying to invoke envy or jealousy of that wealth is a transparent tactic to pass idiotic laws, similar to how the recent focus on the income distribution is no doubt helping to buoy the current idiotic medical reform. If there are important exceptions to why hard work isn't the best pillar to base societal power on, you would no doubt name them but you don't.

Religion requires government to help bind them to a moral code? What nonsense. If they want to congregate, nothing's stopping them from using churches and the like. The only reason to invoke govt is to do precisely what you claim is immoral, to impose their moral code on others by force. The power of the market is only a mystical belief to those who oppose it and who willfully ignore centuries of evidence of the great efficacy of markets in order to advance their own idiotic pet theories. Yes, there are free marketers who take their claims in support of markets too far- whether those who say the only responsibility a corporation has is to its shareholders and their profits or those who advocate the stronger forms of the efficient market hypotheses- but given the much greater exaggeration and lack of reason of their anti-market opponents, it's understandable why they make that mistake. Your jump from free markets to excessive greed is extremely quick, I could point to the much more common rent-seeking of the alternative, government. I'd much prefer assholes were conservative/libertarian if that means they're unlikely to run around doing stupid things like the limousine liberals, who give money blindly to corrupt third-world govts that then proceed to use that money to hold their populace down. At least the libertarian assholes aren't running around doing further damage to the world around them, in a deluded attempt to assuage their guilt at being successful. Ultimately, there are as many asshole liberals as any other stripe, no large group can keep them out. ;)

Ajay,

"Religion requires government to help bind them to a moral code?"
I can see how you might have mistaken what I was saying for this, but no, that's the opposite of what I want. No, it's more that the true libertarians I've met (Ayn Rand followers, mostly) avoid religion like the plague because they think anything that could inflict a feeling of guilt upon them is an unmitigated evil. For them, greed *is* the purpose, and that's specifically what I'm trying to avoid.

I'm intrigued to hear you suggest otherwise for your particular flavor of philosophy.

Quickly, my aside on Rockefellers and whatnot wasn't an effort to stoke envy: it was a reflex to an incorrect assertion.

"If there are important exceptions to why hard work isn't the best pillar to base societal power on, you would no doubt name them but you don't."
No, I meant that there are important exceptions to ownership or wealth deriving from hard work. There are a lot of examples on Wall Street and in Sales and Marketing departments among others. Hard work, morally applied, is a fine basis for a society.

"Yes, there are free marketers who take their claims in support of markets too far-"
I'm surprised to hear you say so. Perhaps I've misjudged you.

I've got to go... I'll leave the rest be for now. You've strayed a bit from where I was going, though.

Ajay,

One addition:
"Asserting that those qualities only matter for those who develop them the most is beyond silly. "

Absolutely. Maintaining that capitalism only works for the best is laughable, but what I'm trying to do is set up a much more difficult metric: what works best for everyone? That's less clear. Capitalism is certainly a leader, but I can't believe there's any system that can't be improved upon, capitalism included.