Possible Insight

Manufacturing Fallacy

with 10 comments

Just in case you hear phrases like, “America no longer makes things,” “…decline of American manufacturing,” or “China is now the world’s factory,” here are the facts…

Don Boudreaux points out that the latest official statistics from 2007 show that US manufacturing output that year was 8% higher than in 2000, 69% higher than in 1990, and 184% higher than in 1980 (all adjusted for inflation).

Moreover, if you look at the value added in the manufacturing chain, the US leads the world by a healthy margin.ย  In fact, as you can see, the US produced about twice as much manufacturing value added as China in 2005.

Of course, if China keeps growing at their current rate, they will pass the US sometime around 2017.ย  But that’s good because it means they’ll have created a ton of wealth.


Written by Kevin

August 24, 2009 at 2:17 pm

Posted in Economics

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10 Responses

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  1. Kevin is right. US manufacturing is incredibly productive and good. It has to be to survive, since US manufacturing workers make 20 times or more what workers in developing countries do. The reason we have been losing manufacturing jobs isn’t that we aren’t good at it. It’s that there are so many high-value-creation job opportunities for US workers in the service sector. If a US worker can earn $20 per hour working a service-sector job, then manufacturers in the US have to match that wage or they won’t get workers. It’s competition in the labor market from the service sector that’s causing manufacturing jobs to go overseas

    Scott Schaefer

    August 25, 2009 at 9:20 am

  2. Also, your blog is hopelessly mis-named. I don’t see a thing in your Category Cloud about “Complex Adaptive Systems.” This is an economics and policy blog.

    Admit it — We’re all economists now. (And you should also admit that I was the only one smart enough to start studying it when I was 19…. Neener-neener.)

    Scott Schaefer

    August 26, 2009 at 11:29 am

    • Wait just a darn a minute. We have the same undergraduate degree in Quantitative Economics. I started taking classes for it when I was… 19. So Rafe is the odd man out here. Though you are still the three man ๐Ÿ™‚

      And don’t try and play the graduate degree card. Remember, I have an MS in Engineering-ECONOMIC Systems. Of course, there’s always the PhD card. But that would just be admitting you’re the only masochist among us ๐Ÿ™‚


      August 26, 2009 at 12:42 pm

  3. Fair enough, but I’m still saying your blog suffers from an identity crisis. Man up and call it what it is!

    Scott Schaefer

    August 26, 2009 at 8:38 pm

    • Oh please. I told you back then that you’d have to be interdisciplinary to make any progress in econ and not just drill down into mathematical minutia and models that don’t have any connection with reality. Happy to say we are all economists these days if you admit that what was called econ back then was witchcraft.

      Rafe Furst

      August 26, 2009 at 11:01 pm

      • I prefer the term pan-disciplinary. I can spout plausible-sounding BS about many subjects simultaneously.


        August 26, 2009 at 11:09 pm

    • Oh, and as for our identity crisis, I think I’ll have to invoke a type hierarchy. An economy is a subtype of complex adaptive system. Rafe and I just operate at a higher level of abstraction. More folds in the old cerebral cortex, you see. (Now that’s pan disciplinary BS for you, computer science and neurobiology applied to economics and complex systems)


      August 26, 2009 at 11:15 pm

    • Dear Scott, You’ve been Owned. Please come again.

      Daniel Horowitz

      August 26, 2009 at 11:29 pm

  4. Two words: Category Cloud. I see a really little “complex” and a really big “Economics”. I repeat to you: “neener-neener.”

    Scott Schaefer

    August 26, 2009 at 11:32 pm

    • I, on the other hand, am a mathematician, NOT an economist. See the most recent post for actual complexity theory, if that’s what you’re interested in.


      August 27, 2009 at 6:13 am

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