Here’s the sort of thing we teach our students in basic economics:
A fable by James Ingram also illustrates that free international trade is production efficient. In his book, International Economic Problems (John Wiley, 1970), he tells of a mysterious entrepreneur, Mr. X., who announces to the world that he has found several amazing discoveries that allow him to produce cheap televisions, automobiles, cameras, and other goods. He sets up a plant on a large tract of land along the coast of North Carolina; hires 5000 employees who are sworn to secrecy; and begins buying grain, coal, and machinery. As the trains of grain and coal roll into his factory, other trains full of televisions and automobiles roll out of his factory into showrooms across the country. Mr. X is hailed as another Edison or Bell, and his company becomes a favorite with Wall Street investors.
Consumers love Mr. X because his products are so much cheaper than what they could buy before. Of course, his competitors dislike him, but their attempts to get laws restricting his operations get nowhere. The Houses of Congress ring with speeches saying that some economic adjustment is an inevitable by-product of technological progress.
Then, one day a small boy trying out his new skin-diving gear accidentally penetrates Mr. X’s security shield and learns Mr. X’s secret. Nothing is produced at the factory. It is all a front for a giant import-export business. Mr. X transforms grain and coal into autos and televisions by trade. His secret revealed, Mr. X is reviled and his factory shut down. Members of Congress proclaim that the American standard of living has had a narrow escape from the threat of cheap foreign labor and urge more money for research in industrial technology.
And here’s what happens if you apply what you’ve learned in econ:
There’s a story floating around the internet that’s so good that it can’t be true – but I really, really want it to be. According to a Verizon security blog, a developer employed by an American company has been caught outsourcing his own job to China – giving him much-needed extra time to watch YouTube videos about cats.
. . .
Verizon investigators found that [Bob] had hired a software consultancy in Shenyang to do his programming work for him, and had FedExed them his two-factor authentication token so they could log into his account. He was paying them a fifth of his six-figure salary to do the work and spent the rest of his time on other activities.
What did those other “activities” consist of? Apparently it was:
9:00 a.m. – Arrive and surf Reddit for a couple of hours. Watch cat videos
11:30 a.m. – Take lunch
1:00 p.m. – Ebay time
2:00-ish p.m – Facebook updates, LinkedIn
4:30 p.m. – End-of-day update e-mail to management
5:00 p.m. – Go home
Throw in a steady diet of custard cream biscuits and this is my idea of heaven – and it wasn’t doing Bob’s productivity any harm, either. According to one source, “His [work] was clean, well written, and submitted in a timely fashion. Quarter after quarter, his performance review noted him as the best developer in the building.”
The Register reports that Bob got canned, which is a great tragedy.
As I said yesterday, the public has utter disdain for the economic way of thinking.