Re: Don't believe the offshore hype?

Subject: Re: Don't believe the offshore hype?
From: "Richard G. Combs" <richard -dot- combs -at- voyanttech -dot- com>
To: "TECHWR-L" <techwr-l -at- lists -dot- raycomm -dot- com>
Date: Wed, 10 Mar 2004 12:33:04 -0700

Dan Goldstein quoted my claim that:

> > ... The number of new jobs created is probably greater than the
> > number of jobs
> > lost, and they're undoubtedly better jobs, on average. In the
> > long run, this
> > _must_ be the case. By spending less to produce the same
> > level of goods and
> > services, we've freed up money to produce a new, higher level
> > of goods and
> > services...

He responded:

> Hmmm. "Must" be the case? Got any numbers to back that one up?

You misunderstand, Dan, I'm not making an empirical claim, based on
observation, but a logical one, based on an understanding of the laws of
economics. Would you question a claim that apples fall to the ground and ask
for empirical data, or would you settle for an explanation based on an
understanding of the law of gravity? :-)

A full explanation would require many pages (trust me, I have an Econ.
degree ;-) ), but here's a highly simplified example. Let's say I make
widgets, and I can increase my profit from $1 million dollars to $2 million
per $10 million (retail value) worth of widgets by <pick one: outsourcing,
automating, waving a magic wand>. What will I do with the $1 million I've

Assuming I have a lick of sense, I'll invest it in producing something at
least as valuable as -- probably more valuable than -- using it to produce
more widgets. I wouldn't invest in something *less* valuable than widgets
(mud pies or french fries, for instance) -- that would be stupid.

An equal or greater return on my investment means that the resources
employed -- including labor -- have an equal or greater value. Even if the
value of the new jobs created is merely the same as the widget-making jobs
(and thus the reward to labor is the same), our community/society/world now
has the *same* number of widgets as before, only cheaper -- *plus* all the
new stuff created by investing the freed-up $1 million.

So, in the aggregate, we're all richer -- and the same income affords us a
greater quantity of goods and services. Even if a laid-off widget worker's
new job pays only as much as the previous one, that worker is better off. If
it pays more, that worker is much better off.

End of econ. lesson. There'll be a quiz later. ;-)


Richard G. Combs
Senior Technical Writer
Voyant, a division of Polycom, Inc.
richardDOTcombs AT polycomDOTcom
richardDOTcombs AT voyanttechDOTcom
rgcombs AT freeDASHmarketDOTnet


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