Krugman's error

I feel a little intimidated by what I'm about to do--I'm about to say a Nobel laureate is dead wrong in an area in which he has far more expertise than I ever will. But, it is what it is: he makes a simple misstatement and thereby possibly invalidates his entire point.

I'm talking about Paul Krugman's recent piece in The New York Times, "The Texas Unmiracle" (August 14^th, 2011), in which he comments on the Texas economy, likely to be a talking point for newest Presidential contender Governor Rick Perry. It's worth a read insofar as Krugman makes some excellent points about unemployment in Texas (lower than California, higher than Massachusetts), the effects of population on maintaining growth (or at least offsetting shrinkage), and related topics. But then Krugman gets to this unbearable howler:

...the rapid growth in the Texas work force keeps wages low--almost 10 percent of Texan workers earn the minimum wage or less, well above the national average--and these low wages give corporations an incentive to move production to the Lone Star State.

So Texas tends, in good years and bad, to have higher job growth than the rest of America. But it needs lots of new jobs just to keep up with its rising population--and as those unemployment comparisons show, recent employment growth has fallen well short of what’s needed.

If this picture doesn’t look very much like the glowing portrait Texas boosters like to paint, there’s a reason: the glowing portrait is false.

Still, does Texas job growth point the way to faster job growth in the nation as a whole? No.

What Texas shows is that a state offering cheap labor and, less important, weak regulation can attract jobs from other states. I believe that the appropriate response to this insight is "Well, duh." The point is that arguing from this experience that depressing wages and dismantling regulation in America as a whole would create more jobs--which is, whatever Mr. Perry may say, what Perrynomics amounts to in practice--involves a fallacy of composition: every state can't lure jobs away from every other state.

It's hard to believe a man as erudite and perceptive as Mr. Krugman would make such a glaring mistake, unless he possibly did it on purpose. Notice the way he treats the United States as a closed system: "every state can't lure jobs away from every other state." But that isn't what Governor Perry will do for the United States if he's elected to bring the Texas miracle to all fifty states. As President, Perry won't be looking to put Texas into competition for jobs with North Carolina or New York or wherever--he'll be looking at putting the entire United States into competition with the world!

That is to say, President Perry will further the agenda of the Republican party in stemming the flood of jobs away from our country by making us competitive again. And to do this, clearly, instead of exporting manufacturing jobs to China, Bangladesh, Vietnam, the Philippines, Mexico, Swaziland, El Salvador, Nicaragua, Indonesia, Honduras, et al., we need to make American labor attractive to investors in those countries so that they'll send their manufacturing and other labor needs here.

How is it fair or sensible that American consumers are expected to buy clothing made in a sweatshop in Vietnam or a luxury electronics item made by a suicidal Chinese assembly line worker? It's just stupid, obviously. It ought to be that the laborer in Vietnam is buying a cheap t-shirt sewn together in Oklahoma or the Chinese consumer is buying an iPod assembled in Indiana. So why aren't they? It's because the United States have collectively enacted a grotesquely anti-capitalist legal system that stymies entrepreneurial investment and creative effort. Karl Marx would be proud of us.

American households are suffering, but have you ever stopped to consider that in a family consisting of a father, a mother and 2.5 children, there are 2.5 members of the household who consume without giving anything back to the family? Every day, in dozens of countries around the world, children--far more clever and capable and resilient than we tend to give credit for, instead we prefer to infantilize and coddle them--get up in the morning and pump water for the cow before walking to a factory to learn and practice the manual dexterity required to stitch together a tennis shoe; a useful skill calling back to a noble trade that lazy Americans are evidently too good for. (I think "Cobbling, Not Coddling" is a catchy motto that could be employed by the Perry regime's Ministry For Work, don't you?)

Instead of fully employing this country's potential workforce, however, we let them get fat and stupid with their XBoxes and bags of deep-fried lardbombs. Do they have an obesity epidemic in Swaziland? Do they complain that the kids never get up and do anything in Bangladesh? I doubt it, because those children aren't barred from participating in their homelands' versions of the Protestant Work Ethic by paternalistic Big Governments forbidding "child labor".

Let's concede, in all fairness, that there may have been a time in which child labor laws were necessary or virtuous. No doubt we've all seen a film adaptation of some left-wing propaganda screed by Charles Dickens or his ilk in which a "poor" orphan child (better dressed than anybody you're likely to see in a photograph taken in Somalia, I tell you what) is portrayed moaning and weeping on the floor of some grim and filthy Victorian industrial hellhouse. But when's the last time you saw such a building or such a child? Clearly, child labor laws have worked and therefore are no longer necessary.

Or consider the ways in which this country hobbles growth by forcing employers to spend extra money transporting their waste to special and remote locations when there's usually a ready source of running water or vacant lot right there in the vicinity, so close they could pipe the waste right into the water or have a couple of strong young men carry the barrels over in a handcart without wasting money on a dumptruck or whatever (we're talking about maximizing profits for the shareholders, which in turn creates jobs--money spent on a pickup truck is money taken away from a job-creating investor, remember that).

Don't even get me started on air pollution. This is a problem we've created for ourselves and a problem we can solve for ourselves. Let's accept, for argument's sake, that human beings have added greenhouse gases--particularly carbon dioxide and methane--to the atmosphere and precipitated a runaway greenhouse effect, causing global temperatures to rise with attendant ill and unpredictable effect. The "solution" that is commonly proposed is what? It's to control emissions.

Which is exactly what got us into this mess in the first place!

I mean the regulations, not the emissions. Look, focusing on greenhouse gases is only a part of the environmental equation; the other major component is the amount of sunlight that penetrates the upper layers of the atmosphere and warms it. Sunlight that doesn't penetrate the atmosphere--that is reflected back into space or absorbed and radiated back--isn't light that is adding to the temperature.

Consider, for instance, what has happened in any number of major volcanic eruptions: the Earth itself has pumped out vast quantities of atomized rock and dust, creating vast clouds of particulates that have shrouded the Earth for months on end and raised the Earth's albedo--creating global cooldowns such as the one that followed the 1883 eruption of Krakatoa or the 1815 eruption of Mt. Tambora, which is credited with causing the "Year Without A Summer".

And yet, presented with ample opportunities to fill the sky with beautiful, cooling, world-saving soot and fumes, we have insisted that corporations eliminate jobs by installing devices to "clean" the air! If we allowed things to run their proper course, we could probably balance out the problems caused by CO₂ emissions by simultaneously reducing the amount of sunlight actually penetrating the atmosphere. But no. So-called progressives ("Luddites" is more like it) stand in the way of true technological progress and insist that the natural chemical outputs of coal burning and other industrial processes cause respiratory ailments and increase cancer rates and so on. Even if they're correct, what are a few lives if it saves the human race? Besides which, children with respiratory ailments are children who need doctors, which promotes the economic well-being of the whole: imagine the great circle of a child taking his month's wages to a physician for a treatment of his chronic bronchitis, whereupon the physician takes the money he's collected from a hundred such children and uses it to buy a clean shirt from a capitalist, who in turn reinvests a portion of that money by paying the children in his shirt factory (minus what they don't get for being out sick all the time); it's a bit simplified and there might be other players, but you get the idea, this is what a functioning economy looks like, free of meddling by bureaucrats and central planners.

I may have digressed, so allow me to summarize: Krugman is wrong because he seems to assume President Perry will have states competing with each other for jobs, when the point of deregulation and low taxes is to create a regime where this country can compete internationally. Doing so will solve the unemployment problem, will alleviate various societal ills created by a culture that has too much time on its hands for The Twitter and PlayStation and computer porn, and will reverse the immigration crisis (not only will Mexicans want to stay at home, but, indeed, American housekeepers, day laborers and landscapers will be sneaking across the Mexican border looking for financial opportunities--let's see how much they like it when the poorly-stitched-in-a-sweatshop shoe's on the other foot!). This will create a new golden age much like the ones this country saw under great Republican Presidents like Ulysses S. Grant and Herbert Hoover.

It's this simple, folks: if you can't beat 'em, join 'em. And we're never going to beat those third-world countries unless we play by their rules, so....

I think the way forward is clear.