Wednesday, November 10, 2004

WSJ.com: Outsourcing

WSJ.com continues its series of debates between John Irons and Tyler Cowen. This time: outsourcing. It distresses me to report that I find Cowen more convincing than Irons. This because Irons has the CV I would like to have (Swarthmore, MIT, academia, think tanks) and the ideological cast of mind I think that I have: a liberal neo-liberal.

Cowen argues that if you include all the cross-border movement of jobs, that America is doing far less bad than you might think. He cites an OFII article which argues that while 10 million "American" jobs have gone abroad, 6.5 million "foreign" jobs have come to America. He argues that if there is a problem with outsourcing, the solution is simply trying to improve the "business environment" in the U.S. Here I disagree with him, I'm very skeptical of the claim that school choice will improve education (it seems to be about neutral) and that the tax and regulatory burden holds back American business, but the point that outsourcing isn't that important I agree with.

Irons has a rhetorical problem. He wants to say that we should be concerned with outsourcing, but he doesn't cite any evidence to support his case. He is reduced to an argument from morality that we should care about American workers -- and thus have a social safety net. I agree, but he doesn't really get anywhere near laying out a cogent case. One would do far better to read Dani Rodrik than muddle through Irons. Such a case isn't that hard to make: x number of workers have lost their jobs through outsourcing, we value them as citizens, so we should have a social safety net.

Cowen closes with a rant against public sector training, arguing that it is inefficient. Perhaps some programs are, but I see no logical reason why private sector training is any better than public sector training. This is a point to which I'll probably return, but the public-choice argument that governments are by definition inefficient and rent-seeking strikes me as deeply problematic both empirically and theoretically. So Cowen's public policy -- leave it to the market! -- is stupid. Yet, alas, I wish Irons could latch onto the problems with Cowen's argument rather than just circling.

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