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Noah The African

The question is to what degree economics falls between the extremes of a zero - sum game and that of infinite wealth for all. I tend to believe that it leans toward the former. As an example, take Ethiopia and Vietnam. The primary export income of Ethiopia came from the coffee bean harvest. Then Vietnam got into the Coffee growing industry. The resultant was that Ethiopia’s GDP dropped 40% or more due to Vietnam’s entry depressing the price for coffee by creating a glut in the market. Hence, if wealth was infinite then Ethiopia should not have been affected by Vietnam’s entry into the market.

Globally, things are interdependent. There is not win-win, but always, win lose or gain loss. Thus, whether outsourcing as defined is true or not, the reality is that as more countries get into the market of doing what we do, they affect our economy via the laws of supply and demand. The more entities competing for customers of a particular good or service will create winners and losers, based upon who has comparative advantage in the competition. America is losing its comparative advantage faster than at any point in our history. This means that more countries can produce what we produce, but at less expensive cost. Thus, opportunity will shift to those producer nations away from the US.

Peg K

I have never been trained in economics, Noah. So, all my reasoning is based upon limited statistical knowledge and plain old logic (in which I have had plenty of education).

I disagree that all economics is a zero-sum game - and that global economics cannot be, at least to some degree, "win-win."

IF other countries begin to become competitive, and our nation doesn't keep up - you're right, opportunity will shift away from us.

But if we attempt to do better than we did, and improve our products and services, we will continue to prosper.

Remember: all those people from other nations who now have decent jobs will be able to afford and will want some of what we have in the U.S. We may have more competition - but our consumer base will be greatly increased, too.

In the long run, this all helps the consumer, too. To remain competitive, businesses, irrespective of where they are based, must improve, create and serve the consumer in a superior manner. The consumer will have more choices than before, and will demand this.

Noah The African

Your in the Real Estate business I believe Peg K. What would happen if more people became licensed and could do what you do at a lower commission? What effect would that have on your income going forward? If the supply of anything increases, relative to demand for it, the value will go down. If you increase the supply of doctors, Engineers and lawyers, relative to demand for them, they will bid down the going rate for these professions in the competition for customers. If one increased the number of degreed people in our economy, the earning of the median degreed person will decline, if the economy cannot produce the demand for all those educated people. Currently only 25% of jobs require a college degree. The thing that keeps economics from becoming an absolute zero sum game is population growth, which creates, theoretically, new consumers and workers, which creates NEW opportunities for producers, which does not come at a loss from other producers. However, adjusted for population changes, the new globalization is bound to reduce the standard of living in America…it is inevitable…barring destruction of the Chinese or Indian economies.

Peg K

Noah, funny that you should use your "realtor" example. I have LOTS of data for that.

MANY more people HAVE become licensed, as real estate has boomed. (At least, in the Twin Cities I know this to be true.) But, not only is it not the case that everyone's income is going down, some people see their income going up!

How could this be?

#1: There is tremendous growth in the housing market in the Twin Cities. More to go around.

#2: There IS, however, more competition. So, many people improve what they were doing over years ago. There are LOTS of things I have to do if I am going to get and keep customers that I did not have to do in the past! So, my "product" and services are improved.

#3: You are correct that for some, their income DOES go down - or, they get out of the business. If they don't improve so that the public perceives them as doing an excellent job, then it'll be tough for them to do well.

You are correct that, all things being equal, the more providers you have, the less there is available for each of them.

I am correct that people can - and will - adapt. Some in the more competitive marketplace will actually see superior results for themselves - and those who cannot or will not compete will have a tough time of it.

Noah The African

Your real estate example was superfluous due to the fact that my premise was that increases of supply relative to demand. The example you presented was increase of supply (of realtors) brought on by an increase of demand for realtors. So it did not work to refute anything that I said.

You make the point that people will adapt…they will have no choice…so that is a no brainier. The question is will the adaptation result in a higher or lower standard of living? When GM moved plants to Mexico a lot of people adapted. They took jobs paying half of what they once earned. Adapting is not the issue. What I am showing is that gain loss is nearly always the resultant, thus demonstrating that the economy is much closer to a zero sum phenomenon that that of infinite wealth.

Peg K

I don't recall making any statements about "infinite wealth."

You will find, however, statements about supply and demand. If millions - or billions - of miniscule wage earners from around the world start to have decent jobs, then the consumer base of the world rises dramatically.

I do not, however, see how it is a zero sum game when a result may be that a great many are now doing better than they were previously - although a few may be doing worse.

And adapting does not equate taking a job at half of what you used to earn. Sometimes it means learning a new skill or taking on a new job. Sometimes it means improving what you used to do to a significantly higher standard.

And in my example about realtors - it was not so much that there was a "demand" for more realtors. Many realtors could handle far more work than they are actually have. What did happen, though, was that people saw an opportunity, and took advantage of it.

Noah The African

No, low interest rate meant that people could afford a bigger homes, which spurred also spurred developers to build more homes. Along with low interest, the local Twin Cities market experienced a healthy increase in population, which created additional demand for housing units. All these factors worked to increase the demand for realtors and people who were not in the field got into the field because they seen the profit potential of demand for realtors exceeding supply. Hence, your example was null and void because it represented a situation that was not my premise, which is that when supply increases relative to demand, it results in an decrease in the value of what is being supplied in a free market, in that case realtors.

If one is arguing the opposite of zero sums, then by default they must accept the belief that wealth is unbound or limitless. If millions or billions of minuscule earners start to get decent paying jobs…the resultant of us Capital investment or transfer of production and jobs from the USA to other nations, then there gain will come at our workers losses, Just as it did with Ethiopia when Vietnam entered the coffee market. These people are making more money as a direct resultant of loss of jobs by American workers. There is NO guarantee that these people will reciprocate via buying USA goods and services with their money. They more than likely will buy the products produced in their land, with their labor…BECAUSE IT WILL BE LESS EXPENSIVE. US wage cost makes for higher prices relative to countries with similar technical ability and quality, but with cheaper sources of labor.

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