George Will on Austan Goolsbee, Obama’s Econo-Man

In today’s Washington Post, George Will profiles Austan Goolsbee, a colleague of Levitt’s at the University of Chicago and an economic adviser to Barack Obama. (You can see what we’ve written in the past about Goolsbee here.)

Will’s piece contains Goolsbee’s interesting take on imports from China and elsewhere, with facts that I am sure most Americans don’t know:

As regards China, Goolsbee — who favors a tougher approach, especially through the World Trade Organization — notes that all imports are only 16.7 percent of the U.S. economy and imports from China are a small portion of all imports. Those from China amount to 2.2 percent of the U.S. gross domestic product. Mexico, he says, is genuinely stressed by China, whose exported products “overlap” with nearly two-thirds of Mexico’s. China’s exports overlap with 5 to 10 percent of America’s economy. Rising imports from China predominantly replace those from other lower-skilled countries. Were China to be pressured into revaluing its currency in isolation, Goolsbee says, America would not start making the kind of toys it has been importing from China — America would import toys from Vietnam.

Will seems pretty impressed with Goolsbee — but then, Will being Will, he ends his piece with this very left-handed compliment:

Economics is the only academic discipline that in recent decades has moved in the direction that America and much of the world has moved, to the right. Goolsbee no doubt has lots of dubious ideas — he is, after all, a Democrat — about how government can creatively fiddle with the market’s allocation of wealth and opportunity. But he seems to be the sort of person — amiable, empirical and reasonable — you would want at the elbow of a Democratic president, if such there must be.

I assume that “if such there must be” refers to a Democratic president, and not an economist at his elbow.


Derek G.

It all boils down to education being an enabler rather than a rite of passage marked with standardized tests. Also, I would argue that while a college education plays a large role in modern success, that simply having entrepreneurial drive and understanding the tools to success are equally important if not more. I believe this drive can be fostered and harnessed through education, be it public or private, or some bizarre mix of the two.

After all, there are plenty of college-educated drones out there who toil through life in shirts and ties and earn a good but not spectacular wage while some with cursory college education are creating their own tiny empires. College education can create a false sense of job security for those just ambitious enough to "get in the door" of the upper middle class.

The whole approach to education in the U.S. needs a rethink.

Marco

I'm glad Austan Goolsbee is Obama's adviser ... now if only Hillary would have someone like Austen!

Bill Clinton was as successful as he was because he listened to Robert Rubin and not Robert Reich.

Austan's analysis shouldn't surprise anyone... except of course most elected officials in Washington ... who still don't understand that China IS NOT stealing US jobs!!!

Eric

Having just graduated from the Chicago GSB, I had the fortune of taking a class with Goolsbee. Not only is he brilliant, but he's a great lecturer and also absolutely hilarious!

Jeff

Are there herbs you can take to cure economists at your elbow?

Brad

Completely agree with Eric. I had the pleasure of taking courses from both Goolsbee (at the GSB) and Levitt (in college). Goolsbee is a rock star...really cool guy. Levitt's course The Economics of Crime was one of the best courses, out of many great courses, I took at the College. I'm glad they are both getting national recognition (along with Obama).

the Gooch

I thought Oprah was Obama's economics adviser...I was hoping for free Pontiacs for everyone in America.

Martin

Marco... if you're pinning your future to Hil's pantsuits, good luck to you. There is no other candidate that the GOP would rather face off against. Democrats will have to pick someone who is less likely to create a political stand-off by the mere mention of his/her name. Even if she were to win the big prize, Clinton will be stalemated by the Republicans at every turn.
My hope is that the Dems select a strong candidate who can not only win next November, but have the ability -- and common sense -- to work with both sides of the aisle. Obama can, Edwards can... maybe even Biden. Mrs. Clinton is a smart woman and worthy of the job... but not the best choice. Here's hoping she is smart enough to bow out gracefully to give her party a chance... and give the US the opportunity to start fixing the mess that the Cheney Administration made.
Yes, Marco... China IS stealing American jobs, thanks in large part to Wal-Mart. If Austan Goolsbee really does want to get tough on China, you can bet that the Walton family's PAC monies will be going to fund anti-Obama ads.

Read more...

Derek G.

What happens when America runs out of developing nations to use?

Marco

Sorry, I stand corrected ... add Martin #7 to the list of people who think China is stealing US jobs ... best of all facilitated by Walmart ... and here I thought the majority of the well paying jobs lost because of Walmart were those disintermediated wholesalers that added no value anyway.

It's not Walmart's fault that 60% of Americans who actually shop there every year love to buy cheap Chinese goods. Of course blaming the majority of American's isn't quite as appealing as blaming a large corporation ... who btw never once forced any of those millions of American's to part with their dollars for Chinese goods.

logan

#8 - i wouldn't call china a "developing nation", unless of course you include the us and europe in there too. china has the 4th largest economy in the world (cia factbook).

in the development of any nation one (at least so far) always sees a burgeoning sweat shop/cheap exploitive labor industry, think new york or manchester in the 19th century. this is later replaced by higher paying more skilled jobs as the country builds wealth.

it's a big cycle. china is holding onto their cheap production capabilities in part by heavily polluting their environment and by sterilizing inflows of currency. i understand peoples' short run concerns about jobs being lost and what not, but come on... do you really want those kinds of jobs? our country has systems in place to educate and train its' citizens for skilled jobs.

Princess Leia

Austan Goolsbee rocks.

Ken H

Basic lesson of economics: seeing the world as a pie of fixed size just flies in the face of reality. Points:
1. Increased productivity is the most powerful, sustainable engine of progress.
2. Labor represents the largest source of added value in the global economy.
3. Freeing labor to enable pursuit of higher productivity generates the highest leverage in economic progress.
4. Ergo: transferring low-productivity jobs to developing countries raises the productivity in the sending country (the US more than any other country).
5. As a matter of social policy, we support people through re-training and economic assistance, to weather job transitions. But, they'll contribute more to the economy (and their own economic well-being) once they land a new, higher-productivity job.

The pie gets bigger through competition, on a global scale. It's the central lesson of Smith, Hayek, Schumpeter, et al.

Read more...

Bertil

Maybe the best way to tell is to sort out USA economy by activity, same for China, include the imports, exports on the row, and value created by each activity. It's big and tedious, but wouldn't that be a better use of the billions that the candidates have, instead of TV ads--and it could be reused.
I'm with Goodsbee on this one, for now; one example: USA imports computer made in China, and sells IT made from them. When Western people will start using Chinese-designed IT,
then jobs will be stolen.

Davey

Martin @ #7,

I live in North Carolina, which has lost nearly all of the textile jobs that it once had. However, those low-paying, unskilled jobs have been more than replaced by higher skilled, much higher paying jobs in the tech and biotech sectors. China can have those jobs; economics dictates that those who can best do the job, will do the job. They can make towels better than we can and they can assemble things better than we can. We, however, do a much better job with design, finance, and for the moment, engineering. All higher level skills than bolting a motherboard into a PC chassis.

Martin

Davey #14:

Strong and valid point.

I'm thankful that your region is blessed with enough forward thinking leaders who clearly made the proverbial silk purse from the sow's ear. If only more industrial/manufacturing communities would do the same...

Unfortunately, we also have to consider what happens next: if the US gives up all seemingly 'lower-skill' manufacturing jobs to other countries, then we can expect them to begin taking the 'higher skill' work next. I'm all for other nations to improve on what they have, but why should the US just roll over and play dead? Should America stop all auto manufacturing because Germany offers better engineering or Japan finds a more efficient organizational structure? Europe (generally) brews better beer, so does Anheuser-Busch throw in the towel?

Davey, as you put it: "We, however, do a much better job with design, finance, and for the moment, engineering." The key phrase is 'for the moment', and I worry about when that moment ends.

Equitable competition results in improved quality, no matter if you're dealing with produced goods or educated students. My earlier point: Wal-Mart is doing whatever it takes to eliminate its competition. If that results in an improved Chinese economy at the expense of that of the US, the Walton family will still get richer.

Read more...

johnleemk

Martin (#15):

You are still thinking in terms of absolute advantage. The relevant economic principle is comparative advantage, which will explain to you why Anheuser-Busch is still in business.

Walter

The whole reason developing nations take 'our' low-skill jobs is that our labor is too 'expensive' for our own tastes. it's expensive because they could be doing something better--or else they would accept chinese wages. the bottom line is, they take our low-skil jobs BECAUSE we are high-skilled people.

The only sure-fire way I know to send high skill jobs overseas is to invest money and laws in protecting low-skill jobs in this country. No one should be making textiles in the English-speaking world, there are far better uses of someone's time if they are simply able to speak the language.

If you were concerned about the future of high-skill industries in the US, a far more responsible respose would be to advocate better education systems in this country. China produces 10xs as many engineers as the US in a year (though for now the quality is unambigously lower).

Derek G.

It all boils down to education being an enabler rather than a rite of passage marked with standardized tests. Also, I would argue that while a college education plays a large role in modern success, that simply having entrepreneurial drive and understanding the tools to success are equally important if not more. I believe this drive can be fostered and harnessed through education, be it public or private, or some bizarre mix of the two.

After all, there are plenty of college-educated drones out there who toil through life in shirts and ties and earn a good but not spectacular wage while some with cursory college education are creating their own tiny empires. College education can create a false sense of job security for those just ambitious enough to "get in the door" of the upper middle class.

The whole approach to education in the U.S. needs a rethink.

Marco

I'm glad Austan Goolsbee is Obama's adviser ... now if only Hillary would have someone like Austen!

Bill Clinton was as successful as he was because he listened to Robert Rubin and not Robert Reich.

Austan's analysis shouldn't surprise anyone... except of course most elected officials in Washington ... who still don't understand that China IS NOT stealing US jobs!!!

Eric

Having just graduated from the Chicago GSB, I had the fortune of taking a class with Goolsbee. Not only is he brilliant, but he's a great lecturer and also absolutely hilarious!