Quote:
Originally Posted by TheOtherGuy
I can't imagine outsourcing having absolutely no effect on the unemployment rate here. If I fire someone and outsource their work to a foreign entity, I've affected the number of unemployed people here. Internal purchases keep money in the US economy; outsourcing does not.
Caveat: Not an economics major. But neither is anyone else in this thread.  |
Sigh... Ok, this will be watered down and not technically correct, but it'll get the point across. Imagine an economy where only two countries exist, the US and China, and each is operating under autarky (no trade/outsourcing at all.) Now someone in the US decides to have Good A made in China because it was cheaper. The Chinese worker produces Good A at instead of producing Good B. However, China still demands that Good B is produced. China doesn't have any option other than to have Good B produced in the US, so the person fired from producing Good A is now hired to produce Good B. Thus there is no change in the number of people employed.
Obviously we've made a lot of assumptions (perfect competition, no transport costs, homogenous workers, only two countries, etc.) But, it turns out that you can relax many of these assumptions and the model still works.
Quote:
Originally Posted by Lil' Lavery
There was a point someone made in this thread about economic policy that applies to this statement. It's below.
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I got a bit carried away, see edited version.