Post by RS Davis on Feb 11, 2004 20:08:57 GMT -5
[glow=red,2,300]Cecil E. Bohanon and T. Norman Van Cott Wrote:[/glow]The Chinese "yellow peril" was the late nineteenth century menace. And today, horrors, the Chinese and Indians are selling Americans things like computer software at bargain basement prices. In fact, when it comes to overall U.S. living standards, there is nothing special about outsourcing software technology. All that matters in this case is whether the Chinese and Indians sell for less than what current American software producers could earn in their next most lucrative employment. If so, outsourcing enhances U.S. living standards.
The effect on U.S. living standards is the same as what would happen if a cost-reducing technology in software production occurred. Living standards rise either way. Those who seek to seal Americans off from the Chinese and Indians in this case are analogous to the Luddites in early nineteenth century England who smashed cost-reducing textile machinery.
What Americans pay the Chinese and Indians for software technology measures what the Chinese and Indians can buy in the United States as a result of the outsourcing. That's the opportunity cost of outsourced software. Does it cost U.S. citizens to produce the software themselves? You bet! U.S. citizens give up what American software producers could produce/earn in their next most lucrative jobs. That's the opportunity cost of domestically produced software. Economists have long noted that there is no such thing as a free lunch. Well software isn't free either, even if Americans produce it for themselves.
It follows that if the Chinese and Indians sell software for less than American producers' opportunity costs, Americans give up less of other things to acquire software. This means opting for Chinese and Indian software is a recipe for higher, not lower, living standards. Anyone who has ever bought a computer (or anything else) will tell you that paying less for the computer means they can have more of other things. It is no less true for the citizenry of any nation.
The effect on U.S. living standards is the same as what would happen if a cost-reducing technology in software production occurred. Living standards rise either way. Those who seek to seal Americans off from the Chinese and Indians in this case are analogous to the Luddites in early nineteenth century England who smashed cost-reducing textile machinery.
What Americans pay the Chinese and Indians for software technology measures what the Chinese and Indians can buy in the United States as a result of the outsourcing. That's the opportunity cost of outsourced software. Does it cost U.S. citizens to produce the software themselves? You bet! U.S. citizens give up what American software producers could produce/earn in their next most lucrative jobs. That's the opportunity cost of domestically produced software. Economists have long noted that there is no such thing as a free lunch. Well software isn't free either, even if Americans produce it for themselves.
It follows that if the Chinese and Indians sell software for less than American producers' opportunity costs, Americans give up less of other things to acquire software. This means opting for Chinese and Indian software is a recipe for higher, not lower, living standards. Anyone who has ever bought a computer (or anything else) will tell you that paying less for the computer means they can have more of other things. It is no less true for the citizenry of any nation.
- Rick
