Sunday, October 06, 2013

Who wants manufacturing? Let's the machines make metal

If you listen to national or local politics you will notice that political leaders all over the world are trying to either create new manufacturing jobs or offering subsidies to bring manufacturing back to the US.

One example of these subsidies is the power subsidies offered by Ohio

Manufacturing jobs sounds appealing as they seem to offer decent jobs to people with medium and low level  training. Most of people don't realize is that the same people can be employed in service industry with almost no training. Manufacturing jobs are usually monotonous and the people who do the jobs don't enjoy it. The customer who see the products don't care if their products were made by real people or by robots because they don't have any direct interaction with the person making the products like tire or metal car doors or shirts.

Customers appreciate human interaction in services where another person is able to help them in ways machines are not able to help. Services like training kids, cooking great food, paintings, music, arts, therapy, sports etc are jobs that cannot be replaced with machines in the near future.

Policy makers should create policies that will eventually increase the number of teachers, nurses, artists, doctors, designers and entertainers instead of trying to increase boring manufacturing jobs which are best left to machines.

Monday, May 27, 2013

Growth and National Debt

Austerity proponents like Reinhart and Rogoff have suggested in their now infamous book This Time is Different that debt to GDP ratio higher than 90% has a signification negative impact on growth. Keynesians like Paul Krugman opposes this view.

Here's my take on this debate.

Why do macroeconomists want to link debt to growth? Will micro-economists argue that debt is the most important factor determining growth for companies?  Correlation does not imply causation.

High levels of debt can hinder growth for companies if debt financing results in lack of investment in areas that will result in higher revenue or making the company more profitable in the future. National economies should have the same result. If debt burden results in lack of investment to make countries more efficient then it will hurt growth but if cheap debt can create productive investment then debt is be good.