NPR has posted a provocative piece arguing that most economists are naive about the distributional consequences of free trade between the United States and developing countries such as China.
Regarding point 1, I think the issue is the permanent loss to seniority and tenure. Even if one could retrain, the acquired job specific human capital is significant and lost. Moreover, I believe it was shown that a lot of former manufacturing workers moved into construction during the boom at that time (till 2008). Only once the great recession hit, the 'shock' fully materialized.
The environmental benefits point is a good one (although probably not first order).
I like your point about job seniority causing higher wages but I wonder whether this is due to union rules or true productivity on the job. The union quasi rents were caused by labor market imperfections.
Dear Matthew - Unpacking what you have done is valuable and interesting. But what do you make of the following (in my view) simpler point? When international trade happens, if it has any effect, it changes some relative price somewhere in one's economy. This occurs whether trade is with a large emerging economy like China or a small developed country like Luxembourg. If it's with a significant trading partner, that relative price change is also, correspondingly, larger. But the condition about trading partners is sufficient, not necessary.
And this relative price disruption occurs whether one operates under classical conditions of comparative advantage or the trading partner cheats (however defined), or more generally however manipulated the situation might be.
When relative prices change, someone somewhere will feel disadvantaged. If those who are disadvantaged happen to be in a position that was especially comfortable before this relative price disruption, then they will face sharp loss in well-being. In your analysis, these individuals' housing choices were facilitated, and that resulted in a lock-in effect. Much earlier in their lives, these individuals' education choices were directed, and again the lock-in effect kicked in. But, before the disruption, those education and housing decisions were, ex ante, sensible and unanimously thought to be the right choices. Flexibility comes at a cost that can ex ante be thought excessive and unnecessary.
While we can identify those features that are especially prominent for the loss of well-being, it is difficult, in my view, to say that either society or those individuals should have done something different, unless they persistently ignored obvious signals that their behaviour should have earlier started to change, and they wilfully ignored that information.
Regarding point 1, I think the issue is the permanent loss to seniority and tenure. Even if one could retrain, the acquired job specific human capital is significant and lost. Moreover, I believe it was shown that a lot of former manufacturing workers moved into construction during the boom at that time (till 2008). Only once the great recession hit, the 'shock' fully materialized.
The environmental benefits point is a good one (although probably not first order).
I like your point about job seniority causing higher wages but I wonder whether this is due to union rules or true productivity on the job. The union quasi rents were caused by labor market imperfections.
Dear Matthew - Unpacking what you have done is valuable and interesting. But what do you make of the following (in my view) simpler point? When international trade happens, if it has any effect, it changes some relative price somewhere in one's economy. This occurs whether trade is with a large emerging economy like China or a small developed country like Luxembourg. If it's with a significant trading partner, that relative price change is also, correspondingly, larger. But the condition about trading partners is sufficient, not necessary.
And this relative price disruption occurs whether one operates under classical conditions of comparative advantage or the trading partner cheats (however defined), or more generally however manipulated the situation might be.
When relative prices change, someone somewhere will feel disadvantaged. If those who are disadvantaged happen to be in a position that was especially comfortable before this relative price disruption, then they will face sharp loss in well-being. In your analysis, these individuals' housing choices were facilitated, and that resulted in a lock-in effect. Much earlier in their lives, these individuals' education choices were directed, and again the lock-in effect kicked in. But, before the disruption, those education and housing decisions were, ex ante, sensible and unanimously thought to be the right choices. Flexibility comes at a cost that can ex ante be thought excessive and unnecessary.
While we can identify those features that are especially prominent for the loss of well-being, it is difficult, in my view, to say that either society or those individuals should have done something different, unless they persistently ignored obvious signals that their behaviour should have earlier started to change, and they wilfully ignored that information.