In Defense of Free Trade and Globalization [aboutcomputer99.blogspot.com]

In Defense of Free Trade and Globalization [aboutcomputer99.blogspot.com]

A 80's teenager, bored by traditional high school subjects like biology but fascinated by computers, accidentally taps into the Pentagon's top-secret computer...the USA's NORAD system. He starts what he innocently believes is a computer game called "Global Thermonuclear War," but the "game" is real. The Pentagon's best minds cannot shut down or reprogram the supercomputer that is readying a missile attack against the USSR, and thereby unleash Armageddon. The teen and his girlfriend attempt to aid the helpless Pentagon and, in a frantic race against a ticking "doomsday clock," try to persuade the computer to end the "game."

aboutcomputer99.blogspot.com Wargames

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Suppose there are two countries: The United States and France. The people of both countries desire computers and wine, so businesses in both countries produce those products. Due to economic conditions, the United States produces computers that are fast and cheap, while its wine is bitter and expensive. Due to different conditions, France produces wine that is sweet and inexpensive, while its computers are slow and overpriced. As long as trade barriers exist between the two countries, two separate markets for each category of products will exist. As a result, consumers in the United States spend more money to purchase bad wine, and those in France waste money while buying slow computers.

What should both countries do? The logical answer is that the two countries should drop their trade barriers and become a single market: The United States should make more computers, and France should produce more wine. The United States should then sell its computers to France, and France should sell its wine to the United States. As a result of this trade policy, the people of both countries receive quality products in each category at low prices. Everyone wins. This, in a simplistic nutshell, is the economic justification for globalization and free trade. When countries trade, people generally win.

The central problem in economics is the issue of scarcity - in other words, how can societies can use their limited supplies of resources most efficiently? In the hypothetical example I provided earlier, is it better for the United States to produce wine or computers? Is it better for France to produce computers or wine?

The justification for the answer - that each country should produce that which it can make most efficiently - lies partly in the idea of economies of scale: "a production process in which an increase in the scale of the firm causes a decrease in the long-run, average cost of each unit." (This is why Wal-Mart is so successfu l - they purchase goods in such high quantities that they can resell them at the lowest prices.) In other words, increasing the size of the market increases the ability of companies and societies to produce better products at cheaper costs. When there is increased competition and access to more resources and labor, only the best and cheapest products will survive. The end beneficiary is the consumer.

Now, take the example I provided earlier, and extend it to the entire world. Every country would be competing with every other country for primacy in thousands of business sectors and over millions of products. When this process occurs uninhibited, the quality of products increases, and their prices fall. In the end, consumers throughout the world benefit because a single global market creates an immense economy of scale. This is why general worldwide inflation (not counting food and energy), is at historic lows at a level of roughly 2 percent. Globalization makes poor cou ntries richer, and it keeps prices low in rich countries.

I have not written anything that should surprise anyone. Nearly all mainstream economists have made similar points because the theory is commonly known. But if the effects of free trade and globalization are obviously positive in the long run, then why are economists, U.S. presidential candidates before the 2008 election, and the American public becoming increasingly skeptical? The answers lie in psychology and journalism.

First, we need to return to my hypothetical example of the United States and France, and their computers and wine. If the United States and France were to stop producing wine and computers respectively because it became inefficient, then workers in those industries would lose their jobs. Those employees would reason that globalization cost them their jobs, and they would be correct. However, their understandable emotions do not recognize the larger, rational context. The effect of losing their jobs would understandably loom larger in their minds than the fact that they have generally paid less for many consumer goods - or, more accurately, that prices have increased at lower rates than in the past - over the past several years. They probably do not even realize that they have been paying less because the change has been incremental over time. However, they certainly know that they do not have jobs. So, to those workers, globalization is a negative trend. It is understandable that they cannot see the big picture because they are worried about the security of their families.

The mainstream media does little to help. The losers in globalization receive much more attention than the winners because those stories are exciting to tell - and sexy stories translate into more television viewers and newspaper subscribers. It is easier to tell a story about layoffs in a thirty-second soundbite on "Lou Dobbs Tonight" than to discuss a complex economic theory. Comm entators who support globalization and free-trade, like Thomas Friedman of the New York Times, need to explain the benefits of globalization as often as possible. But it is difficult in this media climate.

So, what should pundits and op-ed columnists tell the American public? Firstly, and most importantly, they should say that the people cannot stick their heads in the sand and hope to return to a world before globalization. That is not going to happen. The United States needs to adapt.

In my hypothetical example, the former wine manufacturers in the United States cannot simply complain about their lost jobs - they need to learn to make computers because that is where future economic growth will be. Likewise, former computer manufacturers in France need to improve their wine-harvesting skills. These two countries needed to revamp their societies in order to become successful in a world where only one market exists. In business terms, every country has its core co mpetencies - the products it creates or the services it provides that are better than every other country. In a one-market, globalized world, only these industries in a given country will thrive.

The country that can produce and market the best coffee will corner that market around the world. The country that can produce consumer goods in mass quantities and at the cheapest price will be the world's leader in manufacturing. The country that can provide the best outsourcing to English-speaking countries will lead in customer service and basic administrative services in that area. Competition in all sectors is now worldwide.

But where does the United States fall in such a world? I do not have a set answer, but I do know where America's future does not lie. America's future is not in manufacturing - that belongs to China. America's future does not lie in low-level administrative and computer services - that belongs to India. America's future may not lie primarily in high-finance - London is slowly overtaking Wall Street. America's future cannot lie merely in consumer spending because an economy that is based only on people buying stuff cannot last. The United States needs to ask itself: What does it do better than every other country? What can it do that no other country can?

I know that I sound like a pessimist. But I'm not. It is important to state that globalization is neither inherently positive or negative; it is an amoral process. What matters is how individuals and countries react to globalization. If a country adapts to these fundamental changes in the world economy, then it will benefit greatly. (In my example, the Americans who formerly made wine would be learning how to produce computers, and the French who formerly made computers would be learning how to make wine.) If a country sticks its head in the global sand, then it will decline economically. Every country must make a choice. If every country does what it does b est, then the entire world will benefit through access to the best goods at the lowest prices.

The United States will need to make some difficult choices if it is to benefit from the new global order. However, there is little hope if the country's educational system and national infrastructure are in shambles. American high schools leave a lot to be desired. Although American universities are currently the best in the world, their American students are not learning the skills - business, science, technology and engineering - that will be crucial in a globalized world. At a time when high schools should be inspiring more students to study science, many of them are still teaching that creationism is a valid scientific theory. (India must be laughing.) In addition, the skyrocketing cost of higher education is not helping to prepare students. Most importantly, the United States needs to start teaching different languages to the next generation and educating them about var ious cultures and countries. Americans need to travel internationally more often. You cannot engage the world if you do not know it.

In 2002, China spent more than $ 200 billion on improving and modernizing its infrastructure. I'd wager that the annual amount has only increased since that time. In one estimation, China has spent roughly $ 1 trillion. As the Asia Times notes:

China is investing its surplus in railroad, power, road and water management in a concerted way. There is no question that China still lacks adequate infrastructure, but it has understood clearly the importance of modernizing its basic infrastructure to generate employment and adequate utilization of its vast population.

India, for its part, has been looking for $ 320 billion in investment to improve its infrastructure. While these countries are preferring butter to guns, the United States has done the opposite by spending a projected $ 2 trillion on a mistaken war in Iraq at a time when i ts infrastructure is crumbling and the country becoming economically unstable. Even though the future will be a digital age, the United States is falling behind other countries in broadband capacity. Globalization rewards those countries that are as lean and wired as possible.

The United States needs to change its priorities. It needs to revamp its educational system, stabilize its finances, invest in the future, and determine how it can compete in a one-market, globalized world. This is a tall order. But if there is one quality that the United States has more than any other country, it is the ability to be creative during challenging times.

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Question by Joe in texas: How can we depend on computer models of global warming? When computer models can't even reliably predict the weather 3 days in the future? Best answer for How can we depend on computer models of global warming?:

Answer by halfeatenpizza
I don't know if you fly much but airplanes and most machinery that costs crap tons to build are first "built" and tested with computer models to make sure they'll work correctly. That obviously works reasonably well. So don't just throw out computer modeling in general. We cannot predict weather patterns very far in advance because our weather is a chaotic system where small changes in what our initial conditions are lead to exponential changes down the road. That is, we can only measure the best estimates of the data we have of the current conditions so finely and there will always be errors made. Those errors then produce significant changes down the line as to what actually happens vs what our best estimates say would have suggested. However, if you take a range of values around what our best estimates are, and follow those through and they all lead to the same qualitative result, then it isn't unreasonable that that result will eventually take place. In weather predictions we are concerned with precisely where a rain storm occurs, but we can predict that SOMEWHERE a rainstorm will occur fairly accurately. That kind of qualitative predictions ("that" something occurs as opposed to "where" something occurs) is more along the lines of global warming models. And that is something we can do very well. EDIT: I'm not the standard moron that answers questions on here and I actually know what I'm talking about. I'd really love to know who gave me the thumbs down and what their educational background is.

Answer by pegminer
Well, all models are subject to error, but you can learn a lot from them. Here's a couple of reasons to trust them: 1. The idea is not to predict the weather 50 years from now, it's to predict the average climate then. That's something completely different. When you say models can't reliably predict weather 3 days in advance, it's often because the weather pattern is slightly different than what was forecast: faster, slower, farther north or south. It may have gotten the weather "right," but slightly misplaced in time or location. Those sorts of errors may average out when run over the time periods of global climate models. So even though they may not be able to predict the weather then, they can accurately predict how much rain will occur or what the temperature will be when averaged over a year. That's what climate models are intended to do. 2. They verify the models by running them against the past. We know what the climate of the past century was like, so we can start with conditions of a hundred years ago, the ocean temperatures, the amount of ice at the poles, the amount of carbon dioxide in the atmosphere, etc., and then run the model forward in time and see if it matches up against what actually happened. If it did, great; if not, back to the drawing board. But look, they're never going to be perfect, but if they all say that something dire is going to happen, maybe we should pay attention. We have a solid physical background to expect warming, and if they show that, we shouldn't be surprised or try to deny it. I think their biggest problem will be that they won't accurately model what quantity of fossil fuels are actually still available.

Answer by Michael is ninga
well their so complicated that we can change a few factors to make it seem the way we want to. If a scientist made a computer model predicting minor fluctuations in 50 years time and it doesn't lead to anything caterstrofic then noone would have any interest in it. On the other hand if he made a model prediciting absaloute terror and apocalypic cercumstances then he'll recieve a much better response from the media and other bodies of society.

Answer by RUK9P
You can't. NOAA is groping in the dark. The 30 year difference in the 2006 & 2007 projected & actual melting rates could be your first indication. We're living within a self equalizing chemical system driven by heat from our Sun. When something does change, the change will start off very slowly. Then almost overnight, the rate of cha nge per day increases significantly. This is due to the fact that mathematically the primary value that controls the slope of the change curve over time, is an exponent.

Answer by maximac
You can't. Even when you read most of the reports of those scientists who are proponents you will see that they have qualifying paragraphs that make for interesting reading. They leave plenty of room for doubt. Many of the reports come right out and say something to the effect that sun cycles, la nino and la nina and other factors also impact the global climactic cycles and that the researchers do not have full understanding of how those factor into their models. If you want to do something interesting research the properties of steel over different conditions of temperature and stress and minor metalurgical differences. Under real world conditions of temperature and different types of torque, impact and straight pressure, steel can vary from almost rubbery to brittle. In our world we like to think of things as being linear and that we can extend something from a lab out to infinity in a straight line. Or we like to think that all things can use a formula to approximate them. The truth is often times a formula will approximate something for only a limited set of conditions and when you extend it out the formula breaks down - sometimes drastically. For example a portion of a bell curve is very linear and a linear formula can be used for that portion and it would model that portion of the curve very well, because that portion is very close to linear. But when you extend it out you find that the formula is not even close to approximating the total bell curve. Some researchers who want to find for AGW like to ignore and minimize what they consider are minor extraneous factors, I personally believe it is like minor changes in the metalurgical composition of steel. What appear to be minor changes can have a major impact in the real world.

Answer by Dana1981, Master of Science
For starters, weather is much more unpredictable than climate. Climate is just the long-term average of weather over the entire planet. All the little unpredictable variations average out. Plus meteorologists have gotten pretty good at predicting the weather several days in advance. We know we can depend on computer models for global warming because they've proven themselves to be accurate. For starters, they accurately hindcast the temperature changes over the past century: http://www.globalwarmingart.com/wiki/Image:Climate_Change_Attribution_png And they've also been used for 20 years now, and have predicted the ensuing warming to a high degree of accuracy: http://www.realclimate.org/index.php/archives/2008/04/model-data-comparison-lesson-2/ http://www.realclimate.org/index.php/archives/2007/05/hansens-1988-projections/ In short, we can depend on computer models because they have proven themselves to be accurate.

Answer by Ken
We know (without computer models): 1) Climate (average of weather over 30 years) is warming 2) Greenhouse gas levels are rising 3) Increase in greenhouse gas is coming from human activities 4) Greenhouse gases hold heat, that would escape to space, near the planets surface 5) Increased levels of greenhouse gases will hold more heat, warming the planet. A simple math equation (no computer required) using well established physics can show that as greenhouse gas levels continue to rise (all other things remaining equal), the planet will warm. The uncertainty lies in how much various feedback effects will warm or cool the planet. That's where computer models are the only tool scientists have. And while they aren't perfect, that doesn't mean they are useless.

Answer by Kelsey E.
hah, good question.

Answer by Boomer Wisdom
There are many different computer models of man-made global warming, all of which were programed with selected data, and NOTHING that they have predicted has occurred. Myself, I'm more worried about ManBearPig destroying the economy of the free world.

[global computer]