30 July 2011

"The new Commanding Heights"

Marginal Revolution | Tyler Cowen | The new Commanding Heights:

That’s Arnold Kling’s phrase, here is the fact:
…close to 98 percent of the 27.3 million new jobs in the American economy in the last two decades were created in the nontradable sectors, led by government and health care in first and second place."
This sounds eerily reminiscent the way one of Greece's former finance ministers described their economy. The state wanted traditional protectionist policies, but they were too difficult to enact due to European agreements or too obvious in their cost, so they shifted workers into non-tradable sectors. Rather than populist sops like price floors and import restrictions on agricultural goods, they tilted the scales to get more people working in bureaucracy, healthcare, education, etc. It's easier and less obvious to set a price floor on the wages of unnecessary, unproductive government clerks than it is sugar or wheat, and these workers' output is already 100% non-tradable so you don't need to worry about bothering with import restrictions, tariffs, and such.

On a related note, what is the single least tradable job?  Let's exclude politicians and bureaucrats.  My off-the-cuff guess is barbering & hair styling.  I can not conceive of any amount of technological, legal or social change which makes it possible to import hair cutting services, within, say, one hundred years.  It is also resistant to replacing labor with capital.

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