Should we outsource jobs or keep them here in the US?

Trump has recently been asking US based companies to shut down factories abroad such as China and bring those jobs home. Do you believe such a move is good economically for the US? Social factors can be considered as well.

I personally support bringing back jobs to the US. I think having more low-skilled work available will give something for those on welfare to actually do leading to less crime. Also most econ classes teach based off Keynesian economics (indeed supply-side championed by the right is deemed as "voodoo" economics). So an argument that "trade helps all parties involved" is inherently flawed. Ricardo noted that the barter price has to lie in between the opportunity costs for a comparative advantage to be present.

Comments (94)

Aug 24, 2019

Outsourcing a skill or trade out of country at a lower cost than the US enables workers to focus on better ventures within the US. If a large industry is outsourced to another country and US workers lose their jobs, its just structural unemployment until they find a better venture in the US. This should overall raise GDP over the long term to a higher level than if we didn't outsource the jobs.

We want to focus on activities that raise GDP for the US over the long term as it raises the standard of living for everyone in the US.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

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Aug 24, 2019

Sure it is a form of "structural unemployment" but it has led to other problems. The cities in the US that manufactured a lot of goods in the US 50 years ago (including cars) have been hotspots for opium and other drug addictions. This is not a coincidence. People simply have nothing to do in those areas and are impoverished. Not everyone is born with the skill-set to become a tech developer. "Raising the GDP" is too simplistic of an interpretation here, we need to consider the social consequences as well.

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Aug 25, 2019

Fully agree. Beep boop libertarian morons are the most myopic people on the planet. The only thing worse is a Boomer libertarian.

"Muh GDP growth" is not an argument considering we don't live in a society that culls the herd and provides no social safety net. Either way we are going to pay for the dysfunction amongst the lower classes, so I would much rather sacrifice some level of GDP growth and comparative advantage if that means less crime, drug use, and single parenthood while getting better, semi-functional communities because a greater number ofdecent paying jobs are available.

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Aug 26, 2019

Manufacturing production is still at all time highs. China didn't take the jobs - productivity did.

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Aug 25, 2019

God forbid the US doesn't achieve optimal comparative advantage and we provide a few extra decent paying jobs for Americans. All that means is that fat Boomers will have to pay a few hundred dollars more for a 65" 4K TV so that they can eat Doritos in decadent comfort while watching sportsball. Boomers don't need you carrying water for their 401(k)s and endless consumerism considering they've had it easier than any generation in history.

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Aug 26, 2019

Why don't you "provide these jobs" yourself then. I, for one, don't want to pay for it. Put your money where your mouth is or stop trying to structure society as you personally see fit.

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Aug 26, 2019

The world doesn't work this way. Trickle-down economics is a ridiculous farce because wealthier people consume less as a percentage of their total income. America is at its best when the middle class is strong and flush with cash.

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Aug 27, 2019
InVinoVeritas:

wealthier people consume less as a percentage of their total income.

Since when is consumption the only positive way to deploy wealth into an economy?

Aug 24, 2019

People who call supply-side economics "voodoo" economics (also, "trick-down economics') have no clue what they are talking about. There are 3 core aspects to supply-side economics that are essentially demonstrably true: 1) that there is a tax rate >0% and <100% that maximizes tax revenue (in other words, not all tax increases necessarily increase revenue and not all tax decreases necessarily decrease revenue, which is provably true), 2) that whatever you tax you get less of (which is the core philosophy that undergirds carbon taxes, tobacco taxes, and gun sales/bullet taxes), and 3) capital investment increases the supply of products, which decreases prices to consumers and therefore not all economic growth is inherently inflationary; thus, public policy that encourages capital investment could increase economic growth in a low inflation environment.

People who call supply-side economics "voodoo" or "trickle-down" are just ignorant. Painfully ignorant.

Aug 25, 2019

I agree with (1), but it's important that it be understood correctly. There is a bastardized version of this that has a strong hold on a segment of the American Right, and it's led to some negative consequences.

The bad version is that ALL tax cuts will produce more tax revenue overall, because they will expand the tax base. In reality, what was once true for Northern European countries that had stupidly high top marginal rates is not true for present-day Kansas, whose taxes were already reasonable before the recent debacle.

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Aug 25, 2019

What does any of this have to do with outsourcing or not outsourcing?

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Aug 26, 2019
Spike Spiegel:

What does any of this have to do with outsourcing or not outsourcing?

Uh, did you read the original post? Poster talked about how people call supply-side economics "voodoo".

Aug 24, 2019

Trump's a cartoon who wishes to be at every party but nobody wants him at any of those parties.
Time and again, many companies has gone against trump's desires/wishes for the country.

So, I really do not think that MNCs are gonna stop outsourcing, because labor is much more expensive in the US than the major outsourcing centers in the APAC region.
It makes a hell lot of a difference, in terms of cost-cutting, to big firms. So they would wanna keep their business outsourced.

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Most Helpful
Aug 24, 2019

The issue with trade with China and free trade are not the same issue and are constantly being conflated. Free trade is a good thing; there are many aspects of trade with China that are a bad thing. These issues should not be conflated.

With that said, Trump has been utterly incompetent in his engagements with China. Instead of picking a fight with the entire world, Trump should have 1) signed the TPP, which was a direct shot at China and 2) allied with Europe, Canada, and other Asian nations to force change to Chinese trade behavior. Instead, Trump has engaged in petty, irrelevant trade battles with our closest allies.

Aug 24, 2019

You are implying that China is getting the best of the US (and hence it isn't free trade that is being discussed anymore). Any evidence to back this up?

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Aug 24, 2019
FutureBankTeller:

You are implying that China is getting the best of the US (and hence it isn't free trade that is being discussed anymore). Any evidence to back this up?

Huh? Are you asking me if there is any evidence that China steals intellectual property, subsidizes its export industries, manipulates its currency, forces foreign companies to allow the Chinese government involvement, and threatens constantly to take control of the South China Sea? Yeah, no evidence of any of this stuff. Jfc.

Aug 25, 2019

There's an immense truckload of evidence out there that China 1) does not allow for free-trade, violates WTO, and does not provide access to its markets (tried using Facebook, Whatsapp or Google inside of China lately?) , and 2) that China rampantly steals IP (go to any streetcorner shop and buy a DVD, use a domestic Android phone (unlicensed Android offshoot) or witness their latest fighterjet (clone of US fighter) and see for yourself how badly they steal IP.
Your comment is like "show me proof gravity exists". Hold out your hand and drop an object.

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Aug 25, 2019

100% agree
The TPP was supposed to sideline China. Trump used it to score political points by saying it helped China, when in fact the agreement didn't have China as a signator / counterparty, and was actually an agreement among Asian nations to sideline China.

Trump is using China as a way to increase his own power. Politics as usual.

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Aug 25, 2019

Imagine having a competent president... oh I wish we had one

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Sep 8, 2019
real_Skankhunt42:

Trump should have 1) signed the TPP, which was a direct shot at China and 2) allied with Europe, Canada, and other Asian nations to force change to Chinese trade behavior

This is a common misconception about the TPP agreement. In many ways, it would have incentivized even more production from China. The reason for this is what's called "rules of origin", which is one of the many facets of this topic that I never, ever see mentioned in the media.

This is an explanation by one of the guys under Clinton who helped with NAFTA. He's not a Trump supporter by any means, but he tends to cover trade and understand it more than most economists. The issue with this topic is that it is, by far, the most misreported and least understood.

http://rooseveltforward.org/blog/2016/03/28/will-t...

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Sep 8, 2019
jargon223:
real_Skankhunt42:

Trump should have 1) signed the TPP, which was a direct shot at China and 2) allied with Europe, Canada, and other Asian nations to force change to Chinese trade behavior

This is a common misconception about the TPP agreement. In many ways, it would have incentivized even more production from China. The reason for this is what's called "rules of origin", which is one of the many facets of this topic that I never, ever see mentioned in the media.

This is an explanation by one of the guys under Clinton who helped with NAFTA. He's not a Trump supporter by any means, but he tends to cover trade and understand it more than most economists. The issue with this topic is that it is, by far, the most misreported and least understood.

http://rooseveltforward.org/blog/2016/03/28/will-t...

Nope. I just read the article you posted and what you're asserting is not true. The author gave an example of how the rules of origin could be circumvented, but it doesn't actually incentivize production in China. The TPP would have incentivized TPP-country production with loopholes that wouldn't have been as damaging to China as hoped. That's a vast difference than the assertion of incentivized Chinese production.

Aug 24, 2019

Don't see a problem with outsourcing jobs if it's in the best interest of the company. That's capitalism. You can't force change backwards.

The harsh truth is that US can't compete with the relatively cheaper low-skill labor that other countries offer.

Some people argue that jobs are being lost. The job market is simply changing in response to new trends and technology. People either need to adapt with the changing market or get left behind.

Makes no sense to me to try and combat this by "bringing jobs back". We need to create new ones and gain a competitive advantage... what's gone is gone for good. In my opinion, at least.

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Aug 24, 2019

Read my comment to Isaiah 53 5 and tell me what you think.

Aug 25, 2019

This is so stupid. Did you even think before posting?

We have already chosen as a society that we don't "leave behind" the members of society who don't contribute. We simply subsidize them through countless programs, prisons, welfare, subsidies, etc. It would be much better to sacrifice some level of GDP growth if we could provide jobs to people who would otherwise be listless.

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Aug 25, 2019

I find your comment somewhat aggressive, but It's a good point. However, sacrificing "some level of GDP growth" is just the short term effect. We're talking about not capitalizing on what could be a competitive advantage for the US. Not only does it contribute to higher GDP growth long term but should reduce social program dependency if done correctly.

I respect your view. I just think that it's too narrow for the topic at hand.

Aug 26, 2019

You say "some amount" and "much better." Care to elaborate? This matters ... alot. The burden on proof is on you here as the market already spoke and showed its labor preferences without the heavy-hand of social engineers like yourself.

Aug 26, 2019

We are like 25% wealthier than England or pick your second best large country. 25% of our wealth is significantly more than any welfare policies we have. And the reason we are wealthier is due to our "free markets".

Array
Aug 24, 2019

If you truly believe in market efficiency, then as the world becomes more global, the value of labor will continue to converge, as well as gdp per capita. Over the last 50 years the quality of life for the average American has been 100x better than the average person in a poor country, and the only way to ensure this "market anomaly" of high gdp/Capita remains is to have some kinds of barrier to completely free trade. I'd much rather maximize America's GDP even if it lessens potential global gdp

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  • 1st Year Analyst in Sales & Trading - Other
Aug 25, 2019

.

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Aug 25, 2019

This doesn't tell the full story because there have been times in history where much richer nations did effectively have free trade. A lot of structural differences keep rich nations rich and poor nations poor. Liberal Institutions like the court system, our system of laws, social norms, and other structural foundations like private property of western countries provide huge structural advantages. If you can't have private property ownership, you can't have anything because someone else will always get the bulk of the benefit from your work.

GDP/Capita will converge a bit, but capital won't immediately flow out of the country because things like human capital and institutions provide serious constraints to growth when you leave the U.S. and other developed nations. At the end of the day, trade happens because of mutually beneficial transactions taking place, which provides huge benefits to people's standards of living.

China is a problem area though. No respect for private property, especially that of foreigners. The country grew out of Mao and communism, so while the country has liberalized a bit it still remains to be a zespool of destructive tendencies and bad policies.

Aug 25, 2019

Most of the stuff being made in China with inexpensive labor can be made in the US or anywhere really with modern equipment that is almost fully automated. Most of the stuff is just injection or blow molded plastics. Silica based products are already highly automated in China. Tv's can be made right here in the US with little to no cost difference. You can spit them out by the thousands with modern equipment that's made in the US with only a couple technicians on the entire factory floor. We have a ton of older warehouse space that is plenty sufficient for this type of production. We live in an age where it almost seems inefficient to not take advantage of our modern production abilities and the freedom it allows the companies who produce said products. Limited lead times, complete control over production, no loss of intellectual property...

An additional benefit of a contracting Chinese economy is their reduced ability to project their influence worldwide. For years they've been overly aggressive with their maritime claims.

Aug 25, 2019

The real threat is China's advancements in tech - not what they do in low-value manufacturing.
All you guys worried about China in manufacturing are missing the big threat - China is already starting to eat the US's high-value, high-margin tech business. They are a credible threat to the US technology industry leadership.

China's government helps their tech industry immensely through favorable policies. China also graduates far more engineers and scientists than the US or anywhere else. Many come to the US to study, and then get lured back.

China is likely going to win the AI war. The fuel for AI is information, and China has far more of it than anyone else. They have unfettered access to data, and several major Chinese tech incumbents - Tencent, Ali, Baidu, JD - all have a wealth of data they can tap into.

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Aug 26, 2019

Amen

From observation, this viewpoint is a US vs EU view of the world. The US sees China as a threat in manufacturing, the EU sees the rapidly advancing technological threat. The US sees Silicon Valley as superior, whilst ignoring the advantage in China of having strong state support. China is focusing on winning the AI war (e.g. missile control systems through to infrastructure hacking and population control of other states - disinformation etc vis a vis Russia) and is adept at using their population to propel their advancements and propagate their world view. The US focuses on winning physical war (again missile control, but less of the other stuff) but is less adept at using the population today (as historically, everyone loves the USA but this is fading) beyond the country remaining unified/resilient. The EU is scared shitless and regulating everything as hard as possible but is dying due to its overregulation and stagnation that is natural in a sense in the lifecycle decline of a nation (or collection of nations).

Offshore liffe

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Aug 26, 2019

A lot of my friends in DoD had mentioned Cybersecurity being a big thing these days.

No pain no game.

Aug 26, 2019

And if we lose that battle are we richer for it? If China leads in AI and we copy or use their technology aren't we still richer than if China didn't exists.

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  • 1st Year Analyst in Private Equity - LBOs
Sep 8, 2019

So what you're saying is we should stop taking any students from China. I can get behind that. Seems like 90% just cheat their way through Uni with no consequences anyway. In my senior year I had peer Chinese finance students who didn't understand how to calculate working capital. They're just taking spaces and driving up prices for higher education so seriously can we stop fucking importing them?

Aug 25, 2019

mmmm...our election cycle betrays us. China is really smart. I actually would not buy any individual stocks until we get closer to the November 8, 2020. I believe during that time China will make extremely aggressive economic moves to weaken the US economy. Thus pressuring Trump who needs good economic numbers to win the election to make a bad deal.

Aug 25, 2019
MRBIGBUCKS95:

mmmm...our election cycle betrays us. China is really smart. I actually would not buy any individual stocks until we get closer to the November 8, 2020. I believe during that time China will make extremely aggressive economic moves to weaken the US economy. Thus pressuring Trump who needs good economic numbers to win the election to make a bad deal.

I agree the Chinese will attack the U.S. economy to get Trump out, but I don't consider China's economic leadership to be all that smart---the average Chinese person still lives in grinding poverty, and despite the possibility of endless growth, China is probably in a recession today (I say "probably" because China's state-reported numbers are unreliable propoganda).

Aug 25, 2019

why would the Chinese attack the US election, when Trump is helping Xi immesnely?
Trump's railing against Xi has enabled Xi to consolidate his power-base. Having an external enemy enables Xi to get people to think about that, rather than think about China's domestic problems.

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Aug 25, 2019

Automation and AI are a bigger threat than outsourcing.
Outsourcing is somewhat of a red herring.
America's most productive manufacturing year in history is ... last year. The problem is that instead of hundreds of people being employed on the shop floor, the companies are employing robots and just a couple of programmers / managers / oversee-ers. China is actually now an expensive nation from a manufacturing standpoint. They face the same problems the US does around outsourcing and labor costs.
For us as employees the question is... how can we stay relevant. It's getting really difficult to do that. Even sales & trading is shrinking as there's continuous margin pressures.

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Aug 25, 2019

@realskank - You clearly don't know anything about China.

Your basic premise that China wants to get Trump defeated is so wrong.
Trump's presidency has been immensely positive for Xi Jinping. The time when a leader is at his most popular is when the nation is at war. Trump has enabled Xi to rally the nation around his 'noble struggle against unfair US practices' to make himself very popular, and abolish term limits. Without Trump's anti-China grandstanding, it would have been more difficult for Xi to get the population to fall in line around his power grab. As Trump continues to rail against China, Xi is able to further grow his power-base.

"the average Chinese person still lives in grinding poverty" - Not at all. I live in China, and I can tell you that China in the past 2 decades has been the greatest uplift of people out of poverty in human history. In the major tier-1 cities people live wealthy lives, the same as US - and in fact generally better. They actually have public healthcare and nearly no homelessness. Like everywhere else there's economic struggles, but in terms of basic needs, the Chinese in major cities are ahead of the US.

In terms of the vast populations outside of the tier 1 cities - the tier 2, 3 and rural - their purchasing power parity is actually quite high. Now don't go quoting GDP per capita numbers at me. In China you can live incredibly well in tier 3 cities on just $10k - $20k / year. The same cannot be said of most US locations.

"I don't consider China's economic leadership to be all that smart."
Based on what? We can argue pros and cons all day, but the fact is, China's bureaucracy is very pragmatic and business-minded, and they've made an economic miracle happen. Most of Chinese government is really a technocracy. The bureaucrats spend an inordinate of time studying economics and policy, and testing out new ideas in limited batches - whether that be special economic zones (like Shenzhen), or free-trade zones in neighborhoods (parts of Shanghai). Policies are tested in limited experiments - like when they rolled out domestic LP programs, or domestic growth boards for listing startups, or when they rolled out industry-specific matching funds. The US never can get its act together to do that.

In China, bureaucrats advance through education, and forming complex internal alliances. In the US, politicians run a popularity contest where grandstanding and inflammatory commentary often carries the day. It's like a 'who is the biggest asshole' contest.

The only thing you said half correctly is that China is in a recession. It's actually not likely a proper "recession" but it is certainly in a major slowdown. However it's not so much the trade war that is causing that, but more Xi's domestic policies - many of which favor state-owned enterprises, and disadvantage the private sector. There's also the Belt and Road boondoggle (who wants to build superhighways to the 'Stans???) and other boneheaded things one can only do in a dictatorship. Trump just is seizing on the opportunity to kick China while it's having domestic economic problems. Very opportune for him. But please don't believe the US tariffs are doing much to China. Those costs are borne by the American consumerYou clearly don't know anything about China.

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Aug 25, 2019

Can you tell me the source of all these rich Chinese kids studying in the US. They study in my b college and are quite elitist lol. Like I don't understand how they can afford international rate and still have fancy shoes and clothes etc. what gets me also is that I don't go to a Harvard type school . Solid public but still surprised to see all these rich internationals here

Aug 25, 2019

I do business with the Chinese almost every single day. I'm extremely familiar with China.

1) Your timeline is completely wrong. Xi Jinping had already made himself effectively dictator for life prior to Trump, and it was made official before there was any real trade war with Trump and China (it was early 2018). Saying Trump is resposible for the Xi dictatorship is like saying Trump is responsible for partisanship in Washington.

2) China's rise from absolute poverty does not negate the fact that China is still extremely poor and the average Chinese person does live on an extremely low income. I don't need to quote GDP per capita when I can quote GDP PPP, which is around $17,000. That's poor. China is a poor nation with some wealthy people. Adjusted for cost of living, the average Chinese person is 3.7 times poorer than an American, and that's with the extremely wealthy bringing that figure up

3) China's economic leadership is not smart. Adam Smith more than 200 years ago demonstrated that mercantalism is an inferior form of economic system for a nation. The Chinese have not learned the lesson of hundreds of years of trade and have instead achieved sub-optimal results for the people by making outside capital investment difficult and access to foreign goods expensive. And a great deal of economic growth is fake growth, pumped up by building ghost cities with government debt and having the gov't prop up failed companies. The fact that China is in recession when it has an utterly massive trade surplus and about 100 years of economic growth required to catch up with the first world speaks volumes about Chinese economic leadership. A blind mule should be able to lead China to positive economic growth yet they are in recession

Aug 25, 2019

@FutureBankTeller

These rich Chinese kids come from families that have become wealthy through the economic uplift. That means they are the kids of wealthy industrialists, real estate mangnates, etc, In a population of 1.4bn, if a certain % become wealthy, that's a huge number of rich people. And like most entitled spoiled brats the world over, who have never had to work for it or suffer lack, they are generally insufferable.

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Aug 26, 2019

Great question. Easy answer is yes outsourcing is good because it's only low skilled labor getting outsourced so people in the US should just go to college and get a better job... But it doesn't work like that because there is no reason the ownership class would ever stop outsourcing jobs all the way up the skill ladder. This means the managers firing their white collar underlings today to ship those jobs to India will themselves be on the chopping block tomorrow. Look at Amazon's massive recent move into India. Look at Wells Fargo outsourcing good back office jobs to India as they fire tens of thousands in the US.

Tldr: Outsourcing is a good idea until it's your turn to go.

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Aug 27, 2019

Exactly this, you hit the nail on the head. As automation technology becomes cheaper, more efficient, and scaleable, the rate at which humans are replaced will increase. Mature publicly traded corporations solely exist to increase earnings per share and provide capital appreciation and/or dividends to shareholders. There is no element of morality, social responsibility, or respect for workers at most of these companies.

A recent false meme is the idea that manual labor will be replaced which is totally incorrect. Manual labor requires hardware which requires physical resources. Robotic manual labor is still quite a ways off in the future. Meanwhile, entry-level white collar information work from data analysis to legal review is ripe for automation because software solely requires a screen and a programmer which can be easily outsourced to cheaper labor markets and can be replicated infinitely at little to no cost. This will be a huge crisis considering how young adults in America all flocked to universities.

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Aug 26, 2019

I don't think its accurate to say most econ classes "teach off" Keynesian economics. Its presented as a viewpoint like any other.

And you say the pro-trade argument is "inherently flawed" but you don't say why.

Free trade increases overall wealth in the long term. It's up to society/gov't to ensure that the wealth is distributed in a way so that those who are initially harmed by free trade (jobs shipped overseas) can ultimately benefit from the overall wealth creation. It's not efficient to restrict trade and create less wealth just to save someone's job, because that's negative sum overall. You want the positive sum policy and then allocate as needed.

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Aug 26, 2019

Are you serious? Maybe in Notre Dame economic policies from the right are presented as a thought but in most public schools and liberal arts colleges Keynesian economics is taught as FACT not just a viewpoint... If supply side is brought up it is mentioned as voodoo economics and not taught that much. Using a term such as voodoo is also a subliminal measure to discredit a theory and entire field of econ.

Aug 26, 2019

It just seems a little far fetched to me. I'm very aware of the liberal bias on college campuses and how crazy it's become. But Keynes is so widely known as a controversial view that even the most liberal professor would probably not try to pass it off as Econ 101, any more than a politics professor would try passing off Communism as a normal way to govern or a biology professor would try teaching Creationism as though there's no controversy

Your voodoo economics point also seems a little exaggerated and confused, the term was actually coined by a conservative to criticize another conservative.

Anyways why can't you just stick to the economic points since you claim to be such a defender of econ. I wrote a defense of free trade and you want to instead bicker about the off-topic point of how politically biased college is? And throw MS at me? How about you back up what you say. Why are we as a country better off by avoiding free trade

Sep 8, 2019
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Sep 8, 2019
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"Work ethic, work ethic" - Vince Vaughn
Sep 8, 2019
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Currently applying to medical school.