Saturday, March 20, 2004

The outsourcing bogeyman

Regular readers might have noticed that I was focusing a bit on offshore outsourcing recently. There's only so much one can say about the topic in a blog post, however, so I figured, what the heck, let's turn it into a paper:

According to the election-year bluster of politicians and pundits, the outsourcing of American jobs to other countries has become a problem of epic proportion. Fortunately, this alarmism is misguided. Outsourcing actually brings far more benefits than costs, both now and in the long run. If its critics succeed in provoking a new wave of American protectionism, the consequences will be disastrous -- for the U.S. economy and for the American workers they claim to defend.

That's the abstract of my Foreign Affairs essay, "The Outsourcing Bogeyman," which will come out in the May/June issue of that journal, but is now online at their web site.

Here's a link to the bibliography and footnotes, but you should comment on the piece here.

posted by Dan at 03:24 PM | Comments (91) | Trackbacks (3)

Thursday, March 18, 2004

Open Al Qaeda thread

Multiple news stories about a senior Al Qaeda figure being surrounded by Pakistani forces here, here, and here. Anticipatory Retaliation says it's Ayman al-Zawahiri, Bin Laden's second-in-command.

Discuss below.

posted by Dan at 05:56 PM | Comments (56) | Trackbacks (0)

Wednesday, March 17, 2004

Au Revoir

Blogging will be intermittent at best for the rest of this week, as I'll be at the International Studies Association annual meeting in Montreal. Weather aside, I've never been to the city and I've heard from reliable sources that it's a great town.

Don't worry, however -- within the next 24 hours, I will be posting something that should prompt a fair amount of conversation (cue enigmatic smile).


UPDATE: OK, it might be 48 hours.

ANOTHER UPDATE: Wound up being 72 hours -- click here for more.

posted by Dan at 01:18 PM | Comments (25) | Trackbacks (0)

I'll have my coffee extra bitter, please

Brad Delong writes:

A change in state: today I stopped drinking lattes, and started drinking iced lattes. It was 85 degrees. Summer is icumen in.

Yes, spring is coming!! Oh, wait....

Even better -- I'm departing for Montreal later today!!

Damn you DeLong!! Damn you to hell!!

posted by Dan at 01:02 PM | Comments (2) | Trackbacks (0)

The lack of correlation between jobs and trade

Brink Lindsey has a policy brief on the relationship between employment and trade over the past few years, particularly in the manufacturing sector. From the abstract:

Even in good times, job losses are an inescapable fact of life in a dynamic market economy. Old jobs are constantly being eliminated as new positions are created. Total U.S. private-sector jobs increased by 17.8 million between 1993 and 2002. To produce that healthy net increase, a breath-taking total of 327.7 million jobs were added, while 309.9 million jobs were lost. In other words, for every one new net private-sector job created during that period, 18.4 gross job additions had to offset 17.4 gross job losses.

International trade contributes only modestly to this frenetic job turnover. Between 2000 and 2003, manufacturing employment dropped by nearly 2.8 million, yet imports of manufactured goods rose only 0.6 percent. Meanwhile, despite the new offshoring trend, the Department of Labor is forecasting a 35 percent increase in computer-and math-related jobs over the next decade.

Calls for new trade restrictions to preserve current jobs are misguided. There is no significant difference between jobs lost because of trade and those lost because of technologies or work processes. All of those job losses are a painful but necessary part of the larger process of innovation and productivity increases that is the source of new wealth and rising living standards.

Read the whole thing.

posted by Dan at 11:51 AM | Comments (34) | Trackbacks (1)

Iran in turmoil?

Well, don't I feel like the perfect fool.

Post something about possibly cooperating with the Iranian government, and then the Iranian people go and rise up. Click here, here, and here for details.

We'll see where this leads. One wonders whether the complete impotence of "reformers" in the government triggered this outbreak.

I would love for this to pan out -- but I have every confidence that the hardliners are prepared to be as brutal as necessary to stay in power.

I really hope my confidence is misplaced.

posted by Dan at 11:34 AM | Comments (32) | Trackbacks (2)

Should there be a "grand bargain" with Iran?

The Financial Times breaks a story that back in May, Iran wanted to join Libya on the Bandwagon Express:

The US has for 10 months been stalling over an Iranian offer of landmark talks that would see the Islamic republic address Washington's concerns on nuclear weapons, terrorism and Israel - because of divisions within the Bush administration.

US officials and go-betweens say the talks, which could in return establish normal diplomatic relations between the countries, have been resisted by hawks in Washington who adamantly oppose opening a dialogue with the clerical regime in Iran, which George W. Bush, the US president, branded part of the "axis of evil".

However, Colin Powell, the secretary of state, recently told an internal meeting that Mr Bush was looking for an "opening" with Iran, raising the possibility of a positive reply. The recent example of Libya has shown how some countries that Washington has labelled "rogue nations" can begin to rehabilitate themselves in US eyes.

What has become known in diplomatic circles as Iran's "grand bargain" was first communicated to the US State Department through the "Swiss channel" on May 4 last year. Switzerland represents US interests in Iran. The communication quoted a senior Iranian official as laying out a "road map" to normalise relations, which have been hostile since the Iranian revolution of 1979.

Under the plan, Iran would address US concerns over nuclear weapons and terrorism, co-ordinate policy on Iraq and consider a two-state solution to the Israeli-Palestinian conflict. In return, Iran expected a lifting of sanctions, recognition of its security interests, dropping of "regime change" from the official US lexicon and eventual re-establishment of relations. "There was a lot of detail to be worked out," said one American familiar with the proposal. "They proposed concrete steps on how to work on this. The substance of the agenda was pretty reasonable."

However, Washington has given no formal response to the offer. Instead, the Swiss foreign ministry received a rebuke from the US for "overstepping" its mandate. Nonetheless, unofficial contacts have continued with Iran through various channels.

Even those "realists" in the Bush administration, who believe it is in the US national interest to talk to Tehran's hardline clerics, perceive that Iran's behaviour is getting worse on issues such as its suspected nuclear weapons programme, support for "terrorist" groups and its human rights record.

One high-level figure involved is Brent Scowcroft, a former national security adviser and retired general, who has held talks with Mohammad Javad Zarif, the Iranian ambassador to the United Nations. Both men declined to comment.

Here's my question -- should this deal have been made back in May? Should it be made now?

Note that the FT story makes it clear that the quid pro quo required the US to give the Iranian regime a partial pass on human rights. On the other hand, that's also not part of the Libya deal either. One could argue that Iran's record of prior bad acts raises the bar for trusting them. On the other hand, Libya tried to acquire WMD capabilities while the negotiations with the US and UK were taking place.

My initial take -- the deal should have been cut, and probably should still be cut. I say this fully aware that such a deal would be detrimental to the short-term advancement of human rights in Iran.

The top priorities of the administration are the war on terror and remaking the Middle East. Iran's cooperation on the terror front would have been pretty easy to measure (making the deal easy to revoke if Iran failled to follow through), and an unambiguously good thing if Iran had followed through. The downside would have been giving the Iranian hardliners a freer hand in cracking down -- but it's not as if not making the deal has improved matters. Furthermore, if the deal increases Iraqi stability, then it improves the odds of Iraq democracy, which would have a powerful demonstration effect.

I'm perfectly willing to entertain counterarguments.

One final thought -- the deal is still out there. Should it be taken now?

UPDATE: Lots of good feedback, mostly centered on a) whether Iran would live up to its side of the bargain, and b) what this would mean to Iran's citizenry.

My arguments in favor rested on the notion that a) The Iranian government lived up to its bargain, and b) Our current policy of "regime change" via isolation and browbeating was not working (though check out my next post). Furthermore, cooperation on terrorism, WMD proliferation, and Iraqi stability cannot be lightly dismissed -- though I agree that there would need to be tangible metrics to ensure Iranian compliance.

Furthermore, in terms of policy consistency, why would it be OK to cut a deal with Libya and not Iran? Roger L. Simon [who y'all should read] says that it's a question of magnitude -- Iran is bigger and more important than Libya.

Fair enough -- but my question would be whether the demonstration effect of a more stable and democratic Iraq on the Irania population outweighs whatever direct effect U.S. condemnation has on the stability of the Iranian regime.

posted by Dan at 01:08 AM | Comments (63) | Trackbacks (6)

Why Bill James is not an economist

Bill James, the godfather of baseball sabermetrics, is now working as a consultant for the Boston Red Sox. Of course, it's only recently that James' pioneering idea of using statistical analysis to determine what causes a baseball team to win games has been accepted.

Before that, he had an interesting set of careers, as he told

Before he started making his living analyzing baseball, James worked in several unglamorous odd jobs, including fast food restaurants, night watchman, convenience store clerk and forklift driver. One of his first career goals was to be an economics teacher.

But his obsession for baseball drained the ambition he had for any other kind of work.

"I was never a particularly good student," said James. "I suppose I was capable of being a good student -- most everybody is -- but when I studied Micro Economics, for example, I would take what I learned there and figure out how to apply it to baseball. I would spend five minutes mastering the concept, 50 hours figuring out how it might apply to baseball. This was a drain on my potential to become an Economics professor. Even when I was in high school, teachers would tell me to put away those box scores and do my homework. Once I focused on writing about baseball, all of that energy was working for me, rather than working against me."

As someone who also started out in economics, but found politics more interesting, I can certainly understand.

UPDATE: On a loosely related topic, David Pinto has an interesting guest essay by Glenn Berggoetz and Jeff McBride arguing that contra conventional wisdom, ex-catchers make lousy managers.

posted by Dan at 12:50 AM | Comments (10) | Trackbacks (4)

Tuesday, March 16, 2004

Reflection on Spain and Al Qaeda

The New York Times has two very good op-eds about the implication of the 3/11 bonbings and subsequent Spanish elections. Edward Luttwak shows it's possible to simultaneously disagree with the war in Iraq and disagree with the Spanish socialists:

Even those who view the Iraq war as a strategic error for the United States — and I'm one of them — cannot take seriously the Zapateros of Europe, who seem bent on validating the crudest caricatures of "old European" cowardly decadence. It was an act of colossal irresponsibility for the Socialists and the Spanish news media to excoriate the Aznar government for asserting that ETA, the Basque separatist movement, was probably behind the attacks.

Were the Socialists certain Al Qaeda was involved? No, but saying so made it easier to convince voters that the bombs had been placed by Muslims angry that Spain had sided with the United States in the war — and that the only way to make things right would be to get out of Iraq.

Whatever their motivation, the Socialists' argument was fundamentally flawed. Osama bin Laden and other Islamists had identified Spain as a priority target years before the Iraq war. Under Muslim law, no land conquered by Islam may legitimately come under non-Muslim rule. For the fanatics, Spain is still Al Andalus of the Middle Ages, which must be re-claimed for Islam by immigration and intimidation. Even if the bombs were placed by Islamists, the idea that Spain was attacked solely because of Mr. Aznar's support for the Iraq war is simply wrong.

This was Fareed Zakaria's point in the Sunday Washington Post as well (link via Virginia Postrel):

Some in Spain have argued that if an Islamic group proves to be the culprit, Spaniards will blame Prime Minister Jose Maria Aznar. It was his support for America and the war in Iraq that invited the wrath of the fundamentalists. But other recent targets of Islamic militants have been Turkey, Morocco, Tunisia, Saudi Arabia and Indonesia, not one of which supported the war or sent troops into Iraq in the after-war. Al Qaeda's declaration of jihad had, as its first demand, the withdrawal of American troops from Saudi Arabia. Osama bin Laden does not seem to have noticed, but the troops are gone -- yet the jihad continues. The reasons come and go, the violence endures.

Meanwhile, Scott Atran picks up on the evolution of the relationship between Al Qaeda and local terrorist groups in the other op-ed. The highlights:

While most Westerners have imagined a tightly coordinated transnational terrorist network headed by Al Qaeda, it seems more likely we face a set of largely autonomous groups and cells pursuing their own regional aims. Yes, some groups — from Ansar al-Islam in Iraq to Jemaah Islamiyah in Indonesia to Pakistan's Jaish-e-Muhammed — seem to be coordinating strategy and perhaps tactical operations among themselves. But for the most part the factions are swarming on their own initiative — homing in from scattered locations on various targets and then dispersing, only to form new swarms.

While these groups share the motivations and methods of Al Qaeda, it is likely they have had only distant relations with Osama bin Laden and the Sunni salafists around him. In fact, Mr. bin Laden and the Qaeda hardcore should perhaps be viewed as they were in the 1990's, as just one hub of a loosely knit global network of mujahedeen leaders left over from the Soviet-Afghan war. It was only after the F.B.I. began investigating the 1998 American Embassy bombings in Africa that American prosecutors — and the rest of the world — began referring to Al Qaeda as a global terrorist organization. We may be overestimating Mr. bin Laden's reach.

The suicide bombings last November in Istanbul are a case in point. Turkish officials immediately attributed the bombings to Al Qaeda, although it quickly became clear that the explosives were probably made and detonated by Turkish groups claiming to represent Al Qaeda's aims. In fact, Osama bin Laden's greatest threat may be that simply by claiming to act in his name, regional groups are better able to recruit and coordinate operations.

This makes sense. Terrorist attacks conducted by Al Qaeda proper have usually been targeted at highly symbolic targets -- luxury hotels, embassies, the Pentagon, the WTC, etc. They're not averse to killing large numbers of civilians, but they prefer doing it while destroying important symbols of political, economic and military power. The Madrid bombing was not like that -- hence, it's likely that the operation, while perhaps sponsored by AQ, was not implemented by them.

UPDATE: This commentor makes a good point: "I wonder if what's happened is that AQ or its franchisees have moved from targeting physical symbols such as hotels and embassies to also targeting more nebulous symbols, such as the elections themselves."

posted by Dan at 11:06 AM | Comments (127) | Trackbacks (3)

Thanks, but no thanks

Via Glenn Reynolds, I see another ranking of blogger influence. This one claims to rank order "[t]he most influential reporters and bloggers on the web."

The good news -- I come in at #15. Wow -- this and the Library of Congress in less than 24 hours!

The bad news -- According to this ranking system, David Brooks comes in at #20, Tom Friedman comes in at #40, David Broder at #57, and George Will at #172. Fareed Zakaria is not among the top 200.

In other words, I'm fairly certain that the methodology used to compile this list is horses--t. [What if you're wrong?--ed. Then I'll magnanimously offer to trade places with Tom, Fareed, George, or either David -- because I'm that kind of guy.]

UPDATE: After informing my lovely wife Erika of this ranking page, she queried, "I didn't know your Mom had a web site."

ANOTHER UPDATE: Kudos to Philippe Lourier for responding to semi-constructive criticism and taking the responses in stride.

posted by Dan at 01:14 AM | Comments (16) | Trackbacks (1)

Monday, March 15, 2004

Productivity, outsourcing, and employment

Business Week has a cover story on the mystery of low job growth in the United States. Some of the highlights:

[I]f the outsourcing of jobs to India, China, and other low-wage centers has caused some of the U.S. job losses of the past three years, it is hardly the primary explanation for the weak job market. Instead, the continued ability of U.S. companies to squeeze out productivity gains on the order of 5% annually, since the recession ended, is having a far greater impact on the jobs picture. What's more, thanks to a late-'90s binge on technology, a broader array of industries is now finding ways to eke out efficiencies from their workforces than in the past. That means that the dearth of hiring, long a fact of life in the manufacturing sector, is becoming a reality in the service businesses -- retail, finance, transportation -- that account for 80% of U.S. jobs....

As innovation has brought ever-cheaper computing power and new ways to make use of it, capital has become increasingly cheap relative to labor. The returns on investment in new labor-saving, high-tech equipment have soared. Given that labor accounts for about two-thirds of the cost of making and selling products, greater labor productivity in today's global economy is tantamount to corporate survival. As a result, productivity is growing even faster now than in the late 1990s. And it's a real job killer this time: A one-percentage-point increase in annual productivity growth costs about 1.3 million jobs....

As for companies considering hiring, they increasingly face a situation that has long plagued their European rivals: The soaring cost of employee benefits is making companies increasingly hesitant to add workers unless absolutely needed. Benefits costs, fueled by sky-high health-care premiums and the need to restore underfunded pension plans, are up 6.5% from a year ago. After adjusting for inflation, that's the fastest clip on record. If a company can get three people to do the work of four, that's one less health-care premium it has to pay....

Given a dearth of new jobs, why is the unemployment rate falling, from a peak of 6.3% last June to 5.6% in February? Chiefly, people are dropping out of the labor force, which has reduced the amount of job growth needed to push the jobless rate lower. The labor force participation rate -- the percentage of the working-age population that is either employed or seeking work -- has dropped to a level even lower than during the 1990-91 recession. However, almost all of the decline has occurred in the 16- to 24-year-old age group, while participation in the 25-and-older segment has held up....

Which comes back to the vexing issue of outsourcing. No one doubts that it is having an impact -- though exactly how strong is hard to say since good numbers are unavailable. While some put the number higher, Forrester Research Inc. estimates that of the 2.7 million jobs lost in the last three years, only 300,000 have been from outsourcing. (emphasis added)

Given that Forrester's estimates on the effect of outsourcing on the American economy have been at the high end of this debate, this should be treated as an upper bound estimate. This USA Today editorial -- the contents of which are otherwise none too friendly to business -- says, "Many economists estimate that only about 1 in 100 layoffs are caused by outsourcing. By contrast, the bulk of job losses stem from domestic factors. (emphasis added)" Back-of-the-envelope calculations would imply that only 27,000 gross jobs (as opposed to net) have been lost due to offshore outsourcing. Which would be the lower bound estimate.

Technological innovation is responsible for the vast improvements in labor productivity, which explains the combination of seemingly robust economic growth and seemingly weak job growth. One wonders whether this will foster the the rise of a neo-Luddite movement in the United States.

UPDATE: Hmmm.... maybe the USA Today figure was not a lower bound. This Economist story says:

As for outsourcing, it is implausible now, as Lawrence Katz at Harvard University argues, to think that outsourcing has profoundly changed the structure of the American economy over just the past three or four years. After all, outsourcing was in full swing—both in manufacturing and in services—throughout the job-creating 1990s. Government statisticians reckon that outsourced jobs are responsible for well under 1% of those signed up as unemployed. (emphasis added)

Plenty more on this topic from Steven Bainbridge, Tyler Cowen, and Alex Tabarrok.

posted by Dan at 12:54 PM | Comments (93) | Trackbacks (3)

Remember, this is for posterity....

In the final month before I handed in my dissertation, I was working in my office at Stanford when the fire alarm went off. I gathered my things to leave the room, including my laptop with the digital version of the dissertation (during grad school, that laptop was rarely more than ten feet away from me). Leaving the building, I was surprised to see that there was an actual fire in the building? My first reaction? "Thank God I got the dissertation out. Even if something had happened to me, at least my work would survive!"

This is how academics think -- will their work live on?

I relate this anecdote because the Library of Congress has a project called MINERVA -- short for Mapping the INternet Electronic Resources Virtual Archive. According to this explanatory page:

An ever-increasing amount of the world’s cultural and intellectual output is presently created in digital formats and does not exist in any physical form. Such materials are colloquially described as "born digital." This born digital realm includes open access materials on the World Wide Web.

The MINERVA Web Preservation Project was established to initiate a broad program to collect and preserve these primary source materials. A multi disciplinary team of Library staff representing cataloging, legal, public services, and technology services is studying methods to evaluate, select, collect, catalog, provide access to, and preserve these materials for future generations of researchers.

Today I received an e-mail stating that: "The Library has selected your site for inclusion in its historic collection of Internet materials."

What does this mean? Practically speaking, it means the following:

[T]he Library of Congress or its agent will engage in the collection of content from your Web site at regular intervals. The Library will make this collection available to researchers onsite at Library facilities. The Library also wishes to make the collection available to offsite researchers by hosting the collection on the Library's public access Web site. The Library hopes that you share its vision of preserving Web materials and permitting researchers from across the world to access them.

Well, I do share that vision, but my reader-commentors may not. So consider this a public service notice -- your comments are being recorded for posterity.

Think about it -- decades or centuries from now, some struggling graduate student may be reading some of this.

That poor, pathetic soul.

posted by Dan at 11:59 AM | Comments (22) | Trackbacks (0)

Did Al Qaeda knowingly influence Spain's election?

In the aftermath of the Socialist Party's victory in Spain's national elections -- after trailing in most polls to the People's party before last week's Madrid bombings -- what does it all mean? Is this a harbinger of Al Qaeda's ability to influence European voters? Was the electoral outcome what Al Qaeda intended?

Andrew Sullivan believes the answers to both questions are yes:

It's a spectacular result for Islamist terrorism, and a chilling portent of Europe's future. A close election campaign, with Aznar's party slightly ahead, ended with the Popular Party's defeat and the socialist opposition winning. It might be argued that the Aznar government's dogged refusal to admit the obvious quickly enough led people to blame it for a cover-up. But why did they seek to delay assigning the blame on al Qaeda? Because they knew that if al Qaeda were seen to be responsible, the Spanish public would blame Aznar not bin Laden!.... And in yesterday's election victory for the socialists, al Qaeda got even more than it could have dreamed of. It has removed a government intent on fighting terrorism and installed another intent on appeasing it. For good measure, they murdered a couple of hundred infidels. But the truly scary thought is the signal that this will send to other European governments. Britain is obviously next. The appeasement temptation has never been greater; and it looks more likely now that Europe - as so very often in the past - will take the path of least resistance - with far greater bloodshed as a result.

Matthew Yglesias is not so sure about either proposition:

[E]veryone's beliefs about these matters are so obviously going to be colored by their partisan political preferences that I don't know if there's a particular point in trying to argue for one version or another. It just seems worth pointing out that it's certainly not clear that this is what the terrorists were trying to achieve. Personally, I very much do not favor withdrawing troops from Iraq, and will be disappointed if that is the ultimate outcome of this tragedy. One ray of hope is that the circumstances of the attack would give the Socialist Party a possible excuse for flip-flopping were they so inclined. I doubt, however, that they will be.

I'm on the fence on this issue. The fact is, authoritarian/totalitarian actors have had a pretty lousy record at consciously influencing democratic elections in other countries. That said, it seems difficult not to believe that AQ got what it wanted from this attack.

UPDATE: Mickey Kaus speculates about whether and how Al Qaeda would try to spring an October Surprise in the United States. Eugene Volokh also has interesting thoughts on the matter.

FINAL UPDATE: This story would seem to vitiate Yglesias' argument.

posted by Dan at 01:04 AM | Comments (82) | Trackbacks (4)

That cursed affluence

Robert Samuelson's latest Newsweek column argues that America's obesity "crisis" is an ailment of affluence. The interesting grafs:

The supposed villains here are fast-food restaurants and food companies that have supersized us to corpulence. There's some truth to this, but the larger and more boring truth is that food's gotten cheaper, and as a result, we consume more of it—and more away from home. In 1950, Americans devoted a fifth of their disposable incomes to food (and less than a fifth of that to eating out). Now food's share is a tenth (and almost half is out). We eat what pleases us, and so why should anyone be surprised that the average American now consumes about 150 pounds of sugar and sweeteners annually, up roughly 20 percent since 1980? The only saving grace is that some of the extra food "is thrown away—otherwise, all Americans would weigh 300 pounds," says Roland Sturm, an obesity expert at the Rand Corp....

Getting wealthier spawns other complaints. One is the "time squeeze"—the sense that we're more harried than ever. We all know this is true; we're tugged by jobs, family, PTA and soccer. Actually, it's not true. People go to work later in life and retire earlier. Housework has declined. One survey found that in 1999 only 14 percent of wives did more than four hours of daily housework; the figure was 43 percent in 1977 and 87 percent in 1924. Even when jobs and housework are combined, total work hours for women and men have dropped.

Read the entire piece.

posted by Dan at 12:41 AM | Comments (20) | Trackbacks (0)