About that article by Jim Manzi I cited this morning…

Cited in today’s FM newswire:  “Keeping America’s Edge“, Jim Manzi, National Affairs, Winter 2010.  I described this as “Powerful insights from a bright guy.”

I read this quckly (aka sloppy work).  His description of the inherent conflict between cohesion and innovation was interesting {update: and important}, and I skipped over the rest.  Readers have pointed out that much of the rest is absurd.  Here are three examples (this is a dashed off correction).

(1)  America’s military power

“Yet the strategy of giving up and opting out of this international economic competition in order to focus on quality of life is simply not feasible for the United States. Europeans can get away with it only because they benefit from the external military protection America provides; we, however, have no similar guardian to turn to.”

Our armored legions are protecting Europe from … what?  If we’re protecting them, let’s charge them for it.  That will show what value the EU places on our military support.  I’ll bet their bid would be tiny.

(2)  Average living standards

” First, average living standards have continued to rise since 1980.”

The mean has risen.  The median has risen far less (or even fallen, depending on the metric used), because the growth has been concentrated at the top.  Manzi knows this , at some level, as seen in his discussion about rising inequality.  {Update:  this was poorly expressed.  Manzi’s statement IMO is not accurate, for reasons Manzi himself explains in his article’s discussion of rising inequality — IMO the central part of the article).

(3)  US manufacturing

I missed this, somehow.  Manzi shows this graph, which is misleading.

Manufacturing output is best measured by using value-added, not gross output.  The BEA shows that manufacturing was 20% of GDP in 1980 — and 11.5% in 2008.

5 thoughts on “About that article by Jim Manzi I cited this morning…”

  1. FM note: a reply from the author!
    Thanks for your comments on the article. A few quick point keyed to your numbers:

    1. I agree that Europe should carry more of its own defense burden. In the long run, the challenge will be from the Eurasian heartland, as it has been to the maritime powers. (Obviously, some parts of Europe, broadly deinfed, sit on either side of this divide).

    2. I think its a stretch to argue that I didn’t shine a spotlight on the mean / median issue (i.e., rising inequality).

    3. The reason both metrics are produced is that each has appropriate uses. I agree that VA is a better metric to use if we want to understand employment potential, but see a couple of well-known academic articles on the trade-offs involving the alternative metrics for measuring productivity in various global contexts, and generally coming down on the side of using output:

    * “Gross production vs value added approaches to regional comparisons of sectoral growth“, Natalia ALDAZ and Joaquín A. MILLÁN, Papers of the XIII International Conference on Input-Output Techniques (U of Macerata, Italy), August 2000

    * Productivity and Growth: A Study of British Industry 1954-86, Nicholas Oulton and Mary O’Mahony (1994), page 137.

    If what we care about is the production of the physical outputs required for defense (n the broad sens eof the term), then output seems to me to be the better metric. All that said, I agree that I should have made the poiint about reduction in value add.

    Best regards,
    Jim Manzi
    FM reply: Thank you for your response! Here are replies to the 3 points you raise.

    (1) I expressed that poorly. I have added this update: This statement IMO is not accurate, for reasons Manzi himself in this article’s discussion of rising inequality — IMO the central part of his article.

    (2) My comment assumes familiarity with the current debate in military circles about the utility of conventional military forces (perhaps best expressed in The Utility of Force by Rupert Smith (General, UK Army, retired). The EU is not “getting away with anything”; rather we are wasting vast sums on conventional armies which address no likely threat to Europe — or the US. From this perspective Europe need not increase military spending.

    (3) Debate about the utility of different economic metrics quickly gets into deep water. The first paper is tangential to this, as they contrast the utility of gross and value-added metrics in a narrow context — calculation of Total Factor Productivity. While useful, that’s not what you’re discussing. The second (the Oulton and O’Mahony book) IMO supports the use of value-added as the better showing the health of US manufacturing:

    “{T}he largest difference occurs in the sub-period 1973-9; here final output fell by 0.44% per annum, while valued added fell by a massive 3.47% per annum. The difference between the final output and the value added estimates of output after 1973 suggests that a substantial proportion of the fall in valued added is due to increased use of inputs from outside UK manufacturing, rather than to a decline in the demand for UK manufactures on the part of final buyers.”

    This is probably what’s happening to the US, with rising imports of high value-added products allowing US gross manufacturing output to remain stable while measures of value-added drop almost by 1/2 (as % GDP). The causes of this are complex. But the overvalued US dollar probably plays a large part. Whatever the cause, it’s bad news.

  2. “Sloppy work” followed by a “dashed off correction”? You too, FM? I thought only our government representatives had copyright to those behaviors?

  3. Here I was thinking that the article was going to be on the last American edge – the world reserve currency and how we can retain the ability to issue debit without concern for the indefinite future.

    Instead the article seems to be set in 1971 when the edges it claims actually did exist, and hadn’t yet been frittered away. It then claims that all we need to do is continue with existing policies. We know where that will lead to where we are now.

  4. Roberto Buffagni

    Assuming that military spending makes sense when it supports the independence and sovereignty of the spender, I frankly do not
    understand why we Europeans should increase our contribution to the present NATO system. I think that we should seriously increase our military spending if it were intended for building an independent European Army, with independent European nuclear weapons: if we were trying to do, on a continental basis, what General de Gaulle did in France. I do not think that such an endeavour could be happily saluted as a welcome relief from an unsustainable burden by any U.S. government.

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