Wednesday, October 10, 2012

The Most Pernicious Misconception (white board lesson)

If Mitt Romney's $2+ million investment in three Bain Capital funds that invest in China hurts his prospects come November, he deserves it. How dare he, as an investor, pump capital right into China, while, as a candidate, vow to crack down on its "cheating"! Today's NY Times cites Bain's acquisition of a company that, pre-Bain, ran two camshaft manufacturing plants in Michigan—employing 500 people—that now makes them in China. My the hypocrisy!

As an investor he continues to fund enterprises that exploit the freedom to do business wherever they determine is in the best interest of their shareholders and customers. As a candidate, alas, he plays to the consumer's most pernicious misconception. As a President he'll surely not (let's pray) do direct harm to the U.S. consumer, auto manufacturers (think camshafts), and, consequently, the economy by inhibiting our ability to access the goods we desire wherever we can most cost-effectively find them—his portfolio suggests he knows better.

Two lessons below: One on outsourcing and a very short one on subsidies. And click here for the article I reference in the "outsourcing" video...


  1. [...] But then, as I realized (to my dismay) last evening, I turn around and waste your time (in yesterday’s white board lesson and last year’s article) and completely—innocently—mislead you by citing statistics [...]

  2. [...] Marty Mazorra uses his brilliant whiteboard to discuss off-shoring (or, as it’s popularly call....  Mitt Romney and Barack Obama, as politicians, should look at this video and learn from it. [...]

  3. The most convincing argument for me relative to outsourcing is David Friedman's (I think), which makes the parallel between outsourcing and any other technology. Two ways to build cars (you can do it in Chicago or you can grow wheat in Iowa).

    Forget for a minute that the job gets done by people and consider that you send some inputs into a warehouse (outbound shipping dock) and you get some outputs in return in a warehouse (input shipping dock). The warehouse functions as a large black box with some irrelevant technology inside (actually putting stuff on a boat, getting some work done in China, etc.).

    Protectionists are simply a cousins of Luddites.

  4. Very nice. Most of economics can be explained by Bastiat's "That Which is Seen, and That Which is Not Seen."