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Paul Samuelson vs. Outsourcing

September 9, 2004

The New York Times reports that Paul Samuelson has a paper coming out questioning the consensus of economists in favor of outsourcing.

"[The] untruth, Mr. Samuelson asserts in an article for the Journal of Economic Perspectives, is the assumption that the laws of economics dictate that the American economy will benefit in the long run from all forms of international trade, including the outsourcing abroad of call-center and software programming jobs."

Neoclassical economists, we are to understand, have fully grasped the importance of methodological individualism. So I find Samuelson's approach to this puzzling: "But doesn't purchasing cheaper call-center or programming services from abroad reduce input costs for various industries, delivering a net benefit to the economy? Not necessarily, Mr. Samuelson replied. To put things in simplified terms, he explained in the interview, 'being able to purchase groceries 20 percent cheaper at Wal-Mart does not necessarily make up for the wage losses.'"

Mr. Samuelson may make really cool mathematical models. But personally, I'll stick with Bastiat on this one.

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