This isn't a real criticism, because I understand what they are trying to say but....
"Demand exceeds supply by X%", often a labour related headline, always makes me make the Marge Simpson noise. The framing is a direct contradiction of the main supply & demand theories/concepts. Supply and demand (within theory) are curves not amounts. It grates my circa 2005 economics education.
That said... either definition of supply and demand are arbitrary. It is actually true that in many scenarios, the definition of supply and demand used here (demand is a number) is much more insightful and predictive of what happens in real life. Useful lesson that many/most abstractions and models are useful when they're useful, but we tend to get overly attached to them.
There's a babushka doll element to all this. Divergent economic perspectives defined this industry, and the difference between US policies from (eg) South Korea.
The Korean industrial policy is built on the "demand/supply is a number" concept. US industrial policy built on the "demand/supply is a curve" concept. South Korea subsidized the industry on the assumption that it's a massive growth industry. US policy of this era (circa 2000) expected declining US production as marginal profits declined. They also saw the process as natural and positive. Leading economies hand over cutting edge industries to the next tier economies, focusing on the new cutting edge industries. Next tier countries (ATT, south korea) can focus semiconductors, and offload their second tier industries. Textile manufacturing is at the bottom of this stack.
Both US and Korean policy makers were correct. Apple is a great example. The product design, software and other high ROI (because low/no capital cost) elements remained in the US. Apple's profits are great. Their jobs (except retail) are all high paying. The parts of Apple with high capital investment requirements, lower margins, lower ROI or lower paid jobs were outsourced. This is pretty much the future 1990s economists in the US wanted.
South Koreans were also right. The idea was that certain industries, like semiconductors are massive growth industries. A good place to establish a competitive lead. True. The also treated capital investment as a good thing, even though it lowers ROI by definition.
I think the US mistake, if it was a mistake, was considering manufacturing a dead end... or a terminal destination. The truth is there will be more things to manufacture in the future, and a cutting edge manufacturing industry is the way to get a lead on that. Pathe dependencies can be important.
It's an interesting story to pay attention to.. maybe a turnaround in some decades-dominant modes of thinking about industrial policy.
"Demand exceeds supply by X%", often a labour related headline, always makes me make the Marge Simpson noise. The framing is a direct contradiction of the main supply & demand theories/concepts. Supply and demand (within theory) are curves not amounts. It grates my circa 2005 economics education.
That said... either definition of supply and demand are arbitrary. It is actually true that in many scenarios, the definition of supply and demand used here (demand is a number) is much more insightful and predictive of what happens in real life. Useful lesson that many/most abstractions and models are useful when they're useful, but we tend to get overly attached to them.
There's a babushka doll element to all this. Divergent economic perspectives defined this industry, and the difference between US policies from (eg) South Korea.
The Korean industrial policy is built on the "demand/supply is a number" concept. US industrial policy built on the "demand/supply is a curve" concept. South Korea subsidized the industry on the assumption that it's a massive growth industry. US policy of this era (circa 2000) expected declining US production as marginal profits declined. They also saw the process as natural and positive. Leading economies hand over cutting edge industries to the next tier economies, focusing on the new cutting edge industries. Next tier countries (ATT, south korea) can focus semiconductors, and offload their second tier industries. Textile manufacturing is at the bottom of this stack.
Both US and Korean policy makers were correct. Apple is a great example. The product design, software and other high ROI (because low/no capital cost) elements remained in the US. Apple's profits are great. Their jobs (except retail) are all high paying. The parts of Apple with high capital investment requirements, lower margins, lower ROI or lower paid jobs were outsourced. This is pretty much the future 1990s economists in the US wanted.
South Koreans were also right. The idea was that certain industries, like semiconductors are massive growth industries. A good place to establish a competitive lead. True. The also treated capital investment as a good thing, even though it lowers ROI by definition.
I think the US mistake, if it was a mistake, was considering manufacturing a dead end... or a terminal destination. The truth is there will be more things to manufacture in the future, and a cutting edge manufacturing industry is the way to get a lead on that. Pathe dependencies can be important.
It's an interesting story to pay attention to.. maybe a turnaround in some decades-dominant modes of thinking about industrial policy.