Manufacturing must matter-- judging by all the folks talking about it
In the Washington Post, Ezra Klein says that manufacturing is a big topic again. He cites a recent speech by Gene Sperling, the director of President Obama's National Economics Council, which Klein sees as "reopening a debate between economic policymakers and economists" on the value-added that manufacturing provides.
Essentially, Klein says, the "cozy consensus against industrial policy" may get overturned, and that manufacturing may just matter more than has been previously appreciated:
Manufacturing firms, Sperling argues, generate important economic benefits that the firms themselves don't capture -- so-called "spillover effects." There's evidence that they make surrounding firms more productive. There's anecdotal and theoretical reasons to believe they lead to more innovation. There's evidence that manufacturing firms work best when clustered near one another, which means the loss of some firms could lead to the loss of hyperproductive "agglomeration economies" that are worth far more than the sum of their apparent parts.
There is, in other words, a building argument that the market is failing to appropriately price the benefits of manufacturing firms. They're worth more to the economy than they are to individual firms. And that's the key to this new argument: Sperling isn't saying America should support the manufacturing sector because it delivers good jobs, or it's been important to America's middle class, or even because China is competing unfairly. He's saying there's a market failure. And even the most orthodox economists will tell you that it's appropriate for the government to intervene to correct market failures.
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