Sat, 02 Sep 2006

Spitzer, the economic ignoramus

Gentle readers, you are no doubt familiar with Elliot Spitzer's abysmal lack of understanding of economics ( Go Away Elliot, Go Away Elliot 2, Like A Spitzer With His Head Cut Off, and No Thanks Elliot). Well, he's at it again. He's quoted in the Watertown Daily Times (paid site, so no link) as saying, on his visit to Massena on Friday:

"We've got to educate our kids," he said. "In India last year there were 350,000 engineers. In the U.S. there were 70,000. How can we win the battle for new products when they're out-producing us?"

Practically every phrase is wrong.

  1. According to Reason Magazine, while India's central planning did create several high quality technical institutions, it was private colleges which stepped up to the plate. Four of five engineering students attend private colleges, making Elliots use of these engineering students to support public education a mockery of the truth.
  2. By "We've got to educate our kids" Elliot means the exclusive "we" -- that is, he means "the government", not "you". And yet in the India to which he compares us, private schools outperform public schools (pdf). These are for-fee profit-making schools. People willingly pay for them in India, so in India Elliot's "we" includes citizens.
  3. While it seems horrific that India has 350,000 engineers and the US only 70,000 (how can we win??), you need to remember that India's middle class is larger than the entire population of the US. Let's look at matters a different way. India's population is 1,095,351,995, and the US's is 299,630,441. There are 3129 people per engineer in India, and 4280 people per engineer in the USA. So rather than a 5 to 1 ratio, you have a 4 to 3 ratio.
  4. These engineers don't work in a vacuum. They need support services surrounding them to make them effective. India is loosening up its economy, but still exerts substantial central control. India's infrastructure is groaning under the load. A hotel room in Bangalore (which is India's Silicon Valley) costs $400 a night, if you can get it. The traffic in Mumbai (which I visit yearly) is getting worse and worse in spite of the building of new bridges and elevated highways. There are very few miles of high-speed highway in India. Their economy is very inefficient. The thought of their 300,000 engineers "winning the battle" against our 70,000 is simply laughable. The highest goal of many of those engineers is to come work in the US.
  5. Finally, speaking of "winning the battle", herein you have Elliot's compleat expression of his understanding of economics. It is nil. There is no battle in free market economies. It is not a war. We can all win. Indians do what they do best; we do what we do best; and then we trade. Applying militaristic terms to peaceful trade is more than wrong-headed. It is evil.
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