NPR Program on Deflation

Probably one of the best talk shows on radio is Tom Ashbrook's "On Point." I always try to listen when time allows.

On Thurs. this program was produced:

Deflation Fears: U.S. as Japan?

With guests:

David Wessel, economics editor at the Wall Street Journal.

Frederic Mishkin, professor of banking and financial institutions at Columbia’s Graduate School of Business. From 2006 to 2008, he was a member of the Board of Governors for the Federal Reserve System.

David Resler, chief U.S. economist at the Nomura Group, a global investment firm founded in Japan.

Dave Scott, chief investment officer at Sunrise Advisors, a financial planning and asset management firm based in Leawood, Kansas.

I found the program interesting, however, there was a statement made by one of the guests that was not correct.

A caller asked about the affect of outsourcing and the decrease in American manufacturing jobs.

One of the guests responded with the standard economic answer that economies become more efficient as employment shifts to higher value activities. In general, specialization and division of labor across boarders is a good thing.

However, the commentary went further by using agriculture as an example in comparison to the current loss of manufacturing jobs.

While it is true that there was a drastic reduction in agricultural workers during the 20th century, domestic agricultural output continued to increase contributing to GDP growth. The jobs simply shifted from agriculture to manufacturing.

In current times, manufacturing employment continues to go down and with it GDP from the segment as production shifts to other countries.

I can make a strong argument that comparing changes in agricultural employment is not the same as the current changes in manufacturing employment.