Flatworld revisited

Edward E. Leamer, Chauncey J. Medberry Professor of Management at Anderson School, UCLA, has written an excellent critique of Tom Friedman’s The world is flat. In fact, something close to the review I wish I had written rather than what I wrote.

Leamer has some issues with the imprecise language and confusion of direct and indirect causality of Friedman, but ends up concluding that the book communicates a message rather well – and that the market, despite his misgivings about the book, has concluded that it is good. Language and metaphor trumps academic discipline and data. Leamer reduces Friedman’s ten forces to three (p.12):

  1. More Unskilled Workers: Economic liberalizations has injected a huge number of unskilled workers into the global labor market.
  2. New Equipment for Knowledge Workers: The Internet and the PC have fundamentally changed the nature of knowledge work, raising productivity and emphasizing talent.
  3. Communications Innovations: Cell-phones, beepers [beepers? who uses beepers?], e- mail and voice-mail keep us all wired and connected 24/7, thus eliminating the borderline between time at work and time at leisure. These same communication tools, together with the Internet and virtually costless telecommunications have extended the geographic reach of suppliers, and have increased the intensity of competition for mundane work.

and argues that the first two aren’t "flattening", only the third (and he much prefers the term "smaller world"). In essence, we can communicate, so distance becomes less important. Another turn on Beniger’s control screw, in essence.

Leamer also discusses the impact of the communications revolution on work, saying that the more "mundane" the work, to a larger extent it can be moved to a place with lower labor costs. He even provides this list of work in terms of its mundanity:

  1. Type this page.
  2. Edit this page.
  3. Write an article for an Economics journal.
  4. Write a good joke.

(Incidentally, I love this list, because I can, at least when I feel a need for self-justification, place blogging somewhere between 3 and 4 and thereby tell myself that I am doing something unique. Or perhaps something nobody else wants to do?) He also draws a useful distinction between trade that requires a relationship and trade that doesn’t but stops short of discussing to what extent increased communication can establish relationships that will enable trade to move from the very mundane to the less mundane.

Where Leamer really shines is in the facts department, where he shows that the world is becoming flatter at a much smaller rate and in a much more localized pattern than Friedman postulates. Income in India and China is on the rise, but the top 18% of the world rises faster. (He also points to Yale professor William Nordhaus’ excellent spinning globe, which indicates a kind of temperature chart of economic activity, showing red-hot localized areas (notably few in India and China) and solid blue for most of the globe.) Trade contributes to the decline in manufacturing jobs, but doesn’t seem to be the primary driver (technology is). Outsourcing of intellectual work is "a small drop in a very large bucket", and the US does not need to fear for its economic leadership in Tom Friedman’s world.

Leamer concludes with a useful distinction between the computer as forklift (a source of income equality, since anyone can learn how to operate a forklift and thus obviate competitive advantages in strenght) and the computer as microphone (an amplifier of talent and thus a source of income inequality). He ends by saying that the world is not getting flatter, but that to a larger extent the difference will be between those with and without talent.

Which sounds a lot like a flatter world to me.

And therein lies my issue with Leamer’s paper, to the extent I have one. To me, his conclusion sounds like Friedman’s, albeit with less fancy metaphors (though still halting – a weak artist gets better with a microphone, and song distribution services like Pandora are income equalisers for talent, in that they decompose the delivery of music and thus reduces the need for recognizeable artists).

For my part, I think economists should do what I think Leamer is doing, but not quite admitting: Come to peace with Tom Friedman and his book, and use it (and, of course, Tom Friedman) as a communications vehicle to promote what Hans Rosling calls a facts-based discussion of globalization and economics. Tom Friedman creates language and ideas that may not be as precise and well-defined as academia would want, and his conclusions are definitely on the livelier side of average. But people read the book and, like it or not, it becomes the reference point. And I read Leamer’s critique because, well, I read Tom Friedman’s book.

Worse could have happened. Think of philosophers having to explain their ideas in terms of Sophie’s World, The Tao of Pooh, and anything Ayn Rand has put out. Not to mention management researchers having to deal with Who moved my cheese? At least Friedman tells good stories and provides wonderful examples. It is up to academe to bring a more coherent story to the table, and make it as understandable.

(Via Marginal Revolution via Brad Delong.)

1 thought on “Flatworld revisited

  1. China Law Blog

    Excellent, thought-provoking post. I find the similarities between the elites in places like India, China, Russia, Korea, and the United States, fascinating. It is almost as though all are of one country and the difference between countries lies only in the “non-internationalized” portions. For that reason, I agree with your conclusion that the distinctions will be between the haves and the have nots and to that extent the world is getting flatter.
    China Law

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