The Seen and the Unseen

On a recent blog post by Don Boudreaux at Cafe Hayek pointing out (for the millionth time) that America is not deindustrializing, a Jayson Ramos responded to a comment from me saying: “So whom [sic] is Mr. Korol supposed to believe? You and Dr. Boudreaux—or his “lying eyes”?”

This is a common “gotcha” style question meant to imply that the experts on a matter are out of touch and/or making things up.  However, the good scientist knows that the eyes are not lying, but rather they are simply one tool of understanding.  Our eyes provide us with valuable (seen) information.  But what is unseen is of vital importance, too.

A simple example to make my point: my eyes looking out my office window show a beautiful sunny day. A thunderstorm is forming off in the distance, but it’ll likely go south. A good day for a walk, no?

But my weather app, pulling data from the National Weather Service in New Orleans, says otherwise. Although it is barely 9am, we have a real feel temperature of 104°. It says the air is heavily humid and breathing may be difficult, especially for folks like me with asthma.  They also say we could get a thunderstorm later.  So, who am I to believe? My lying eyes or some meteorological nerds in New Orleans?

It turns out: the nerds were right.  As soon as I stepped outside to take out the garbage, I was hit by the heat and humidity.  Although the garbage compactor is about 100 yards away, I got in my car and drove to it.  And, as it gets darker as I write this, they’re likely to be right about the storm, too.

Did my eyes lie to me?  No: they told me the truth.  The sun was out.  The storm I saw did go south.  But another storm is coming from the north (I have no north-facing windows).  My eyes saw the truth, but just one part of it.  The NWS saw much more and provided me with additional information.  What was unseen to me was just as important as what was seen.

With US manufacturing, it is the same.  It is easy to see the Rust Belt- to see many once great towns laid low.  When I lived in Syracuse, New York, it was heartbreaking to see such beautiful façades fallen to disrepair, to see such grim poverty in a once-shining city.  No one denies that similar stories play out in cities around the US.  But there are also cities being transformed by new construction in Tennessee, Massachusetts, Alabama, Mississippi, and the Carolinas.  In fact, US manufacturing construction spending is at the highest level since data has been recorded (2002).  The recent jump is due to subsidies and incentives from the Inflation Reduction Act, but note that spending has been generally trending upward since 2011.  Even within those old Rust Belt cities, new life is being born: art halls, breweries, museums, and all sorts of other development are moving into old factories.

Science teaches us to search for the unseen.  Science teaches us to use all our senses in conjunction with sense and reason to make conclusions and inferences. Sight is an important sense, but it is obscured by a veil.  The goal of education is to help sharpen our other senses so that we can pierce that veil.  It is the poor scientist who relies only on what is seen; as we see with Mr. Korol, it leads to incorrect conclusions about the state of the US economy and US manufacturing. 

 


Jon Murphy is an assistant professor of economics at Nicholls State University.

 

READER COMMENTS

Craig
Aug 21 2024 at 2:25pm

I have seen the Professor make that argument and he does point to a FRED chart showing, I believe, manufacturing value added, at being at an all time high. The regime is lying. The regime is a multi-headed hydra though and it also reports that the number of manufacturing establishments are down by tens of thousands at this point from, say, 2000.

The numbers also tell you that Germany isn’t as wealthy as Alabama, and they tell you Japan is much poorer than the US and then you go to Tokyo and even East Germany and you realize its just not true.

“With US manufacturing, it is the same.  It is easy to see the Rust Belt”

Its not just the Rust Belt though. The wealthy non-Rust Belt areas have deindustrialized like NJ.

Here’s the thing if its true, if we see value added at all time, or near all time, historical highs, coupled with declines in total manufacturing employment why aren’t these remaining industrial workers wealthy beyond imagination. They’re not, they’re dying early actually.

But there are also cities being transformed by new construction in Tennessee, Massachusetts, Alabama, Mississippi, and the Carolinas.

Except for MA, all of them have 3rd world life expectancies. TN happens to be 71.

The regime stat is a straight up lie.

Jon Murphy
Aug 21 2024 at 3:33pm

With respect, Craig, you seem to be missing some important context (the unseen, if you will).  In no particular order:

All the states I mentioned have life expectancies about 20-25 years more than 3rd world countries (depending on how one measures).

The number of establishments can be down even though construction spending and output is up: economies of scale.

NJ is part of the rust-belt.

Earn quite high salaries, depending on the job.  The average entry level manufacturing job pays about $80k, including bonuses.  Depending on the job, it can even be well over $200k.

Mactoul
Aug 22 2024 at 12:00am

Life expectancy in India is 67 and in Bangladesh 72, in Indonesia 67, in Pakistan 66.

These are four of the most populous 3rd world countries.

These are

From which century is the data saying life expectancy in the 3rd world is 20-25 years lower than in US states?

Jon Murphy
Aug 22 2024 at 12:02pm

From which century is the data saying life expectancy in the 3rd world is 20-25 years lower than in US states?

The 21st.  The year 2022, to be precise.  Recall that the 3rd World is more than just 3 countries.  Cherry-picking does not tell the whole story.

Mactoul
Aug 23 2024 at 10:13am

All data by country needs to be weighed by population size.

Jon Murphy
Aug 23 2024 at 11:54am

You keep saying that, but it’s not clear why you think it’s the case.  There are times when it is appropriate to weight by population and there are times it is not.

Jon Murphy
Aug 21 2024 at 3:39pm

Also, one should note that the number of Private Manufacturing Establishments in the US has been rising since 2013 and is actually just about at the highest level since data began being collected in 2001

Craig
Aug 21 2024 at 4:12pm

I’m seeing 360k dipping to 300k and now back to 305k (+/-) as the population has increased by 40-50mn +/- so from start to end nominally down, from trough to today its nominally up but still relatively down.

“The average entry level manufacturing job pays about $80k,”

No, that’s not correct. BLS has average mfg at $34/hr. The union @ Chattanooga had to beg borrow and steal to bargain for $40/hr to match their UAW counterparts, but you don’t start there, you start as a temp at about $20 or you can go pluck chickens for Perdue in Monterrey for $20.

“All the states I mentioned have life expectancies about 20-25 years more than 3rd world countries”

Bangladesh = 73-74 years. Vietnam, Morocco, Phillipines.

Yes, there are places in the third world where its lower, for instance sub-Saharan Africa of course and maybe some places like Russia where they drink themselves blind (ignore the war), but TN is 72, MS and AL I think are slightly worse and call it whatever you want, but I’m not calling it first world.

“NJ is part of the rust-belt.”

Where I live in TN is a part of Appalachia, Pickett County, and it is included in every conceivable map that considers itself as depicting Appalachia, the extent of Appalachia still varies and one of them, rarely used, but it is seen occasionally, goes up to Atlanta and one used to include NW NJ as well. Rust Belt similar, the absolute furthest extent of the Rust Belt that I have personally seen on a map was Paterson, NJ, but most go to the Delaware River . Indeed there are places east of there which have ‘rusted’ including Brooklyn, New Haven, Fall River but usually not considered Rust Belt.

But for the most part even the best US cities look like dumps. That includes Detroit, it includes Cleveland, and I’m not excluding Boston, NY, Philadelphia, Nashville, Orlando, Houston, LA, San Francisco. But boy our per capita GPD is second to none! Or well, maybe Liechtenstein, right, but right now the US has a legacy reputation but boots on the ground it does NOT match.

Still where I lived in NJ in Morris County the income there is $100k+ per household but want to know who opened the last factory? Me, over two decades ago (I’m being glib but I actually would not be surprised if I were the last one actually)

Craig
Aug 21 2024 at 4:30pm

Secondary issue is also classification because no politician wants to preside over the ‘decline of American manufacturing’  indeed one funny attempt was to try to classify fast food workers as manufacturing workers but NJ filled with former factiries, the footprint of which still exists, they don’t make anything anymore besides being an HQ and a warehouse for the imports made elsewhere but still classified as manufacturing. Just straight up contrived.

Jon Murphy
Aug 21 2024 at 4:45pm

I’m sorry, I just don’t know where you’re getting your numbers from.  I cannot verify them.  And most of them are cherry-picked anyway.

Craig
Aug 21 2024 at 5:01pm

https://www.bls.gov/news.release/empsit.t19.htm

Manufacturing

32.61
33.83
34.02
34.06

The first two numbers are June/July last year and the next two are June/July this year.

You’re saying ENTRY level manufacturing getting 80k, that’s not in the ballpark. VW Chattanooga they’re TRYING to get that and GOT $40 as in UP TO $40, not START at $40/hr.

When you start you’re WAY under that.

Jon Murphy
Aug 21 2024 at 6:34pm

Two things, Craig:

First: Given you called those numbers lies, I’m surprised to see you cite them.

Second: note I said “including bonuses.”  Bonuses help increase one’s income.

But even if we want to ignore that, note than manufacturing workers still earn above average.

The death of American manufacturing is nonexistant.  These are not “third world” level jobs.  I don;t care how many (unvarifiable) ancedotes and cherry-picked numbers you want to throw out.  Looking at the whole picture does not support the story of a deindustralizing and poverty-riddled America.

Craig
Aug 21 2024 at 7:51pm

“But even if we want to ignore that, note than manufacturing workers still earn above average.”

The average is 35.07, that class is below below average. But even if they were as far above the average as they are below, I don’t care, I wouldn’t call either above or below average, I’d say its ‘around’ the average until its much more significantly above or below the average, maybe a standard deviation? Either way we’re <$1 from the mean.

“Given you called those numbers lies, I’m surprised to see you cite them.”

For purposes of impugning the government’s credibility. They’re straight up lying.

Craig
Aug 21 2024 at 8:55pm

” I don;t care how many (unvarifiable) ancedotes”

This is how governments get away with propaganda or, at best, lousy methodology. You’re right, that’s all I have to offer because I don’t run the federal government but I did run a factory and I know many others who still do. And there are people out there saying things like this:

“Even in these sophisticated areas, U.S. manufacturing leadership is in peril. Correcting for biases in the official data, ITIF finds that from 2000 to 2010, U.S. manufacturing labor productivity growth was overstated by a remarkable 122 percent.” — https://www.nist.gov/system/files/documents/2017/05/09/2012-american-manufacturing-decline.pdf

No small part manufacturing establishments are selling just as much with fewer workers and just producing less while importing more. Indeed its going to appear as if they remaining workers, from an accounting point of view, will produce more value per worker than before.

 

Craig
Aug 21 2024 at 8:56pm

I apologize I fear my response crossed your deletion, please delete unless I am somehow no longer seeing something that I did see for a little bit.

Jon Murphy
Aug 22 2024 at 12:57pm

This is how governments get away with propaganda or, at best, lousy methodology.

It’s also how people discount evidence and get duped.

Fortunately, we have all sorts of privately collected data and they show the same trends as the government data (IHS Markit Insights, for one).

 

Andrew_FL
Aug 21 2024 at 5:25pm

“Then you go to Tokyo”

You’re literally comparing the richest parts of countries to the poor parts of US states. Worse, you’re doing it as a tourist.

Jon Murphy
Aug 22 2024 at 12:03pm

Exactly.  Craig is highlighting the very fallacy I am arguing against.

Craig
Aug 22 2024 at 12:42pm

“The numbers also tell you that Germany isn’t as wealthy as Alabama, and they tell you Japan is much poorer than the US and then you go to Tokyo and even East Germany and you realize its just not true.”

 

J Mann
Aug 23 2024 at 2:29pm

I usually am able to get people on both sides to agree with the following:

US manufacturing is now a lot like US farming – the US produces huge amounts of crops and huge amounts of manufactured goods.  But for a lot of crops, it only takes a few people to do the work that dozens or a hundred or more might have done 100 years ago, and in manufacturing, it only takes a few people to do the work that dozens might have done even 30 years ago.

It’s true that some farming and some manufacturing has moved overseas, but the biggest reason there aren’t 1950s style factory jobs anymore is that there aren’t 1950s style factories anymore.

Jim Glass
Aug 21 2024 at 6:45pm

Even the lyin’-est eyes can see that manufacturing is following the same “extinction event” course that hit US agriculture.  Once 50% of the US population worked on farms, now farming has been “wiped out” to employ only 1.5%.  The number of US farms has fallen by half since 1950, and as that’s happened farm production has … multiplied.  That’s called “productivity” and it is the thing that makes countries rich — producing more from less.

It’s the same story with manufacturing — production is as high as ever, employment is falling because of increasing productivity.   Anyone who really thinks that’s “bad” should propose the alternative — making manufacturing less productive.  See what happens then.

In response to clamor about jobs, jobs, jobs, Milton Friedman used to say, “You don’t want jobs, you want productive jobs.”  “No, we want more jobs.”  “That’s easy, ban tractors, reapers and other powered equipment from farming.  Go back to food from muscle power.  Full employment for all.”

When the combustion engine arrived on farms in the 1920s, productivity started shooting up with employment plunging, and we got two generations of novels, articles and Hollywood movies about greedy bankers foreclosing on family farms to ruin honest farmers and destroy virtuous farming communities.  Of course it wasn’t greedy bankers, it was the more productive farmers forcing out the less productive, making the country as a whole much richer.  (Food cost has fallen by more than half as a percentage of disposable income even though we buy much more of it — the real cause of obesity.) Creative destruction.

Now it is manufacturing. History rhymes.

(And in truth none of this is “unseen”, it is all entirely visible right out in the open for anyone actually interested enough to look.)

Jon Murphy
Aug 22 2024 at 7:59am

Good points, Jim.  In my humble opinion, if one is concerned about manufacturing as necessary for national defense, one should celebrate the current trends.  American power has always been through our productive capabilities, not numerical power.  By making factories more productive, it frees up labor which can be used for other things, such as R&D, supply chain management, and other issues of war.

Jon Murphy
Aug 22 2024 at 8:01am

(And in truth none of this is “unseen”, it is all entirely visible right out in the open for anyone actually interested enough to look.)

Yup.  My use of the “unseen” was to mean that, at any given moment in time, we are limited by our perspective.  There is relevant information we probably do not have.  And, while experts are not infallible, they tend to know what information is lurking out there beyond what is just seen and whether it is relevant or not.

James
Aug 22 2024 at 5:11am

Building factories, adding capacity, all great. The tax incentives companies are using to build these factories are simply in many cases a grab at tax credits to offset income tax elsewhere on the P&L. The cost of not grabbing the tax benefit outweighs the cost of building the new facility. A very strange economic model. Manufacturing is still in a recession.

Jon Murphy
Aug 22 2024 at 12:01pm

Manufacturing is still in a recession.

It’s not, though, and hasn’t been for quite some time.

Craig
Aug 22 2024 at 12:49pm

The source data that Professor Boudreaux is citing to in his article is here:

https://fred.stlouisfed.org/series/INDPRO#0

102.2167 in Nov 2007

102.8887 in July 2024 which is itself lower than the July 2022 number.

That’s a whole lotta sideways.

And that’s if we assume its true.

 

Jon Murphy
Aug 22 2024 at 12:52pm

“Sideways” is not “recession.”  And two data points do not a trend make.  Us manufacturing output is bouncing around record highs.  Bizzare definition of a recession.  It’s like saying Bill Gates is poor

Craig
Aug 22 2024 at 12:54pm

It is because you’re not keeping up with population growth and the current number is lower than the number two years ago. and the July 2024 is lower than June 2024, so right now TODAY it IS in recession actually according to THAT chart.

Jon Murphy
Aug 22 2024 at 1:00pm

And the July 2024 is lower than June 2024, so right now TODAY it IS in recession actually according to THAT chart.

No.  That is not the definition of recession.  One month does not a trend make.

Jon Murphy
Aug 22 2024 at 12:53pm

Besides, the data you linked to show manufacturing hasn;t been in a recession since April 2020.  That was 4 years ago.

Craig
Aug 22 2024 at 12:58pm

The number today is lower than the post-pandemic high.

Jon Murphy
Aug 22 2024 at 1:02pm

Craig-

A recession is definined as a sustained reduction in output.  Cherry-picking two points and ignoring the overall trend is not indicitive of a recession.

That’s all I can say here.  You really need to see the unseen.

steve
Aug 22 2024 at 10:10am

I think there is a problem with semantics here. While our manufacturing output remains strong the number of manufacturing jobs has decreased. While that might represent increased productivity and is better for the country in many ways it does mean that the number of manufacturing jobs has decreased. It has also seen major disruptions with companies moving. It makes the losses very visible while the gains are invisible to most people. Also, while those jobs still pay well the increase in pay has not been as strong as that for the top 5%-10% of people. (This is from memory so could be wrong.)

I also think the complaints above by Craig about major US cities being dumps is telling. All of those cities I have been in over the last few years, quite a few of them, mostly consist of large areas of decent housing and nice communities, some areas with really spectacular housing and buildings and then they have some bad areas. Pretty much the same as they have always been. They nearly all have some rusting hulks of closed factories but then you have to ignore the gleaming new data centers and research centers. This all ties in with the belief that crime is worse when it is actually again close to all time lows. Despite 7 different agencies tracking crime showing that,  people want to believe what they see on the local news which always features some crime, be it local or if they dont have a local one someplace else. Pew polls show that in 22 out of the last 25 years people think crime has been increasing.

As noted recently, people want to believe their stories and no amount of evidence will convince them otherwise.

Steve

Jon Murphy
Aug 22 2024 at 12:00pm

As noted recently, people want to believe their stories and no amount of evidence will convince them otherwise.

Absolutely.  But, of course, the implication of claims by Mr Krol (and what Craig says explicitly) is that when these stories clash with data, the data must be lying.  But both can be (and often are) true.

Craig
Aug 23 2024 at 11:49am

Actually we already know that the data collector itself, the government, has competency issues from the get go. See for instance the most recent BLS revisions.  Indeed there are government data points on this issue that themselves are just not congruent with the other data points. The problem is that libertarians want to argue for free trade and in doing so the protectionists bring up the decline of manufacturing.

As Steve notes: “They nearly all have some rusting hulks of closed factories but then you have to ignore the gleaming new data centers and research centers.”

No, actually that would be the HONEST free trade argument actually, ie the rise of IT/meds/eds in the cities that are doing relatively well with people engaging in activity that comports with their comparative advantage, but libertarians want to refute the counterargument by saying, “Well, actually manufacturing is in some halcyon age” in a country where such things are rather quite heralded, economic miracles of this variety actually don’t go unseen actually. And they latch onto bs government stats produced by mandarins playing to a bipartisan incentive that nobody wants to, politically, preside over the decline of manufacturing. So just report that it isn’t because after all the factory is still there, the ‘business’ is still there under the same NAICS code, whether that business adds value by manufacturing in the US or not, the business doesn’t track that or care, indeed its still ‘adding value’ and from an accounting pov it even appears that fewer US workers are adding more value as they substitute for cheaper imports even if they themselves are making, 50, 60, 70% less in the US itself.

” the data must be lying”

No, the government is lying. And don’t forget you’re in economics, not physics, there are academics out there saying the government is overstating manufacturing.

Its the productivity miracle that only libertarian economists and government mandarins seem to know about, both incentivized by their own biases to: 1. argue for free trade with respect to the former and 2. to veil the decline of manufacturing.

Craig
Aug 23 2024 at 12:09pm

“I also think the complaints above by Craig about major US cities being dumps is telling.”

It should contain the Sowell cavet, as compared to what and I am mentally comparing them to Germany/Northern Europe and yes, the worst on their list are nicer than the best on our list. And frankly its not even close. US cities DON’T look good by comparison, they really don’t.

 

Roger McKinney
Aug 22 2024 at 10:29am

Great points! They fixate on consumer goods, though, which the US can’t make. I point them to the reasons the US can’t make consumer goods: high taxes, unions, massive regulations, ridiculous medical costs, and the Fed’s inflationary policies.

Richard W Fulmer
Aug 22 2024 at 11:04am

Good point. Much of what the populist right complains about is the result of government intervention in the marketplace. Their solution, of course, is more government intervention in the marketplace.

Jose Pablo
Aug 24 2024 at 2:42pm

high taxes

High taxes? … they are not even enough to cover the government expenditures!

They are way too low … the measure of how low they are is call “deficit” and it is huge.

Thomas L Hutcheson
Aug 23 2024 at 7:40am

Something else that is unseen is the tax on exports (including manufactured exports) of a) import restrictions (even if you think some are justified on national security ground)  and b) fiscal deficits that draw in international capital and overvalue the dollar.  Of course these subsidize “unprotected” imports, too.  On net we probably do have a bit too little manufacturing taking place.

Jon Murphy
Aug 23 2024 at 11:53am

On net we probably do have a bit too little manufacturing taking place.

I agree with that.

Craig
Aug 23 2024 at 12:18pm

“On net we probably do have a bit too little manufacturing taking place.”

I agree, I should be focused on manufacturing those items where the additional cost of labor in the US < freight from foreign countries and there are many items like that, but there’s no way I’d trust it to risk my family’s well being on. Good example was the postal treaty that Trump exited (I think he exited?) where the US government, not China, subsidized developing nation’s freight such that you could buy something from China directly and pay less than the price I would pay to actually SHIP you the item. Below my cost of SHIPPING. Washed my hands of that.

 

https://www.vox.com/2018/10/19/17996378/trump-china-universal-postal-union-treaty

Jose Pablo
Aug 24 2024 at 5:53pm

“Too little manufacturing” …  compared to what?

What are the variable(s) that would be optimized with more manufacturing?

In every generation, there are some Illuminati who believe that the only problem with industrial policy is that it wasn’t “designed” by them.

John
Aug 27 2024 at 6:42pm

Pointing to construction jobs to argue manufacturing is not in terrible shape. The two industries couldn’t be more different and have completely different barometers for measurement.

Even so, many of these spending projects reek of New Deal fascism where the projects are pointless, a waste of everyone’s money, and the people forced to live and drive through them’s time.

I live in one of these “transformed” construction utopias and it hasn’t been a bigger, more egregious waste of peoples’ time and money. These projects never end on time, they hold up traffic, and always cost significantly more than quoted. So local governments jack the sales taxes and property taxes of their taxpayers up to compensate instead of simply abandonimg the project, which makes it extremely expensive to live all-around.

Additionally, I think the recent revision of the employment numbers downward by a whopping 818,000 should be a stark reminder to ANYONE that the government is not a good source of information. ESPECIALLY on the economy, which is regularly mispredicts at every single turn.

A reading of Hayek is apparently in order for this author (or a rereading if he has already done so). Clearly they have forgotten about the dangers of central planning.

David Henderson
Aug 29 2024 at 7:06pm

Jon, The [sic] is misplaced. Jayson Ramos’s grammar is correct. “Whom” is the object of believe.

Comments are closed.

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