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At 5/25/11 05:53 AM, SadisticMonkey wrote: greater deamnd for chinese labour can only ever help chinese workers

Not really. I can help, but so long as those demanding the labor have so much reater power than those providing it, the demanders will be able to mainupulate the supply of their demand in order to get cheaper labor than it is worth. You want a real life example of demand being turned into supply? Take a peek at Wal Mart's procurement practices.

a few hundred, though I don't see how it's relevant

Really? Because the CEO of a 50 person company has to do a ton more than one of a larger company that can afford to have a bigger bureaucracy to handle much of the overhead tasks.

why do US workers deserve jobs more than anyone else

Because the US says so. If the US has an interest in keeping jobs here creating an economy slightly more resitant to the mad swings of globalization, and increasing tax revenues, than the US would like to keep jobs inside the country. That's pretty simple to understand.

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@igott, Iron-Hampster, Camarohusky

Krugman, yet again.

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At 5/21/11 10:41 PM, SmilezRoyale wrote: ___________

Well I read up the wikipedia article on the topic, I'll assume because you didn't provide a specific link that Wikipedia does the job.

Wikipedia is evil (except for getting the functional forms of probabilistic distributions, and its parameters). Here's the Original paper.

I'll begin by saying frankly that I'm amazed something as mundane as this can pass for a momentous discovery in the world of economics.

It was the starting point of the mainstream's treatment of information and contracts, more precisely, asymmetrical information. For this paper, among others, Akerlof was awarded the 2001 Nobel Prize in Economics. If you are interested in its relevance, you should read his prize lecture.

I see this as unlikely save ...

You're challenging axioms here. What you should have clear is that the example is not really an example, an empirical verification of a hypothesis, but a model. It's like challenging profit maximization on the ground that production functions have no derivatives. If the car market works like that or not, is irrelevant. Economics' concerns about information problems do not lie in the used cars markets, but mainly in insurance, financial and labor markets.
The key finding of the paper isn't that it is widespread, or that used car markets work like this, but that these kind of phenomenon is possible, an existence theorem if you like.

in a situation where the market for selling used Cars is highly cartelized, and while I'm not an expert on car markets this seems unlikely. Car sellers are simply engaged in facilitating the exchange of cars from one person to another, we're not talking about someone trying to build some very expensive power plant. There are obviously start-up costs, but they seem relatively small.

Your intuition is incorrect, people have an incentive to lie if they have no sunk costs. A power plant is to be trusted more than a normal salesman. A small firm with zero sunk costs has nothing to lose if it cheats on quality. A power plant, however, has incurred in huge capital costs, that are going to be very costly to be undone. A similar analysis can be made with firms that have reputation, or those who incur in the most popular sunk cost: advertising.
The original treatment on product quality assessment were treated in The Role of Market Forces in Assuring Contractual Performance, by Benjamin Klein and Keith B Leffer.

A monopoly wouldn't cheat, because it would then lose all demand for high quality products. As you said, a guy you're never going to see again and who's trying to sell you his car, however... That's why some people buy used cars only from people they know and can trust.

Either a continuum of seller qualities exists or the average seller type is sufficiently low (buyers are sufficiently pessimistic about the seller's quality)

Deficiency of effective public quality assurances (by reputation or regulation and/or of effective guarantees/warranties)

And i presume this is where the public servant descends from on high to cure the imperfections of Man?

Solutions to quality assessment include branding, guarantees, or official licencing.
Asymmetrical information in other markets may need specific measures, such as mandatory government provided health insurance in the health market.

Forgive the sarcasm but if nothing else, the democratic process is definitionally a lemon market.

Public choice is faced with huge information problems, asymmetrical information is a subset of the most general principal agent problem.

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in a situation where the market for selling used Cars is highly cartelized, and while I'm not an expert on car markets this seems unlikely. Car sellers are simply engaged in facilitating the exchange of cars from one person to another, we're not talking about someone trying to build some very expensive power plant. There are obviously start-up costs, but they seem relatively small.

Your intuition is incorrect, people have an incentive to lie if they have no sunk costs. A power plant is to be trusted more than a normal salesman. A small firm with zero sunk costs has nothing to lose if it cheats on quality. A power plant, however, has incurred in huge capital costs, that are going to be very costly to be undone. A similar analysis can be made with firms that have reputation, or those who incur in the most popular sunk cost: advertising.

My intuition was incorrect only because my intuition assumed that sunk costs exist to some degree for every firm. Except in the rare case of the village mountebank, but for the most part people assume that the larger the firm the more conniving than the smaller ones. I.e. the old Halo around the ma and pa store. This might be true but I suppose you are above the emotionalistic bias.

There's also the fact that Newer firms tend to have it harder than older ones. When dealing with an old firm, you are generally "know what to expect" more often then from a Newer Firm. I'm also unsure as to why we have to assume that consumers will assume

If I'm dealing with someone I don't know on a used Car I would imagine it's in the consumers interest to assume it's a piece of junk and bargain for it as such.

The original treatment on product quality assessment were treated in The Role of Market Forces in Assuring Contractual Performance, by Benjamin Klein and Keith B Leffer.

Thankyou for the literature

A monopoly wouldn't cheat, because it would then lose all demand for high quality products.

Wait who is the monopoly going to lose it's demand to exactly? Unless it's buying something that is a genuinely optional purchase.

Solutions to quality assessment include branding, guarantees, or official licencing.
Asymmetrical information in other markets may need specific measures, such as mandatory government provided health insurance in the health market.

XD well I **know** this already.

However I'm not sure why the health insurance market is special. Perhaps you have another forum post on this topic? or a blog post? or another 15 economics paper which deals with this topic.

Forgive the sarcasm but if nothing else, the democratic process is definitionally a lemon market.

Public choice is faced with huge information problems, asymmetrical information is a subset of the most general principal agent problem.

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Free trade benefits all equally as long as it's negotiated properly. The United States has absolutely 0 broom factories, but is that a bad thing? We have a higher opportunity cost to make brooms (we could be doing more important jobs like being lawyers, doctors, etc.) so it's better for us to import them all.

NAFTA created US jobs too; it's not like we only got cheaper imports. Our exports increased, however, this was a time of great prosperity, so naturally our imports slowly outgrew our exports in NAFTA.

In the long run, trade hurts everybody. Remember, if you say "well I'll slap a tariff on all Japanese-made cars," Japan's just going to slap a tariff on your cars. Hindering trade makes the quality of life for all go down. Free trade should not be hindered. It sounds nice and populist to say "we'll save American jobs," but there are some jobs that America doesn't need. Why? We got better stuff to do.