[snrplfth]

The cost of the educational system is a complex thing, but generally speaking, if a) competition in a sector is tightly restricted and b) large amounts of subsidies are available for consuming that good, then c) prices will climb sharply, and quality will not improve.

I suggest that this is true of much of the US educational/training system. The government keeps pumping more and more money into the educational system, especially via loans. But the number and size of universities are still limited by accreditation and other restrictions (especially in qualifying for those loans) so competition can't drive the price down. Indeed, the price climbs precipitously because students have ever-more amounts of money to spend (often as debt) on a limited number of spots. But you have to pursue a degree to get the money, so rather than pursue what seems best in the job market, pursue what's easier to get into and succeed in. Hence, the phenomenon of a big mis-allocation - a huge number of expensively-educated people carrying lots of debt who can't find commensurate jobs.

I think a lot of the problem is just the suddenness and visibility of a lot of it now. US unemployment is now getting quite low, but a lot of it consists of the chronically unemployed who were accustomed to a solid, long-term job. (I would disagree that purchasing power is falling for a majority - though it did during the recession.) Hence it is more visible. But can the US close itself to large sectors of trade indefinitely to maintain this workforce, especially as automation advances anyways?

It's not so much that I have "accepted the human costs" or "have all the knowledge" - but rather that I don't, and don't really imagine that somehow a system can be designed that provides all the benefits of free trade without actually instituting it. To balance and tweak tariffs and quotas and supports seems to be just as high, or higher, a claim to having all the knowledge. The trouble of Trumpian or Le Pen populists is a real one - but do we just say: whoever has the loudest, weirdest political base gets to set the economic agenda, because we're scared if they get angry? I dunno. If so, we should be honest about that - that we're avoiding free trade not because it's bad economically, but because we're worried about fierce populist backlash.

[sprafa]

I am absolutely honest about that. Those weird vocal people weren't born that way - they became disenchanted with a system that has failed them and failed to make their lives better. If political radicals are the only ones who propose solutions that make sense they will vote for political radicals.

economists and experts keep telling them that they're "wrong" to blame free trade or immigration (just like the linked article). Even though most competent economists would actually say, like you said, that free trade is not beneficial to everyone everywhere.

To answer your question directly yes I think the economics of the system must include the "externality" of the discontent it generates in populations.

It seems like you're saying that although some people might lose their jobs and see their earning potential collapse, free trade is "more efficient" for some majority (+50%) of the population therefore it is good. I would say whatever benefits that come to the majority doesnt really balance out with the suffering of those left with their wellbeing destroyed. Their backlash against the system that destroyed their livelihoods is only natural.

markets are supposed to serve us, and our societal wellbeing. If they fail do that, in my view, they are a failure.

[sprafa]

I also would never defend the current educational system in America (clearly a case of poor government and excessive intervention). What I was saying is that American businesses used to see investment in education of American citizens as essential for their future profits. Therefore they invested in American workers. I think this is no longer true, but to be honest this is conjecture as I don't have the data to back it up ( outside of the Intel program which is anecdotal).

[sprafa]

Also, have you seen Pickety ? My understanding of his work is that the majority of the population is seeing their real earning power collapse while the top 10% or so of the population in developed countries is reaping most of the growth.

So yes people are losing purchasing power in developed economies, and from my understanding it's been that way since the 70s.

[snrplfth]

Picketty's work is generally about wealth inequality moreso. He asserts that the returns on capital investment exceed the average growth of the economy at large, and that therefore the share of wealth going to the top of the wealth scale will continuously increase. Others point out that this increase is relatively small, happening only in a few countries, and also happened in the context of a historic bubble in real estate and securities. They also point out that this does not count wealth such as government pensions and health insurance, or human capital like education and training (which in a services economy is quite significant.)

As to losing purchasing power, I would more prudently say "relative stagnation". Here's before-tax incomes, adjusted for inflation, for the top 1% and bottom 20%: (http://inequality.org/wp-content/uploads/2014/10/Figure-8-e1...) It's not that the majority have seen real declines in purchasing power in most areas, it's just that they have seen relatively less growth than the richest - but this is unsurprising in a rapidly growing, globalizing world. Inequality certainly chafes a lot of people - but it's not quite the same as declining real incomes. (You can also see how tied to asset valuations the top 1%'s incomes are - the dot-com bust and the 2008-2010 recession are quite visible.)

Edit: Here's the same sort of graph for the whole income spread: http://inequality.org/wp-content/uploads/2014/10/Figure-9-e1...

[sprafa]

Alright that's new to me. I was under the impression that real wages were falling, not stagnating. Still, most of the population is stagnated, but the top 1% are getting an increasing share of economic growth: That graph shows an increasingly escalating sine wave of returns going up to the top 1% of the population. On some years, like pre-2008, the returns on the top 1% go all the way to 300%. That's crazy.

On top of that, it's making people angry, for very good reason, because if you look into behavioural economics and psychology, we have an innate sense of fairness that's being violated. And the social contract that maintains democracy includes the idea of fair work, fair rewards.

It seems like you regard this sort of outcome, of massive income inequality and stagnating wages, as inevitable, or neutral. I don't and many other people don't. They're angry about it and they're voting for Trump, or fighting for higher minimun wages, or unionizing. And historically those things (political change, collective bargaining) have in fact ended up giving higher percentage of the profits to the workers and citizens involved in the manufacturing of the products that are making so much money for capital. This is exactly what global trade is destroying, and people are getting increasingly angry.

Look, I just think you need to reconsider, globally, the psychological effect this sort of thing has on the population. Since 1973 the median wage has grown at a 0.2 percent annual rate. 0.2 percent! And the return is slowing down since 2000.

Source: https://thinkprogress.org/wages-have-been-stagnant-for-40-ye...

[snrplfth]

Just a few concluding notes here on my end:

Yes, I understand why people are angry. People get angry about all number of thigs, more or less justifiably.

The problem is that most of the cures being proffered for this percieved unfairness will not solve the problem. To reduce the disparity between the wealthiest and the rest, are people talking about, you know, ending mortgage and property tax deductions, liberalizing the education sector, permitting more housebuilding, ending moral-hazard-generating bailouts of companies and banks? A little, but hardly. What you hear is that the "people" want tariffs (impacting the poorest, who disproportionately consume cheap imports), higher minimum wages (which slightly raise the incomes of some workers, at the expense of making youth, people with minimal educations, ex-prisoners and the disabled unemployable), and trade unionization (which benefit those in the union, but those shut out of the union scarcely at all.)

I'll also note that this era of stagnation for the developed-world middle class has also coincided with a huge growth in the incomes of most of the rest of the world - these are not totally unconnected. Sure, we can be nationalists about it, but there are big benefits to the rest of the world from globalization.

I think there are sensible ways to diminish these income disparities. But I don't really that many people advocating for them - mostly I hear the old protectionist mantras, and I just do not agree with that.