Wednesday, February 4, 2009

Science and Policy Bootcamp - Day 3

At long last...I know you all were waiting with bated breath. Right. Sorry about the delay, though...this class put me behind-ish in lab work, and then I had to present at lab meeting last night, and my roommate moved out, necessitating a ton of cleaning. Anyways...back to policy:

Day three was all about manufacturing. And I'm not going to lie....snore. We went through some of the manufacturing revolutions, as well as how things are currently progressing in emerging economies.

I do understand the importance of manufacturing, but five hours of it was really rough, especially since much of the vocabulary was general and yet applied (as in, it uses words that I know from common usage, but they mean something different in economics and industry).

American manufacturing started with Alexander Hamilton, who saw the promise in factories and built good fiscal policy, as well as a pro-commercial economy (as well as national taxation and banking). The US had the best manufacturing until World War II, and trade agreements helped our allies. However, after the war ended, the global economic model began to grow, and no one was really “in charge.” Manufacturing became the currency of world trade (although services are increasing drastically in their importance). From 1973 to 1993, there was declining productivity and growth, and we were basically rescued by computer technology and the internet.

Some important distinctions in manufacturing philosophy: America’s method is to never stop the production line, and throw out what doesn’t meet quality-based standards. Japan’s method is much different: if any worker sees a problem, they can stop the line. Also, things are made to order, which reduces cost and risk. Additionally, the Japanese industry guarantees lifetime employment, and labor becomes a fixed cost. However, Japan has a problem: they are resource-poor, and therefore must have an export orientation (so they can pay for imports. Yes it feels backwards to me, too).

Korea is also an interesting case study, showing that developing countries are able to develop industrially. After the Korean War, the formerly classist society broke down due to universal military service, a meritocratic institution. Confucianism and Christianity combined to form a combination of improving self and community, ethics which fit in very well with the industrial structure. Higher education was encouraged and mandated by the government, and integrated/monopolistic companies (like Samsung) were created to allow for easy transfer of ideas and building the best product without intellectual property strings attached. An unfortunate side effect of this whole process was rampant corruption. (you can’t get everything right, I guess).

How do we create economic growth if we don’t want to lower wages? The answer is research and development. Once you reach that frontier, all you can do is innovate and create. For places like Korea, that is the next step: getting to this edge and being an innovator instead of just a producer. A fair point--is it necessarily bad to be a second adapter? No—they can often improve on the mistakes of the past, producing higher yields at a lower cost.

Do any countries or companies just focus on innovation and divorce themselves completely from the manufacturing process? As it turns out, the answer is yes: a common example is Apple and the Ipod…the technology wasn’t new, and the parts weren’t new, but the whole product and system or a database with music made it a crossover product that was extremely successful. This really frustrated companies like Sony, who “know” electronics, but they didn’t come up with this innovative idea. The piecemeal parts also came from all over the world (a distributed manufacturing model. Several companies, including H&M and Ikea, have uncoupled design and manufacturing, leaving the creation of the individual pieces to the factories themselves, thus creating challenges for industry to solve in terms of lowering cost.

An interesting problem that could grow out of all of this is oil. Suddenly, we’re going to find that—yikes—it is expensive to transport things all over the globe. And we’re going to have to rethink how factories work, possibly building zero-waste factories that are able to be diverse in their outputs (ie, that produce the entire product or several components not just one discrete part or component).

India’s approach is novel since it is innovating in the service sector, building a comparative advantage in one of the most critical parts of daily life: software. Software, you say? Really? Okay. Now stop and think about how much in your life is legislated by software. Email, banking, the system at the grocery store, the algorithms that make sure planes don’t crash in the sky, the national defense system, cell phone companies…as the US loses software designers to India, we are losing one of the most pervasive ways to innovate. And according to the people who know, only 200 people in the world functionally understand how an operating system works. That’s only slightly more than the number of princesses in the world (160, since you’re asking).

So—should we require programming in high school? I personally think it’d be great to offer programming as something that will take care of your foreign language requirement.

To conclude day three:

One of the professor’s odd comments was, “I’m sure you’ve all visited Japan.” Some of us glanced at each other, curious at why he would think a very diverse group of twenty graduate students somehow had the money to go to Japan.

A recommendation (for President Obama and others I’m sure): “Get China “right” or it’ll be one hell of a century.”

Really--during this entire lecture, I felt like a History-Channel-style version would be more exciting and interesting. Next time, maybe?

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