On national competitiveness

A question from Yahoo! Answers:

How can the U.S. economy succeed competitively when it is so expensive to produce in this country?

It seems that producing anything in the United States becomes more expensive every year and beyond the normal rates of simple inflation. I think the U.S. is the greatest country in the world and believe that our citizens are more fairly and equally treated than most peoples of other government. But with all the litigation meant to improve things there is far too much done purely for greed and you end up with all these expensive unneccesary rules imposed on employers driving up the cost of production. Then when you factor is all the money that must be paid for healthcare, workers comp, social services, etc how can we possibly compete with these countries that don’t saddle their producers with these financial burdens? Is the ever increasing costs of production in this country mean our eventual economic doom?

You really (no, REALLY) need to read “Competitiveness: Does It Matter?” by Paul Krugman:


What you fail to realize is that most of what the U.S. (or any other industrialized) economy produces is services. In the U.S., services account for more that 70% of all consumption. And services are very hard to trade internationally (or even interstate).

Also, if you really want to see production whose costs run far ahead of inflation, look at higher education and healthcare…

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