Courtesy of Mish.
In response to Readers Question Free Trade; Does Nonreciprocal Free Trade Cost Jobs? Paul Krugman “Was” Right!, reader Ken is wondering about legacy capital and the destruction of capital.
Ken writes …
Hi Mish
I really enjoy your explications of economic ideas, and I think the world really needs them, since many are so economically illiterate.
I do have a question about free trade and loss of capital. My father and uncle both trained at Detroit’s illustrious technical high school. My dad went on to college and became a physiology researcher and professor, my uncle developed a state of the art machine shop making rocket engine parts.
When job and factory loss occurs there is also loss of the physical capital of the legacy tools and machines, and not all of them are worthy of obsolescence. In addition there is the loss of human capital embodied in persons and organizations.
Here I am thinking of institutions such as the famed Detroit technical high school, and of individual trained personnel such as the senior master machinist who has years of experience and detailed practical knowledge that can only be relayed in person from a master machinist to a developing journeyman machinist.
I recognize that there is radical technological innovation ongoing, but there still must be some value in this legacy capital. I would be interested if you might address this consequence of free trade in your writing.
Thanks,
Ken
Legacy Capital Disappears Over Time
As technology advances, the value of legacy capital depreciates at varying rates, but skills can change from being very needed to completely obsolete quite fast, even overnight.
Is there any legacy capital left for ability to use a slide rule? I suspect none at all. I have that skill and it is totally useless other than as a conversation piece….
