The Global Economics of Desire

How concerned should advanced countries be about the outsourcing of manufacturing to China or software development to India? Fear of jobs lost to low-wage countries strikes a populist chord, but misses a vital point: the prosperity of developed countries depends primarily on entrepreneurship.

After all, no economy can raise living standards forever through innovations that make production of existing goods more efficient. In the short run, increased efficiency reduces the cost of a good or service, so people consume more of it. But eventually, consumers refuse to buy more even if prices continue to fall. After that, further efficiencies require shedding workers.