Obsolescence: Economic and Technical

The language of economists is often fraught with confusion for a simple reason: we use common words and use them in a precise manner that is different from what many people think.  We inherited a language and our words don’t quite fit into others mouths easily.

One such word is “obsolescence.”  People tend to think of “obsolescence” in a technical sense, that is as something that is old and thus no longer needed.  The horse and buggy was made obsolete by the automobile.

Economists think of the term in a different manner, that is to describe a method of acting that is no longer economically practical given the change in costs/benefits.  This may include adopting a new technology, but it may not.  By way of example, consider the following: why do some people still take the train when we can fly everywhere?  In a technical sense, the airplane has made the passenger train obsolete.  But people still ride the train because the costs of riding are lower than the benefits of riding versus the same calculus of flying.  For some people, the act of flying is obsolete.

Ian Fletcher makes this very mistake in responding to Pierre Lemieux’s new monograph What’s Wrong with Protectionism?  Fletcher writes:

You [Lemieux] attack a protectionist straw man. For example, contrary to what you [Lemieux] say on page 48, reasonable opponents of unilateral free trade do not advocate protecting “obsolete manufacturing.”

Fletcher is confusing technical and economic obsolescence.  Protectionists do indeed advocate protecting obsolete manufacturing; they are obsolete in that they are no longer serving people’s needs since people are now choosing imported products.  If this were not the case, then protectionism would not be needed.  These firms might be at the top of the tech world, but that does not mean they are successfully serving a need.  To protect them is indeed to protect an obsolete industry.