The Outsized Benefits of U.S. Manufacturing

In a New York Times op-ed, Christina Romer, the former chair of President Obama’s Council of Economic Advisors, argues—contra her former boss—that there is no compelling justification for policies aimed at supporting U.S. manufacturing. She lays out and rejects a few theoretical justifications for supporting manufacturing, including the idea that there are large positive externalities—large social benefits relative to what private companies can capture—tied to the sector. Her arguments are unconvincing. Most important, there are large social benefits associated with innovation and manufacturing plays an outsized role in creating them. In so doing, manufacturing makes a disproportionate contribution to economic growth.
http://www.brookings.edu/up-front/posts/2012/02/06-manufacturing-wial-rothwell