INCOMPLETE SPECIALIZATION. Dean at Dean's World expresses surprise that the ongoing economic recovery includes an expansion in manufacturing, with spot shortages (or upward price pressure) in some manufactured goods. No big surprise, really. Mr Esmay is conflating two effects, a shifting production possibility frontier (with the higher opportunity cost of manufactured goods in the United States being reflected in a reallocation of resources out of manufacturing and into knowledge-intensive goods not ordinarily classified as manufacturing; the comments to his post about the adjustment cost effects on older workers are worth a closer look) and a general economic expansion that might involve producing more of both manufactured goods and knowledge-intensive goods as the economy moves closer to its production possibility frontier.

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