What, if any, role should government policy play in determining the composition of production? For example, should government target particular industries

A century ago, gross domestic product of the United States came primarily from the production of tangible goods (a.k.a. manufacturing). Today, GDP of the US is weighted heavily toward the production of services. The basic issue on the table for discussion is whether this is a good thing.  Can standard of living in the United States, or any country for that matter, continually improve if aggregate production is composed of more and more services, and less and less manufactured goods?

In advance of our class discussion, your team should prepare a written report of at least two pages (more is encouraged) that collects your views and positions on the issue. The writeup should include at least three cited references.  Although this Blackboard discussion board will not be formally used as part of our discussion, you can use it to post information and references that you think might be useful to the class.

Some areas to consider as you prepare:

• More precise info on the fraction of GDP tied up in manufacturing vs services…now versus years ago.
• Examples of US headquartered manufacturers that have built facilities outside of the US.
• What does trade theory bring to bear on this issue? The role of specialization and trade between countries? Are there risks associated with specialization?
• Influence of government policy, both domestic and abroad, on historical trend toward less manufacturing and more services. Consider for example, protectionist policies (tariffs, subsidies, etc) tax policies (corporate taxes, etc), monetary policies (Federal Reserve interest rate actions), and industry regulation (environmental, HR regs).
• Is it possible that production of more services is merely a natural outcome of increasingly well off consumers? (consider using Maslow’s Hierarchy of Needs as a basis for thought here)
• Who should decide what gets produced and how economic resources should be allocated? Keep in mind that the two general approaches for allocating economic resources are capitalism and socialism.
• What, if any, role should government policy play in determining the composition of production? For example, should government target particular industries (e.g., alternative energy) for growth?