On Justifying Outsourcing and Offshoring
Dr. William H. Friedman

The practices of outsourcing information technology work domestically and offshoring it internationally call for both ethical and economic justifications. Ethically, each company displacing workers needs to consider the effects on the workers displaced, those remaining employed in the company, and the community in which this happens. Not often considered is whether the recipient of offshored work as well as the recipient’s country receives unalloyed benefits. Economically, long- range considerations as well as immediate advantage need to be weighed against one another. This paper also considers how well Ricardo's law of comparative advantage supports offshoring. Further, mathematical considerations adduced from game theory and the economic analyses of Gomory and Baumol suggest a somewhat different perspective on these difficult issues. The paper also treats the consequences of current practice for an entire country where numerous, if not yet all, companies engage in offshore outsourcing. The conclusion suggests various means of dealing with this problem constructively.

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