Tag: government intervention
Industrial Policy Isn’t About Creating Jobs
“Government favoritism in the form of subsidies, tariffs, and other interventions allocates resources (labor and capital) differently than the way resources are allocated by consumers spending their own money. Ordinarily, businesses—spending their investors’ money—compete for these consumer dollars. Industrial policy rests on the assumption that such market outcomes don’t adequately support higher causes such as national security. If that’s true, it’s all the justification industrial policy needs. Nothing needs to be said about jobs.”
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“As Noah Smith reminded his readers in a recent blog post, “Most of the actual production work will be done by robots, because we are a rich country with very high labor costs and lots of abundant capital and technology. Automated manufacturing is what we specialize in, not labor-intensive manufacturing.””
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“Be wary of those who push industrial policy as a means of job creation. It’s a short-sighted approach that distracts us from the more important question, which is whether hindering the market allocation of resources is truly justified for national security or other valid reasons.”
Great Moments in Unintended Consequences: Venomous Bugs, Warning Labels, Carbon Credit Scheme (Vol. 12)
Study: San Francisco Rent Control Expansion Led to More Evictions
Biden’s hydrogen bombshell leaves Europe in the dust
“The clean energy subsidies that undergird President Joe Biden’s climate agenda have just prompted one Norwegian manufacturer to choose Michigan, not Europe, as the site of a nearly $500 million factory that will produce the equipment needed to extract hydrogen from water. And other European-based companies are being tempted to follow suit, people involved in the continent’s hydrogen efforts say — making the universe’s most abundant substance the latest focus of the transatlantic trade battle on green energy.
The Norwegian firm, Nel, announced its decision in May, nine months after Congress approved Biden’s flagship climate law, the Inflation Reduction Act. The move takes 500 new jobs to the other side of the Atlantic, despite the European Union’s efforts to position itself as the obvious place for clean tech investment.”
Private Insurance and Government Programs Drive Up Health Care Costs
Study: Banning Investors From Buying Homes Leads to Higher Rents, More Gentrification
“They found that banning investors from buying and converting housing to rentals worked in one sense: The share of investor-owned rental properties in affected neighborhoods fell, and the number of properties bought by first-time homebuyers increased.
On the other hand, however, these new homeowners tended to be richer than the renters they were replacing, and the costs of rental housing increased overall.
“The ban has successfully increased middle-income households’ access to homeownership, at the expense of buy-to-let investors. However, the policy also drove up rents in affected neighborhoods, thereby damaging housing affordability for individuals reliant on private rental housing, undermining some of the intentions of the law,” write researchers in the study published on SSRN.”
Nigeria Looks To Reduce State Role in Energy Sector
States Spend Billions on Economic Development Deals With Little Return
The origins of Biden’s most important policy, explained
“At its heart, industrial policy strives to solve a “classic Keynesian political problem,” says economic historian Yakov Feygin, director of the Berggruen Institute’s Future of Capitalism program: The only way to grow the economy is ultimately through productivity-enhancing investment — but there are enormous upfront costs to building new plants or buying new equipment, especially at the technological bleeding edge, while returns are years in the future if they ever come at all.
If only capitalists get to decide when to invest, they may — rightfully — decide that the unpredictability of future demand and credit conditions make it difficult to justify expanding capacity in crucial sectors even in the face of soaring prices. They fear the “bullwhip effect,” where investors may put up cash for new plants or equipment to respond to higher prices, only for those prices to fall before new production can actually come online.”
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“The government, for better or worse, has the unique ability to stabilize the investment cycle and goad risk-averse private capital into making desperately needed, but enormously costly, long-term investments.”
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“Biden’s economic team is betting on something Hamilton knew: Long-term investment in the real economy is essential, but private investors might not provide it. That’s where government can — and should — step in.”