From: mbk@lyapunov.ucsd.edu (Matt Kennel)
Newsgroups: sci.econ
Subject: Re: Protectionism as investment
Date: 16 Nov 92 06:03:30 GMT
Organization: Institute For Nonlinear Science, UCSD
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livesey@solntze.wpd.sgi.com (Jon Livesey) writes:
: 
: In article <1dpjm4INN7jm@network.ucsd.edu>, mbk@lyapunov.ucsd.edu writes:
: > Re:  the articles that talk about how protectionism costs us 2x for
: > each job saved.
: > 
: > 
: > Could not one view this cost as an "investment"---in that if you save
: > this job now from foreign competition, then perhaps the industry will
: > survive long enough that sometime in the future it has the capability
: > to compete in some new product area not yet invented?
: > 
: > By this measure, government protectionism and industrial policy is forced
: > investment by citizens in these industries.
: 
: One problem with this argument is that in any country there
: are industries spread over a spectrum of competitiveness,
: from very competitive compared to foriegn industry, to not
: competitive at all.
: 
: Now from which end of that spectrum does pressure for
: protection emerge?   From the end where domestic industry
: is already *very* uncompetitive.    These are then the
: industries least likely to survive in the long run, with or
: without the kind of "investment" you propose.   In other
: words, the industries least likely to benefit.

Yes exactly!  We (meaning U.S. 'authority') throw good money after
bad, putting effort where we've already "lost".

I would rather make sure we do everything we need to to *win* in other areas,
which is approximately what the Japanese do.

I agree it's stupid to waste taxpayer's money to simply make industry
lose slightly slower.  If we are going to spend money, make sure we
*WIN*.

The "market has spoken" and is saying that U.S. is losing and Japan winning

The "market has spoken" and wants to average my standard of living with
Mexico's

The "market" has spoken and is saying "WE'RE DOING IT WRONG!".


I want to make sure the market says what I want to hear, rather than
take its short term valuations passively and say "the market made me do
it".

Do you really think the "market's" doing the right thing when it slashes
private R&D across huge segments of industry? 

Perhaps the "market" is punishing us for poor decisions.  Why do
people think that the 'market' is not shouting "YOU BOZOS! YOUR ECONOMIC
SYSTEM DOESN'T WORK!  DO SOMETHING DIFFERENT!"

The statement of the fundamental problem:
=========================================

Only in a econometrician's linear fantasy world can you locally optimize
individual variables to obtain a global optimum.

The "market" is propelling us to local "optima" which don't really
seem even that locally optimal in the U.S.

The idea of an industrial policy that works is to jump over the local
maxima, rather than spend money to swim against the gradient.


: A concrete example: when I was a kid, there were 700,000
: men employed in the British coal-mining industry, and the
: Govt.  was already "investing" taxpayer funds in the
: industry "to keep the jobs of men currently empoyed in the
: industry alive".
: 
: Now it's 1992, and there are less that 50,000 men employed
: in British coal-mining, and some of these men were not even
: born when the effort tp protect "existing" jobs started.
: Taxpayer protection has created new unproductive jobs in an
: uncompetitive industry.     What's more, there is still a
: pressure group, headed by Arthur Scargill, the leader of
: the Miners' Union, who want to "invest" yet more taxpayer
: money in the industry, and the argument is still that we
: should keep "existing" jobs around.


Yes, I agree that's foolish.  I was thinking of things like industrial
policy for developing better solar and nuclear plants.

In this case, protectionism and industrial policy might only be beneficial
for those industries that don't already yet exist.

The obvious problem is that nonexistent industry has no political power.

Somehow the Asian nations seem to have gotten around this problem.  Perhaps
it's because they're culturally disinclined to whine. (this is exceedingly
superficial i know)

: jon.

--
-Matt Kennel  		mbk@inls1.ucsd.edu
-Institute for Nonlinear Science, University of California, San Diego
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