From: mbk@lyapunov.ucsd.edu (Matt Kennel)
Newsgroups: sci.econ
Subject: Re: Protectionism as investment
Date: 16 Nov 92 06:36:32 GMT
Organization: Institute For Nonlinear Science, UCSD
NNTP-Posting-Host: lyapunov.ucsd.edu
X-Newsreader: Tin 1.1 PL3

jwh@citi.umich.edu (Jim Howe) writes:
: |>  {I said}
: |> What is more valuable?  Cheap cameras, or a camera industry?  Its probably
: |> a tossup on that level---but what if 5 years down the line, you find that
: |> the camera manufacturers have unique facilities and abilities to manufacture
: |> nonlinear optics?
: |> 
: 
: How much are you willing to pay for the remote possibility that the lack
: of some industry will prevent some future industry from developing in
: this country?

: New companies start up all the time, particularly if there
: is a supportive capital market.

That's exactly the point.  Why is there only sometimes a supportive
capital market?

Is a new teeny company doing nonlinear optics going to do as well against
the full force of Nikon and Matsushita and NTT if all of a sudden this new
field arises?

:  If the manufacture of non-linear optics
: is a good business to be in, someone will start one.

And if it's really good, foreign competitors might make sure by
'any means necessary' that ours don't get off the ground.

Because the 'capital markets' are so good at observing economic
trends, there won't be a supportive capital market here because
most of these new startups fail.

Bummer.

The capital markets will make their evaluations based on *existing* economic
factors, rather than "what could be".  The capital markets have already
taken into account trade policy when they make their decision.  Right now,
they place their bets on Nikon & Matsushita and not on Yoyodyne, Inc.

: The Japanese are already facing competition from the Koreans.  You seem
: to be making the 'predatory' argument, that a country will wipe out
: domestic industry with low prices and then raise prices.  Japan currently
: supplies most consumer electronics.  Why haven't prices gone up?  Global
: competition keeps quality high and prices down.

Yup. And the Japanese now have a huge, very efficient, low-cost, high
performance, high-technology industry and we don't. 

Funny thing that.

They knew that we could compete against them, and did everything to make
sure we couldn't.  Maybe they didn't have time to deal with the Koreans, but
you know, I wish our country had that problem.

: This is to the benefit
: of everyone.  If citizens of some country want to subsidize my purchase 
: of a product I'm all for it.

I'm touched by their generosity.
Like a drug dealer who gives out free samples.

Here's the question: cheap VCR's give individual Americans $50 extra free
dollars.  Will that make us make more money in the long run or will
having all 10 billion working in one place?  I thought the point of
*capital*ism is that having alot of capital in one place can do a lot of good.

Somehow, the Japanese still seem to have been able to acquire enough VCRs of
their own.

It's not easy to take apart those cheap VCR's to get to their cheap
parts to salvage them to make cheap ISDN network connectors.


: |> Another idea,
: |> Suppose the social security administration invested in the stock market,
: |> with a buy-and-hold strategy?
: |> 
: 
: Why not let workers invest their SS funds in a fund or plan of their
: own choosing?

Better.

: If you let the government invest in private investments,
: who would determine which investments got the money?  The amount of
: influence the government could wield over stock prices would be 
: tremendous.

: |> What if it invested in those companies with the maximal median wages
: |> paid to workers, in order to support "high-wage high-growth jobs", and
: |> the growth of business in those industries?
: 
: Who says that those investments would maximize the return on investment?

Yes, this could be a problem.  I was thinking about a huge venture capital
firm whose mission was in fact to make a profit.

How about this---a capital market in government policies?  You can buy
options in some stocks or derivatives combined with various policy proposals.

Current capital markets only evaluate current conditions, and not "what would
things be like if policy were different".  Maybe this could aid policy
makers by having "many" people evaluate proposals through more objective
means than the current "who whines the loudest and who knows whom".


Question: does parallel local optimization of profit lead to global
optimization of GDP?


: James W. Howe                  internet: jwh@citi.umich.edu
: University of Michigan             uucp: uunet!mailrus!citi.umich.edu!jwh
: Ann Arbor, MI   48103-4943         

--
-Matt Kennel  		mbk@inls1.ucsd.edu
-Institute for Nonlinear Science, University of California, San Diego
-*** AD: Archive for nonlinear dynamics papers & programs: FTP to
-***     lyapunov.ucsd.edu, username "anonymous".