From: jmorriso@ee.ubc.ca (John Paul Morrison)
Subject: Re: Protectionism as investment
Organization: University of BC, Electrical Engineering
Date: Wed, 11 Nov 1992 22:32:19 GMT

In article <1dpjm4INN7jm@network.ucsd.edu> mbk@lyapunov.ucsd.edu (Matt Kennel) 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.
>

unfortunately, tariffs and quotas get applied to protect an industry, but
never get taken off. A good example is the American car industry:
the US government created quotas for Japanese cars, which limited the supply
of Japanese cars, driving the price up. The US car makers should have had an 
advantage, since they had a lower price (incentive for more people to buy),
instead the US carmakers took advantage of this and upped the price of the
cars. Then the US cars no longer had a price advantage; meanwhile, the US
carmakers didn't improve quality etc. The net result is higher prices, and
the US industry is still inferior to the Japanese.

Quotas, tariffs, etc tend to get you the worst of both. Now, perhaps
an initial quota, with a scheduled reduction in tariffs, might have had
a better effect, since manufaturers would have had to prepare for a 
resumption of normal trade. But more likely, they would have convinced
government to delay rolling back tariffs, and preserve their higher 
profits at the expense of consumers.

>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?
>

but how do you measure that value? Do you let the local industry argue for
protection with their own studies, to argue for 1000% tariffs, just so they
can make a quick profit off reduced competition? what kind of (market)
mechanism do you propose to measure the value of local jobs vs efficiency
through competition?

>Would we be better off now if we didn't bail out Chrysler?  It's doing
>much better than GM is now.

it's not obvious. Perhaps if Chrysler bit the dust, a new manufacturer would
have snapped up the remaining assets. Just because a company fails doesn't
mean the assembly lines disappear. Maybe the US auto industry is better
served by only two automakers. Ford might have bought Chrysler, and mayber
the entire industry would have been better off, not just Chrysler.

It's not obvious.
>
>---------------------
>The implementation of government investment might be very inefficient and
>corrupt due to political influence.
>
>Suppose we had a market in goverment investments, i.e. for every dollar
>from private investors, comes a U.S. "dollar" in some measure.  There
>would also need to be something to make sure the investments go towards
>long-term, rather than short-term performance.

perhaps the government shouldn't invest? This seems to duplicate existing
investment markets. Every dollar the government "invests" in an industry
is a dollar you the taxpayer could have spent more wisely.

(Clinton Comment: I don't know what kind of shape the USA is in, but if 
he's talking about "investing" in industries etc. I'd be scared. But if
he's talking about investing in the nation's infrastructure: roads, sewers,
transportation; education etc. that seems like what governments are elected
to meddle in. It depends on how well it is invested, and whether or not
it pays back in greater productivity)

>
>Another idea,
>Suppose the social security administration invested in the stock market,
>with a buy-and-hold strategy?
>
>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?

Fundamentally, the money they would invest is owned by the people who
contribute to the social security plan. Social security should invest
for maximum return - minimum risk, so that people will have social security
when they retire. Now if there are dumb tax rules that discourage investment
with the country, then that could be changed.

Let me give an example of what could happen if governments start trying to
direct the way public pensions are controlled. They basically want more
money to grab hold of and spend. In Canada, some socialist-government-
labour union provinces (ie Ontario) are trying (or have succeeded) in
forcing pension funds to make available a certain % of funds for
"investment" in union sponsered buyouts, bailouts, and employee takeovers
of (quite shaky, nearly failed) businesses.

I'd say WATCH OUT! if the government starts coming around, wanting to
"invest" your pension fund.

>
>--
>-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".


-- 
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 John Paul Morrison                     |  
 University of British Columbia, Canada |  
 Electrical Engineering                 |   .sig file without a cause
 jmorriso@ee.ubc.ca              VE7JPM |  
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