Comment by speleding

Comment by speleding 2 days ago

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> Do you have a source for this?

There are reams of economic literature trying to estimate whether government intervention in the market was a good idea. Most of the time it doesn't turn out great. So the parent's suggestion "probably won't be a win for economic output" is a pretty safe bet.

Often governments will use "security" as an argument to keep steel, shipbuilding, etc, in the country. That argument is not really possible to evaluate on economic grounds.

testrun 2 days ago

A few counter examples:

1. TSMC (supported by the ROC government[https://dominotheory.com/tsmc-and-taiwans-government-two-boa...])

2. Korean chaebols (Samsung, Hyundai, LG etc, supported by ROK government[https://www.investopedia.com/terms/c/chaebol-structure.asp])

3. Japanese heavy industries (Japanese government support)

The government support are a combination of low interest loans, import controls and financial subsidies.

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  • eru 2 days ago

    That the favoured industry (or company) is doing well isn't necessarily a sign that the policy is overall good for the country's economy.

    As an analogy: weapons manufacturers do well when there's a war on, too, but that doesn't mean war is good for prosperity.

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    • smallnamespace 2 days ago

      > That the favoured industry (or company) is doing well isn't necessarily a sign that the policy is overall good for the country's economy.

      You are answering specifics with generalities.

      If Taiwan didn't support and nurture TSMC so that today it's a national champion that prints money, what development path do you think they could have taken that would've brought at least the same economic success? Please be specific.

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      • eru a day ago

        There's plenty of other companies in Taiwan already today, and that's without the counterfactual of leaving more money in people's hands.

        I can't predict specifically what other things would have happened. If people could do these kinds of predictions well, maybe central planning would actually work?

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  • throw0101a 2 days ago

    > The government support are a combination of low interest loans, import controls and financial subsidies.

    There is a very well-understood formula on how to go for from an agrarian society to an industrial one, which has been used going back to the late 1800s:

    * https://www.goodreads.com/book/show/16144575-how-asia-works

    Of course you have to actually follow it, and not get sidetracked with cronyism and such, like the Philippines did:

    * https://en.wikipedia.org/wiki/Crony_capitalism

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    • eru 2 days ago

      'How Asia Works' is not exactly economic orthodoxy, to put it lightly.

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      • chlodwig 2 days ago

        Is that an indictment of the book or of economic orthodoxy?

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      • epistasis 2 days ago

        I would like to hear how that book is viewed by the orthodoxy, if you have any pointers.

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      • throw0101a 2 days ago

        > 'How Asia Works' is not exactly economic orthodoxy, to put it lightly.

        And yet it describes the historical record of several countries (in the case of Japan, how they did it twice: post-Meiji Restoration and post-WW2).

        It goes over countries deemed 'successful' (Japan, Korea, etc), and others (Philippines).

        What (particular?) "economic orthodoxy" would you suggest countries follow? What are countries (if any) have followed them, and what are the results? Are there book(s) that you would recommend on how to implement this/these orthodoxies, with case studies or historical examples of implementations?

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        • eru 4 hours ago

          'How Asia works' describes the historical record of some examples, yes.

          There are some correlations between various factors and 'success'. Alas, it's hard to tease out which of the correlations, if any, are causal factors, and which are just coincidences, or worse. [0]

          The book guesses at some of these causal factors, and makes policy recommendations.

          I am mostly not really convinced by the full list of causal factors the book presents. On the one hand, the book observes protectionism and argues that it's a causal factor in promoting prosperity. That's just the old and tired 'Infant Industry Argument', so we should require quite some evidence to take it serious. On the other hand, the book ignores the possible impact of having lots of ethnically Chinese people in your country. (I don't know for sure whether that's a causal factor, but it sure looks noteworthy and deserves at least as much consideration and discussion any of the other factors.)

          I also think the book is too quick to dismiss Hong Kong and especially Singapore. Singapore did not start out as a financial centre, and especially early on manufacturing was much more important here.

          > What (particular?) "economic orthodoxy" would you suggest countries follow?

          Much of what the successful countries examined in the book have been doing is worth following.

          In any case, if you want an orthodox policy recommendation: the Washington Consensus was pretty decent. Lots of examples there.

          Well, to be precise: Washington Consensus with the crucial addition that your central bank (if you have one) should be doing something like nominal GDP level targeting.

          What that means is that the total nominal spending in your economy needs to be on a stable path. Don't let it grow too much, or you get inflation and overheat the economy. Don't let it collapse, or you get a recession.

          See Scott Sumner's or George Selgin's writing for why that's really important and how that can work. (And why it's more sensible than targeting inflation.)

          As a cautionary tale, look at Argentina. They were doing fairly well during their neoliberal / Washington consensus phase, but their currency arrangements led to a collapse of aggregate nominal spending in the economy. Alas, the subsequent recession was blamed on neoliberalism.

          For examples with stable total spending, have a look at Israel or Australia. (At least until a few years ago, I haven't checked recently.) Both countries' nominal stability let them avoid recessions. Australia is especially noteworthy, because as a resource exporter you'd expect their economic fortunes to be as volatile as commodity prices. See https://marketmonetarist.com/2012/11/19/the-export-price-nor... for an investigation.

          https://www.amazon.com/Just-Get-Out-Way-Government/dp/193086... is an alternative view at development economics. The title is a bit provocative, (even the author wasn't really happy with it, when I had a chat with him about it). The main thesis of the book is that honest and competent civil servants are the most rare and precious resource a country has, especially a poor one, so policies should economies on their labour.

          So eg you should privatise a state-owned company by auctioning it off in one piece to the highest cash-bidder open to all comers from anywhere, no questions asked. Instead of having your civil servants set up a complex system or worse trying to evaluate proposed business plans. Complexity breeds corruption in the worst case, and in the best case still takes up civil servants' limited time.

          See also https://www.econlib.org/library/Enc/GermanEconomicMiracle.ht... for some recommendations.

          [0] When I say 'worse', I have in mind an example like: empirically we can observe a strong correlation between personal wealth and owning a fancy car. Alas, that doesn't mean getting yourself a fancy car will make you rich. Just the opposite, in fact.

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woodruffw 2 days ago

Does “government intervention” include subsidies and R&D, in your account? I can think of more than a few industry segments (aerospace, biotech, etc.) that likely wouldn’t exist or be nearly as lucrative as they currently are without the extensive government intervention that helped build them.

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  • throw0101a 2 days ago

    > I can think of more than a few industry segments (aerospace, biotech, etc.) that likely wouldn’t exist or be nearly as lucrative as they currently are without the extensive government intervention that helped build them.

    This is the central thesis of Mazzucato:

    * https://en.wikipedia.org/wiki/The_Entrepreneurial_State

    Has an entire chapter on the iPhone and its technologies (GPS, touch screens, Siri, etc), which would be applicable to most smartphones.

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  • cogman10 2 days ago

    And continues to make. The NHS, for example, is a major source of funding for research into new drugs and treatments. mRNA vaccines came from decades of NHS funded research that the manufacturers are just now picking up and running with.

    It should also be pointed out that economic goodness is not and should not be the be-all end-all reason for government spending. Governments building parks, for example, is a social good with little economic value (or at very least hard to quantify benefits).

    In the case of things like medicine, government spending there has a social good of limiting communicable disease which is more important than how much money a drug company can make off a drug.

    For something like TSMC putting plants in the US, even if it's somewhat economically disadvantageous we are still talking about bringing onshore more jobs and training for US citizens which will generally increase our capabilities here and the satisfaction of those employees.

    Trying to get onshore development of electronics, the government basically has 2 levers to pull, either subsidizing building new manufacturing or applying tariffs to incoming tech goods. One of those levers has the negative consequence of raising prices on tech goods for everyone while we wait for manufacturing to build out.

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    • lostlogin 2 days ago

      > the government basically has 2 levers to pull

      That’s simplistic and assumes a baseline where the relationship with the government starts at zero.

      The company pays taxes. There can be negotiations over the tax rate, which is not a subsidy so much as a ‘tax you less’ type arrangement. This can happen at multiple levels for a company like Apple, even beyond the state/federal thing. The repatriation of billions of dollars of earnings is also in play.

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      • cogman10 2 days ago

        TSMC doesn't pay taxes to the US government (at least, not significant taxes until recently). And that's what we are trying to onshore, the fabrication capabilities.

        We could try and incentivize a company like Apple to fabricate in the US, but the simple fact is that (until recently with the new TSMC fabs) we did not have the fabrication capabilities in the US needed to make apple silicon. Apple does not have the capabilities to make these fabs either.

        You can cut taxes to 0 for US fabrication plants, but there are simple overhead costs that are hard to get away from. That's why an actual subsidy is needed.

        I mean, you could exempt fabrication plants from employment and environmental laws to allow them to operate cheaper... but that's sort of monstrous.

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    • trashtester 2 days ago

      The main reason for TSMC to build plants in the US is as a hedge against a Chinese invasion of Taiwan.

      That outweighs anything like jobs or economic efficiency (given no such war) by a couple of orders of magnitude.

      And this really applies whether or not the US would join the war on Taiwan's side. TSMC production would be likely to be shut down for 5-10 years, regardless.

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    • eru 2 days ago

      > For something like TSMC putting plants in the US, even if it's somewhat economically disadvantageous we are still talking about bringing onshore more jobs and training for US citizens which will generally increase our capabilities here and the satisfaction of those employees.

      And completely ignores customers.

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  • eonwe a day ago

    Out of the examples, aerospace engineering was helped by many government interventions such as war-time buying and development of titanium working.

    On the other hand, it's also hindered by government regulations making all new development much more expensive than what it could be.

    I'd think all the industry segments would exist as the do provide clear benefits to everyone but the development paths taken could be different from what they're now.

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  • Someone 2 days ago

    > I can think of more than a few industry segments (aerospace, biotech, etc.) that likely wouldn’t exist or be nearly as lucrative as they currently are without the extensive government intervention that helped build them.

    Likely, yes, but even if they are, it’s impossible to say whether that’s a net win for society. Possibly, if the government hadn’t subsidized them, but instead had had lower taxation, other industry segments would have blossomed, and gotten better benefits for society.

    As an example, US government support for the Internet may have led to larger automation, making labor relatively more expensive, and because of that decreasing the size of the middle class. Opinions will differ on whether that’s a net positive.

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    • woodruffw 2 days ago

      I think there’s too many layers of counterfactuals here: much of the government’s economic intervention stems from a (perceived) need that transcends ordinary economic concerns. Think wars, epidemics, famines, etc.

      In other words, I think we’d need to presume the absence of those concerns to intelligibly consider the absence of taxation-funded interventions. And that’s more of a minarchst fever dream than a thing that could actually happen.

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      • mlyle 2 days ago

        Sure. Maybe the market will provide food security in 98% of years on its own, but we need more 9's. And we obviously need our government to be coercive enough to protect us from outside, less benevolent, forms of coercion.

        At the same time, this isn't a "yes/no" question. This is thousands of sliders that we adjust for each industry.

        You always have to consider the opportunity cost. Sure, perhaps we've ended greater security and have also ended up with vibrant industry A at the end of it; but we maybe had to pay by hurting industries B, C, and D. It might be worth it; but it doesn't mean it makes sense to do it for industry Z where there is a smaller security benefit.

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  • eru 2 days ago

    And that's not necessarily a good thing.

    All those subsidies had to come out of some tax payers pocket, and they could have spent it on something more worthwhile (to them!).

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    • woodruffw 2 days ago

      A lot of people would prefer to pay no taxes, but that’s presumably not your point. Per-dollar, I think the average American taxpayer is probably very happy with the government’s investment in, for example, the Heavy Press Program (= modern airplane airframes) and resilient packet switched networking (= the Internet).

      Or more directly: it’s hard to even imagine a contemporary national or international industry without the economic interventions that produced those things.

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      • eru 2 days ago

        I know, imagining things is hard. But that's not much evidence either way.

        Yes, there might be some government programs that look like a good deal in retrospect. Just like some lottery tickets are winners.

        The heavy press program even turned a profit, if I remember right. Though private enterprise is usually pretty good at funding these kinds of projects, even with long lead times. (See eg how Amazon or Tesla or even Microsoft took ages to return capital to investors, but still had enthusiastic shareholders.)

        I don't know specifically about packet switching, but you hear similar arguments about the invention of the computer.

        In our reality, programmable electronic computers owe a lot to government and specifically military funding. But as a thought exercise, perhaps you can imagine an alternative history without WW2: IBM already made computing devices for business long before the war, and it's relatively easy to see how they would have eventually come up with a programmable electronic computer.

        Compare also Konrad Zuse's work in Germany:

        > After graduation, Zuse worked for the Ford Motor Company, using his artistic skills in the design of advertisements.[14] He started work as a design engineer at the Henschel aircraft factory in Schönefeld near Berlin. This required the performance of many routine calculations by hand, leading him to theorize and plan a way of doing them by machine.[21]

        > Beginning in 1935, he experimented in the construction of computers in his parents' flat on Wrangelstraße 38, moving with them into their new flat on Methfesselstraße 10, the street leading up the Kreuzberg, Berlin.[22]: 418 Working in his parents' apartment in 1936, he produced his first attempt, the Z1, a floating-point binary mechanical calculator with limited programmability, reading instructions from a perforated 35 mm film.[14] Zuse Z1 replica in the German Museum of Technology in Berlin

        > In 1937, Zuse submitted two patents that anticipated a von Neumann architecture. In 1938, he finished the Z1 which contained some 30,000 metal parts and never worked well due to insufficient mechanical precision. On 30 January 1944, the Z1 and its original blueprints were destroyed with his parents' flat and many neighbouring buildings by a British air raid in World War II.[22]: 426

        > Zuse completed his work entirely independently of other leading computer scientists and mathematicians of his day. Between 1936 and 1945, he was in near-total intellectual isolation.[23]

        In our real history, the US and UK armed forces came first, but a world with more resources in the hands of the private sector (and also with less war) would have surely accelerated some of these private computing experiments (IBM or Konrad Zuse or someone else), and we would have seen computers at roughly the same time as in ours, or perhaps even sooner.

        Similarly, the real history of packet switching is heavily intertwined with some US government projects. But even just browsing Wikipedia https://en.wikipedia.org/wiki/Packet_switching tells you about other attempts and projects going on around the same time. So the government's investment probably did not speed up things by that much, even before you consider that in our counter-factual the private sector would have more resources.

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consteval 2 days ago

> Most of the time it doesn't turn out great.

I don't know why people say this. The reason China beat us out in manufacturing of many goods is BECAUSE of government interference. They have a much more top-down leadership style that allows these gains in efficiency. They've streamlined.

But even looking at the US' history this hasn't been the case. The only reason we got out of the Great Depression was because of the most radical government-backed economic policy ever: The New Deal. Even today HUGE sectors of our economy, like defense, are paid for on government money. Those are jobs, companies, entire industries.

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  • chrisdhoover 2 days ago

    There is debate about the new deal. Its not clear it was a success.

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    • consteval 2 days ago

      There really, truly, isn't. Classical economists can't handle being wrong, but given an alternative reality did not happen, it was a success.

      We can speculate and play armchair economist all day. But the hard reality is that the New Deal revitalized the economy and created countless jobs to pull the US out of the Depression. Maybe a "do nothing" approach would've worked too, eventually. When I unlock the secrets to interdimensional travel, I'll let you know.

      Armchair economists set up an argumentative scenario where they cannot be wrong. You see, if they're wrong about a situation then secretly they're right, because if you did what they suggested instead it would've worked too (and better!). But if they happen to be right then of course they're right, and countering suggestions are obviously wrong and would've caught the economy on fire.

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CPLX 2 days ago

> There are reams of economic literature trying to estimate whether government intervention in the market was a good idea. Most of the time it doesn't turn out great.

These sentences are just propaganda. There’s no factual basis for them.

There are no markets without government intervention. Statements like this are more like religious incantations than appeals to “research” of some kind.

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  • kloop 2 days ago

    > There are no markets without government intervention.

    Of course there are. Black markets pop up everywhere to route around government intervention

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    • chrisdhoover 2 days ago

      Yes they do. Consider weed. It was well established before being legalized. Legalization brought higher taxes and interference. The black market continues as an alternative to the free one.

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    • CPLX 2 days ago

      For obvious reasons a market for a product that is banned by the government is a poor example of a market that exists "without government intervention"

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  • eru 2 days ago

    > There are no markets without government intervention.

    David Friedmann (and others) would like to object, I am sure. See eg http://daviddfriedman.com/Legal%20Systems/LegalSystemsConten... for how many legal systems work without (or despite!) government intervention.

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    • mlyle 2 days ago

      Functional markets require a strong mechanism for protection of property rights. The fact that we have some historical systems where that has taken a different form than a conventional government doesn't negate that the only practical mechanism that we have to protect property rights and support markets is a government.

      Ancap fantasies aside, of course.

      And then, there's lots of situations where externalities exist. If I poop in the river and you're downstream, it costs me nothing; I have no reason to stop.

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      • eru 2 days ago

        > Functional markets require a strong mechanism for protection of property rights. The fact that we have some historical systems where that has taken a different form than a conventional government doesn't negate that the only practical mechanism that we have to protect property rights and support markets is a government.

        Even if we grant that argument, that's at most an argument in favour of a minimalist nightwatchmen state. Not the full blown Leviathan.

        > And then, there's lots of situations where externalities exist. If I poop in the river and you're downstream, it costs me nothing; I have no reason to stop.

        See https://en.wikipedia.org/wiki/Coase_theorem

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  • robertlagrant 2 days ago

    > There are no markets without government intervention

    What does this mean?

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    • dbspin 2 days ago

      It means that markets rely on the rule of law. From monopoly regulation to the prohibition on outright theft, markets literally cannot exist without governance.

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      • robertlagrant 2 days ago

        I think law and order needs to exist, or enforced rules, but that's not "government intervention".

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      • eru 2 days ago

        Even if you buy that argument (and I'm skeptical), that's at most an argument for a minimal nightwatchmen state; not for further government intervention.

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      • refurb a day ago

        Clearly not true as markets exist outside the government (black markets).

        But that’s beside the point. Even if most markets rely on government intervention, it tells you nothing about how much intervention is optimal.

        It’s like saying “no human survives without food”, which is true but tells you nothing as to how much food is good.

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    • bottled_poe 2 days ago

      Someone must police the rules of the market I suppose? Also, a truly free market benefits those who own the market, no?

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      • [removed] 2 days ago
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corimaith 2 days ago

Well I do think the security argument does stand, you don't want to outsource navy carrier construction to China for example. Just don't expect a thriving economy to be built around it.

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lostlogin 2 days ago

> to estimate whether government intervention in the market was a good idea. Most of the time it doesn't turn out great.

Is this really accurate? Most places regulate, surely there is a reason for that? It works pretty well compared to the infamous ‘self regulation’.

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edgyquant 2 days ago

Yet the most successful nations on the planet go against this economic wisdom and do subsidize industries they deem important and/or protect them with tariffs. The US did this until the 1960s. China does this now.

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zztop44 2 days ago

I have no idea what you could mean by this unless you have a very specific personal definition of “government intervention in the market”.

The literature makes it clear that government intervention in markets is broadly necessary; the disagreement is around the how and what and why.

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  • speleding 2 days ago

    Sorry, I should have picked a clearer term. There is broad agreement among economists that _regulating_ markets is needed to have an optimal outcome for society. I was referring to government subsidies specifically, in that case the distortion is rarely beneficial. Especially when taking into account that the money could have been applied elsewhere with bigger gains to society.

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Spooky23 2 days ago

There’s a lot of navel gazing around these sorts of analyses. Consider that the entirety of the tech industry exists in its current form due to federal spending.

The Silicon Valley story is well known; the SAGE project really created the classic IBM.

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  • criddell 2 days ago

    One of the greatest examples is the DARPA VLSI project of the late 70's and 80's. The ROI of that program is crazy.

    If you are interested in this time, I 100% recommend the book The Dream Machine which is centered on J.C.R. Licklider but covers most of the people and projects that lead to personal computers. Stripe Press has a beautiful hardcover version of the book, but the font is tiny. I had to switch to an ereader version in order to read it.

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