Comment by 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.
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.
> 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.
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.
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.
> 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.
The NHS? Are you referring to the UK national health service? They are not mentioned at all in the history of mRNA vaccines... https://www.nature.com/articles/d41586-021-02483-w
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.
> 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.
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.
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.
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.
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.
> I know, imagining things is hard. But that's not much evidence either way.
Imagining is easy; "hard to imagine" is an English idiom for "that seems implausible" :-)
You're providing examples that counter the impact of government innovation, but it's unclear to me whether these are true counterexamples. The history for IBM, for example, is almost entirely intertwined with IBM's role as a defense contractor. Zuse's second computer (the Z2) was funded directly by the German government, presumably because it aligned with Nazi military interests.
(As a whole, these things are impossible to extricate: it's clear that the government doesn't create every possible idea, and there are an infinite number of innovations that can't be assigned back to government sponsorship. But I think there's general academic consensus that computing, aerospace, and biotech all progressed at rates beyond their equivalent private sector capacity due to government investment, and that the resulting progress was "worth it" in terms of returned economic and social value.)
Yes, that's why I talked about Zuse's earlier work. And IBM also had plenty of private business (and would have had more).
> But I think there's general academic consensus that computing, aerospace, and biotech all progressed at rates beyond their equivalent private sector capacity due to government investment, and that the resulting progress was "worth it" in terms of returned economic and social value.
It depends on your counterfactual. If government had taxed the same funds, but spent it on something else, yes, we would have had less progress in these specific sectors.
If they had taxed and intervened less, perhaps we would have had more?
And, of course, we picked these sectors out after the fact. There's plenty more examples of failed government investments.
> 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.