PSCI 152 Lecture Notes - Lecture 5: Solyndra, World Trade Organization, Oligopoly
31 May 2018
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Department
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I. PSCI 152| Lecture 5: State Centered Approach
State-Centered Approach
a. State intervenes, independent of interest groups demand
i. Natl interest over specific interest groups
b. State intervention may increase welfare
c. Infant Industries
i. New firms are not initially efficient
ii. Protection allows these firms to development
iii. Over time Firms may become efficient and protection can be removed
iv. Economies of Scale
1. Avg. cost of each unit falls as more are produced
a. Research&development costs
b. Infrastructure investment costs
v. Economies of Experience
1. Completely inept at first
2. Not yet efficient
3. Specific skills needed
vi. Limitations
1. Subsidy better than tariff at protecting industry
a. Enhances consumer welfare
2. Private lending could accomplish similar goal
a. Infant industries should be able to borrow
b. Risk is auto factored in through interest
3. Hard for govt to pick winners in advance
4. Hard to remove protection once the industry is established
a. The larger the indsutry they have more political sway and being
lobbying for protectionist policies
d. Disjuncture between private and social reurns can incentivise state intervention
e. State intervention raaises sort-term gains
i. Encourages factors to move into industry
II. Green Industrial Policy
a. New Tech has positive spill overs
b. Original investors don't capture these spillovers
c. Industry wide learning, skill development
d. Greenhouse gas emissions are mispriced
i. Fossil fuels receive significant subsidies
ii. Neither firms not consumers internalize risks and social costs
iii. *rodrik 2014 ask to read some of his articles
e. Examples
i. Germany and China offer much R&D support
ii. Germany- Feed in tariffs. Pays people to have
iii. US- tax incentives, R&D, and subsidized loans
f. We don't know if these policies works
i. Encourage growth but cause other externalities(moving resources from
potentially more effiecent)
ii. Strong correlationbut not necessarily causation
iii. Design policies that often prove inefficient
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
State-centered approach: state intervenes, independent of interest groups demand. Natl interest over specific interest groups: state intervention may increase welfare. Over time firms may become efficient and protection can be removed. Economies of scale: avg. cost of each unit falls as more are produced, research&development costs. Economies of experience: completely inept at first, not yet efficient, specific skills needed. Limitations: subsidy better than tariff at protecting industry, enhances consumer welfare, private lending could accomplish similar goal. Green industrial policy: new tech has positive spill overs, original investors don"t capture these spillovers. Industry wide learning, skill development: greenhouse gas emissions are mispriced. Neither firms not consumers internalize risks and social costs. *rodrik 2014 ask to read some of his articles: examples. Us- tax incentives, r&d, and subsidized loans: we don"t know if these policies works. Encourage growth but cause other externalities(moving resources from potentially more effiecent)
