Friday, October 09, 2015

The Infant-Industry Argument: A Dialogue

Part of my duties this year include teaching left-wing economics like it's the gospel truth. I dislike. So in response to the textbook's claim that the infant-industry argument is valid, I created this dialogue for my students.

PROTECTIONIST: We could be the low-cost producers of widgets in the world.

FREE-MARKET: Then do it.

P: The start-up costs are too high. The existing producers overseas have the advantage of already having the necessary capital.

FM: So borrow it.

P: From where?

FM: Capital markets. There are venture capitalists willing to invest their own money in new enterprises. There are investment firms willing to invest on behalf of their shareholders. There are banks willing to invest on behalf of their depositors.

P: They won’t lend to us.

FM [suspiciously]: Why?

P: We don’t have the data to support my initial claim.

FM: So why are you making the initial claim?

P: Because it would be cool if it was true.

FM: So it’s more a wish than a claim? The government shouldn’t use citizens’ money to fund wishes.

P: Okay, we have the data to back the claim, but our country is lacking fully-formed capital markets.

FM [suspiciously]: Why?

P: Our institutions aren’t compatible with an advanced economy.

FM: If your institutions don’t allow for capital market creation, they probably won’t allow for efficient government oversight of this investment program you want. The government shouldn’t use citizens’ money where proper oversight is lacking.

P: Okay, we have good institutions, but our people are too poor to create the high level of savings needed for this investment.

FM: So get the money from overseas investors.

P: We can’t do that.

FM [suspiciously]: Why?

P: We don’t like foreigners. Or maybe we don’t like the optics of “neo-colonialism.” Either way, we can’t allow for foreigners to invest in our showcase industry.

FM: You don’t have a capital formation problem, you have a racism/nationalism problem. Government shouldn’t use citizens’ money to fund bigotry.

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