tag:blogger.com,1999:blog-19649274.post114235153653014533..comments2024-03-29T12:03:50.891+05:30Comments on The Leap Blog: Fab envyAjay Shahhttp://www.blogger.com/profile/03835842741008200034noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-19649274.post-1142992396163180082006-03-22T07:23:00.000+05:302006-03-22T07:23:00.000+05:30"Infant industry arguments" are generally applied ..."Infant industry arguments" are generally applied in the context of trade restrictions? The argument is made that because India is as yet immature in the making of cars, import of cars should be hindered in order to foster the industry. I suppose similar arguments could be tried in favour of industrial policy such as government subsidies or equity financing. As with trade restrictions, I'm of the view that such interventions are a bad idea. In the best of times, an incorruptible government will not do the right things. And a realworld State cannot possibly do the Right thing - realworld public administration is about political economy.<BR/><BR/>South Korea - yes, some of their industrial policy is rather impressive. But do you believe you can pull off such agencies in India? I do not.<BR/><BR/>And South Korea is not an unblemished record (see NYT article in my blog posting). Similarly, in Japan, MITI is lot more humble today than they used to be earlier.Ajay Shahhttps://www.blogger.com/profile/03835842741008200034noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-1142618369361668522006-03-17T23:29:00.000+05:302006-03-17T23:29:00.000+05:30so what would infant industry argument say on this...so what would infant industry argument say on this?? (is the keypoint here.. "no" production of public good ? )Ankur (THE consultant)https://www.blogger.com/profile/12116610700551596475noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-1142361999249944652006-03-15T00:16:00.000+05:302006-03-15T00:16:00.000+05:301)Doesn't an oligopolistic market structure that r...1)Doesn't an oligopolistic market structure that results in a few players capturing the rents actually create space for industrial policy on the part of the government that lead to outcomes that enhance welfare?<BR/><BR/>2)What will economic historians say about the South Korean experience (between the 1960s and 80s) in this regard? Wasn't there an active 'industrial policy' that the government followed? Maybe there was no grand standing policy that the government threw around (like in India), but there must have been an implicit policy in the government's decisions and actions..<BR/><BR/>3)In a world of market failures, it may be quite possible that the capital markets may not allocate capital towards such projects (like Fab India. Does this provide a conceptual case for the government to either actively invest in such projects (or in the worst possible case provide incentives for such investments)?<BR/><BR/>4)Regarding the question on land allocation and other freebies, would you consider the tax holidays, excise duty exemptions etc that the government regularly provides to such industries misplaced? After all it can be argued that the government can use the proceeds of these tax revenues to improve infrastructure in the areas surrounding these industrial locations.<BR/><BR/>ThanksFree Thinkerhttps://www.blogger.com/profile/03724960238076985720noreply@blogger.com