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October 5th, 2012, 08:25
The whole Solyndra debacle (and the 38 studios one) do well to illustrate in which situations government investment in economic development is wholly unhelpful and perhaps rather unwise.

The short of it is that this sort of economic development put way too much towards the wrong kinds of ventures and was made with far too little insight. They're two of the absolute worst kinds of products to second guess the market and investors on, the potential secondary benefits that could justify such government spending were few compared to other possibilities, and the individual costs compared to other comparable projects in terms of economic development/job creation were very high.

Long ass bit


Spoiler


Both Solyndra and 38 Studios are excellent examples of the kinds of things the government should be the least interested in spending money on. In terms of economic development they represented high risks and large single expenditures compared to other comparably stimulative investments. In terms of secondary benefits that the market is not well equipped to evaluate, they represented clearly inferior choices to projects such as fundamental research and infrastructure.

I would hope examples like this highlight the need for independent oversight as well as strict rules governing conflict of interest and elligibility for any of these economic development programs. I would rather that second lesson learned from this is not that the government can't do things for the economy but instead that the government shouldn't second guess the kinds of determinations the market is especially good at making and recognize its roll in those things the market is particularly ill equipped to value. There's a reason that the government handles things like law enforcement while the market usually does a good job regulating the production levels of commodities. The principles that make the roles of each in those situations obvious should not be entirely ignored in other questions of governance and market economics.
Last edited by jhwisner; October 5th, 2012 at 08:41.
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