It's maybe also worth noting that business corporations were considered to be parastatal in the 1780's. That's when Hamilton conceived of his corporate "Society for the Establishment of Useful Manufactures." It, too, was intended as state policy correcting market failure: in this case, the inability of the small entrepreneurs of the time to take advantage of the Paterson waterfalls.
Hamilton advances the hypothesis that that the state may shift relative incentives among activities (more for some meaning less for others) in ways that will result in higher growth than not shifting the incentives. (Let's stipulate that Hamilton correctly saw no way of shifting incentives than tariffs.)
There are ways this hypothesis could be correct. The state incentivizer could foresee that the incentivized activity would produce more external economies than the dis-incentivized activities. It is also possible that the particular way the incentive is financed could have the additional effect of shifting resources from consumption to investment. The incentivizer might also believe that there would be enough competition among incentivized firms as to shortly make the incentive redundant, meaning that incentivizing the wrong activities is harmless (or still positive if it produced a shift from consumption to investment. [In the peculiar situation of the United States in the 19th century, tariffs on manufactures have the effect of taxing exports of raw materials in whihc the United States had some monopsony power and thereby acting as optimal tariff/export tax.]
A policy stance of being open to granting incentives (nowadays, there are better ways than through import restrictions, ways that do not discourage exports of the incentivized activity or exports in general) on a case-by-case basis, a stance we might call "Industrial Policy" woud be wise. It would be a specific instance of the broader principle that the state should undertake or cause to be undertaken activities with NPV > 0. Such a policy creates no presumption that the granting of an incentive in any particular case is wise.
It's not Hamilton's fault that the Federal government did not have a source of revenue for first best industrial policy and so had to use tariffs. Joe Biden does not have that excuse.
Importing inexpensive EVs from China while we subsidize, the auto industry( Elon got subsidies from US government) or other key technologies ‘manufactures’, seems like a win win- keeping inflation down with inexpensive imports( thanks China) and gaining new skills and capabilities with new manufacturers. Will Trump follow Hamilton or a new path to prosperity by spending into the our economy. If there are unused real resources available inflation expectations should be minimal.
It's maybe also worth noting that business corporations were considered to be parastatal in the 1780's. That's when Hamilton conceived of his corporate "Society for the Establishment of Useful Manufactures." It, too, was intended as state policy correcting market failure: in this case, the inability of the small entrepreneurs of the time to take advantage of the Paterson waterfalls.
Touché...
Hamilton advances the hypothesis that that the state may shift relative incentives among activities (more for some meaning less for others) in ways that will result in higher growth than not shifting the incentives. (Let's stipulate that Hamilton correctly saw no way of shifting incentives than tariffs.)
There are ways this hypothesis could be correct. The state incentivizer could foresee that the incentivized activity would produce more external economies than the dis-incentivized activities. It is also possible that the particular way the incentive is financed could have the additional effect of shifting resources from consumption to investment. The incentivizer might also believe that there would be enough competition among incentivized firms as to shortly make the incentive redundant, meaning that incentivizing the wrong activities is harmless (or still positive if it produced a shift from consumption to investment. [In the peculiar situation of the United States in the 19th century, tariffs on manufactures have the effect of taxing exports of raw materials in whihc the United States had some monopsony power and thereby acting as optimal tariff/export tax.]
A policy stance of being open to granting incentives (nowadays, there are better ways than through import restrictions, ways that do not discourage exports of the incentivized activity or exports in general) on a case-by-case basis, a stance we might call "Industrial Policy" woud be wise. It would be a specific instance of the broader principle that the state should undertake or cause to be undertaken activities with NPV > 0. Such a policy creates no presumption that the granting of an incentive in any particular case is wise.
It's not Hamilton's fault that the Federal government did not have a source of revenue for first best industrial policy and so had to use tariffs. Joe Biden does not have that excuse.
How does a JEP article miss something as evident as this? Where are the editors?
Importing inexpensive EVs from China while we subsidize, the auto industry( Elon got subsidies from US government) or other key technologies ‘manufactures’, seems like a win win- keeping inflation down with inexpensive imports( thanks China) and gaining new skills and capabilities with new manufacturers. Will Trump follow Hamilton or a new path to prosperity by spending into the our economy. If there are unused real resources available inflation expectations should be minimal.
So basically he was a proponent of import substitution?
Did he have any thoughts on the US eventually becoming an exporter of manufactures?