13 ms·

The solution to a market inefficiency isn't to involve a more inefficient entity.

by dimitrios1 5y ago

ramesh31 5y ago
Ah yes, the Herbert Hoover approach.
- MagicWishMonkey 5y ago
  I wonder how many of these people rant about how bad the government is while using GPS to navigate their way to work on government funded roadways.
  - evilduck 5y ago
    On the DARPA derived internet, no less.
    - nradov 5y ago
      DARPA funded the basic research. Then the actual Internet was largely built by for-profit private sector companies. That hybrid model seems to usually be the most effective for major new innovations.
      - JohnWhigham 5y ago
        DARPA funded most of the grant money used by research entities to create the various parts of the IP stack. That's not "basic research". Simply put, were it not for DARPA, we wouldn't have the Internet of today. We'd probably have something like it, but something a lot more closed off and walled garden-esque.
  - abfan1127 5y ago
    As if those things wouldn't innovate in the market? Or because 1 thing came from the government, then all things the government touches are gold?
    - ramesh31 5y ago
      The free market can do a lot when it has the basic requirements to operate, but the point is that government spending is the only solution when we end up with a chicken/egg problem as the OP pointed out.
    - bumby 5y ago
      This take might have some hindsight bias. While a lot of industry seem obvious and worth the investment today, when they were nascent that wasn't the case. Would GPS exist if private companies had to fund the rocket and satellite research just to tell you where you are on the map? Or would the aircraft industry exist? Most of those types of high-risk, nebulous reward (at least on short-to-near-term timescales) industries are predicated on government investment. SpaceX, as great as they are, probably wouldn't exist if they didn't have NASA as a customer.
      - abfan1127 5y ago
        it certainly does have hindsight bias, on both sides. The Satellite TV and Radio industries spend the money to launch. Back in the 90s (during the age of early GPS), Motorola (iirc) tried to launch a satellite phone company too. NASA isn't that big of a customer. DirecTV was a huge consumer of rockets. As it turns out, SpaceX doesn't sell to them because they own their own rocket company.
        bumby 5y ago
        >The Satellite TV and Radio industries spend the money to launch. Correct, but this is an after-the-fact understanding. They spend money to launch now because the industries are no longer nascent and being launched on platforms designed around government investment. The key to my point is that the government spends money when the industries are young and risky to develop platforms. If those platforms work out that helps the private sector have a less risky path down the road. This is why telecoms weren't rushing to develop rockets in the 1960s. >NASA isn't that big of a customer. This is very much the same thing. Early on, NASA was really the only SpaceX customer and NASA helped keep them from going bankrupt [1]. In addition, NASA made early launches more palatable because the government is self-insured. Government contracts help usher along young, risky companies until they could have a less risky business model that the private sector feels more comfortable with. It's very similar to aerospace development over 100 years ago with the Wright brothers and Curtis vying for Army contracts. Without those contracts, they are as much hobbyists as entrepreneurs. [1] https://www.ndtv.com/offbeat/elon-musk-says-nasas-1-5-billion-contract-had-saved-spacex-from-going-broke-2502210 https://www.ndtv.com/offbeat/elon-musk-says-nasas-1-5-billio...
  - adventured 5y ago
    They can't even manage a trivial task like maintaining roads and bridges properly. You could have hardly picked a worse example than the government roads system (including our thousands of dilapidated bridges), which is in absolutely horrific condition and is a humiliating example for the government. It's the opposite of a good example. That's all due to lack of funding, one might suggest? They're not lacking for funds. They spent our money on blowing up other countries and then (occasionally) attempting to rebuild them. Vietnam, Iraq, Syria, Libya, Afghanistan, Korea and 497 other cases of meddling and foreign adventurism. There rests $10 trillion in infrastructure money. No, they have had plenty of our money to spend, and they chose to squander it. What ever would we do if we didn't have those hyper incompetent clowns to manage our roads. GPS is trivial. If Russia can do it, various US private corporations could easily do it just the same.
    - anotherman554 5y ago
      US private corporations maintaining roads implies a society like the one depictive in the Robocop movies. It's fun to see you prosing that unironically.
only_as_i_fall 5y ago
Then what's the solution? Seems like the government is the only entity that can intervene if market forces are counter to supply chain resilience. This is partially the justification for agricultural subsidies in the US, so clearly there is precedent.
- PaywallBuster 5y ago
  Apple approach, invest in your supply chain Extra points by diversifying from China/Taiwan In direct opposition, Auto makers approach of minimizing inventory and producing "just-in-time" caused them to be vulnerable to supply chain or big market shifts
  - ceejayoz 5y ago
    The article notes that Toyota avoided "just-in-time" supply for chips, and has benefited for a while from this. Their stockpile just ran out. > New cars often include dozens of microchips but Toyota benefited from having built a larger stockpile of chips - also called semiconductors - as part of a revamp to its business continuity plan, developed in the wake of the Fukushima earthquake and tsunami a decade ago.
  - baybal2 5y ago
    > Extra points by diversifying from China/Taiwan Take a look on the linkedin jobs in Shenzhen. The trend IS NOT towards diversification. In the last 5 years since Trump's election, US multinationals were increasing their presence in China, not decreasing. Google for example said to open "a small representative office" in Shenzhen 2 years ago, now it's a full giant RnD centre in the Ping An Tower where they shipped all of Pixel's development. Apple had RnD offices in China for more than a decade, but they barely acknowledged their existence. Their people in the Kerry Plaza were prohibited by their contract to even show their employment for Apple in their LinkedIn profiles. Their Shenzhen RnD centre is where AirPods were developed, along with many other iPad, and iPhone sub-assemblies. Apple's VR goggles project had its start in Shenzhen as well. Amazon had no presence whatsoever in China besides a failed Chinese Amazon.com launch. They left China, and then returned to move the whole of their Kindle, and Echo device development to Shenzhen. Now they are working on something rather cryptic there. Some suggest VR goggles of their own design. Facebook... absolutely bizarrely opened their RnD centre in Shenzhen amid the COVID, just a floor below Google I heard. Dell, Microsoft, Nvidia, Qualcomm, Intel — all conventional hardware makers were here since nineties, but I think they really doubled down on China recently as well too, to one up the dotcom upstarts in hardware.
blululu 5y ago
This is a pretty axiomatic view that governments can never be as responsive or as efficient as markets. The more commonly accepted economic wisdom is that they are usually less efficient and responsive than free market forces operating under ideal conditions. There is a lot of room for market failures, inefficiencies and temporal dynamics to change the balance. The are plenty of examples of government regulatory bodies that have a nice anchoring effect on the relevant markets. The Federal Reserve Bank, for example, responds quickly to changing market conditions, looks at the data and intervenes at a speed that keeps pace with the rapidly fluctuating market it regulates.
- nyokodo 5y ago
  > The Federal Reserve Bank, for example, responds quickly to changing market conditions The Fed was established by Congress and the Chair is appointed by the President, however the Fed is still a private institution. That independence makes it a very different organization than what most people mean by government.
- abfan1127 5y ago
  The Federal Reserve hardly responds to market conditions. Their free and open printing of money is arguably the greatest risk to our economy. Milton Friedman has great resources on this, including a video series from the 1970s (based on clothing alone) called Free to Choose. Its on Youtube, amongst other places.
  - kube-system 5y ago
    Natural boom-and-bust cycles are a huge risk to economies as well, despite the fact that they're natural and don't have anyone for which we can point a finger at.
    - nickff 5y ago
      The Federal Reserve was originally devised to put an end to the boom-bust cycle... Well before the Great Depression. If you're going to point a finger, the Federal Reserve is a very good institution to point at.
MagicWishMonkey 5y ago
We're in this mess due to our never ending quest for more "efficiency" The government needs to recognize the fact that semiconductors are essential to national security and ensure we have the capability to produce our own.
- bumby 5y ago
  I think you're right, but it's partly because we weren't couching the quest for efficiency in the context of risk. I might be more time efficient by speeding everywhere, but that efficiency gain needs to be understood in terms of how much additional risk it incurs.
  - hypertele-Xii 5y ago
    Moving fast and breaking things isn't national security. (I agree with you)
    - deleted 5y ago
      [deleted]
Slartie 5y ago
That sounds nice, but a singular entity within a government, entrusted with the necessary power to regulate the relevant parts of the market without too much coordination overhead with other government entities, is actually much more efficient at resolving market inefficiencies than the free market. Case in point: production of vaccines. That's also obvious: the inefficiency in governments originates largely from coordination overhead between many competing entities with overlapping responsibilities. Self-regulating systems like markets do not eliminate that overhead, they just use other means of coordination that trade some of the complexity overhead for a time overhead - instead of having to coordinate a complex set of rules, you now have to give the system enough time to "find" its stable state. But when time is of the essence, an intelligent, singular entity without the need for coordination with anyone besides the entities to be regulated can always outcompete the self-regulating system when it comes to short-term stabilization (though not necessarily with regard to long-term stabilization, but that's not the issue here).
- freewilly1040 5y ago
  The government did very little in managing vaccine production other than act as purchaser, how is this an example of them managing a market?
  - Slartie 5y ago
    The US government regulated critical parts of the supply chain of raw materials and preproducts in order to ensure that US manufacturers have no sourcing problems. It then compelled the manufacturers into exclusively servicing the US purchase contracts first before fulfilling competing contracts from other global buyers with any of the finished product produced on US territory. I'd call that quite a lot of "market management". But as everyone could see it resulted in the fastest vaccination ramp-up worldwide (excluding Israel, which was a bit faster, but is also much smaller than the US and which had its own way to get "preferred" access to vaccine produced in the EU).
    - freewilly1040 5y ago
      > regulated critical parts of the supply chain of raw materials and preproducts I'm unfamiliar with this having happened, but if it did as you say that would definitely support your point. > It then compelled the manufacturers into exclusively servicing the US purchase contracts Wasn't this just a component of the purchasing contract? I would draw a distinction between cases where the gov was a purchaser and where it was not.
jimbokun 5y ago
This assumes an efficient global market, without interference from other state actors. If other countries are implementing protectionist policies, like keeping semiconductors for themselves or supplying other nations first to curry favors or improved relationships, for example, it might be in another nations interest to increase fab capacity with its borders to avoid being vulnerable to those political and diplomatic factors.

The solution to a market inefficiency isn't to involve a more inefficient entity.

ramesh31 5y ago

Ah yes, the Herbert Hoover approach.

MagicWishMonkey 5y ago
I wonder how many of these people rant about how bad the government is while using GPS to navigate their way to work on government funded roadways.
- evilduck 5y ago
  On the DARPA derived internet, no less.
  - nradov 5y ago
    DARPA funded the basic research. Then the actual Internet was largely built by for-profit private sector companies. That hybrid model seems to usually be the most effective for major new innovations.
    - JohnWhigham 5y ago
      DARPA funded most of the grant money used by research entities to create the various parts of the IP stack. That's not "basic research". Simply put, were it not for DARPA, we wouldn't have the Internet of today. We'd probably have something like it, but something a lot more closed off and walled garden-esque.
- abfan1127 5y ago
  As if those things wouldn't innovate in the market? Or because 1 thing came from the government, then all things the government touches are gold?
  - ramesh31 5y ago
    The free market can do a lot when it has the basic requirements to operate, but the point is that government spending is the only solution when we end up with a chicken/egg problem as the OP pointed out.
  - bumby 5y ago
    This take might have some hindsight bias. While a lot of industry seem obvious and worth the investment today, when they were nascent that wasn't the case. Would GPS exist if private companies had to fund the rocket and satellite research just to tell you where you are on the map? Or would the aircraft industry exist? Most of those types of high-risk, nebulous reward (at least on short-to-near-term timescales) industries are predicated on government investment. SpaceX, as great as they are, probably wouldn't exist if they didn't have NASA as a customer.
    - abfan1127 5y ago
      it certainly does have hindsight bias, on both sides. The Satellite TV and Radio industries spend the money to launch. Back in the 90s (during the age of early GPS), Motorola (iirc) tried to launch a satellite phone company too. NASA isn't that big of a customer. DirecTV was a huge consumer of rockets. As it turns out, SpaceX doesn't sell to them because they own their own rocket company.
      - bumby 5y ago
        >The Satellite TV and Radio industries spend the money to launch. Correct, but this is an after-the-fact understanding. They spend money to launch now because the industries are no longer nascent and being launched on platforms designed around government investment. The key to my point is that the government spends money when the industries are young and risky to develop platforms. If those platforms work out that helps the private sector have a less risky path down the road. This is why telecoms weren't rushing to develop rockets in the 1960s. >NASA isn't that big of a customer. This is very much the same thing. Early on, NASA was really the only SpaceX customer and NASA helped keep them from going bankrupt [1]. In addition, NASA made early launches more palatable because the government is self-insured. Government contracts help usher along young, risky companies until they could have a less risky business model that the private sector feels more comfortable with. It's very similar to aerospace development over 100 years ago with the Wright brothers and Curtis vying for Army contracts. Without those contracts, they are as much hobbyists as entrepreneurs. [1] https://www.ndtv.com/offbeat/elon-musk-says-nasas-1-5-billion-contract-had-saved-spacex-from-going-broke-2502210 https://www.ndtv.com/offbeat/elon-musk-says-nasas-1-5-billio...
- adventured 5y ago
  They can't even manage a trivial task like maintaining roads and bridges properly. You could have hardly picked a worse example than the government roads system (including our thousands of dilapidated bridges), which is in absolutely horrific condition and is a humiliating example for the government. It's the opposite of a good example. That's all due to lack of funding, one might suggest? They're not lacking for funds. They spent our money on blowing up other countries and then (occasionally) attempting to rebuild them. Vietnam, Iraq, Syria, Libya, Afghanistan, Korea and 497 other cases of meddling and foreign adventurism. There rests $10 trillion in infrastructure money. No, they have had plenty of our money to spend, and they chose to squander it. What ever would we do if we didn't have those hyper incompetent clowns to manage our roads. GPS is trivial. If Russia can do it, various US private corporations could easily do it just the same.
  - anotherman554 5y ago
    US private corporations maintaining roads implies a society like the one depictive in the Robocop movies. It's fun to see you prosing that unironically.

only_as_i_fall 5y ago

Then what's the solution? Seems like the government is the only entity that can intervene if market forces are counter to supply chain resilience. This is partially the justification for agricultural subsidies in the US, so clearly there is precedent.

PaywallBuster 5y ago
Apple approach, invest in your supply chain Extra points by diversifying from China/Taiwan In direct opposition, Auto makers approach of minimizing inventory and producing "just-in-time" caused them to be vulnerable to supply chain or big market shifts
- ceejayoz 5y ago
  The article notes that Toyota avoided "just-in-time" supply for chips, and has benefited for a while from this. Their stockpile just ran out. > New cars often include dozens of microchips but Toyota benefited from having built a larger stockpile of chips - also called semiconductors - as part of a revamp to its business continuity plan, developed in the wake of the Fukushima earthquake and tsunami a decade ago.
- baybal2 5y ago
  > Extra points by diversifying from China/Taiwan Take a look on the linkedin jobs in Shenzhen. The trend IS NOT towards diversification. In the last 5 years since Trump's election, US multinationals were increasing their presence in China, not decreasing. Google for example said to open "a small representative office" in Shenzhen 2 years ago, now it's a full giant RnD centre in the Ping An Tower where they shipped all of Pixel's development. Apple had RnD offices in China for more than a decade, but they barely acknowledged their existence. Their people in the Kerry Plaza were prohibited by their contract to even show their employment for Apple in their LinkedIn profiles. Their Shenzhen RnD centre is where AirPods were developed, along with many other iPad, and iPhone sub-assemblies. Apple's VR goggles project had its start in Shenzhen as well. Amazon had no presence whatsoever in China besides a failed Chinese Amazon.com launch. They left China, and then returned to move the whole of their Kindle, and Echo device development to Shenzhen. Now they are working on something rather cryptic there. Some suggest VR goggles of their own design. Facebook... absolutely bizarrely opened their RnD centre in Shenzhen amid the COVID, just a floor below Google I heard. Dell, Microsoft, Nvidia, Qualcomm, Intel — all conventional hardware makers were here since nineties, but I think they really doubled down on China recently as well too, to one up the dotcom upstarts in hardware.

blululu 5y ago

This is a pretty axiomatic view that governments can never be as responsive or as efficient as markets. The more commonly accepted economic wisdom is that they are usually less efficient and responsive than free market forces operating under ideal conditions. There is a lot of room for market failures, inefficiencies and temporal dynamics to change the balance. The are plenty of examples of government regulatory bodies that have a nice anchoring effect on the relevant markets. The Federal Reserve Bank, for example, responds quickly to changing market conditions, looks at the data and intervenes at a speed that keeps pace with the rapidly fluctuating market it regulates.

nyokodo 5y ago
> The Federal Reserve Bank, for example, responds quickly to changing market conditions The Fed was established by Congress and the Chair is appointed by the President, however the Fed is still a private institution. That independence makes it a very different organization than what most people mean by government.
abfan1127 5y ago
The Federal Reserve hardly responds to market conditions. Their free and open printing of money is arguably the greatest risk to our economy. Milton Friedman has great resources on this, including a video series from the 1970s (based on clothing alone) called Free to Choose. Its on Youtube, amongst other places.
- kube-system 5y ago
  Natural boom-and-bust cycles are a huge risk to economies as well, despite the fact that they're natural and don't have anyone for which we can point a finger at.
  - nickff 5y ago
    The Federal Reserve was originally devised to put an end to the boom-bust cycle... Well before the Great Depression. If you're going to point a finger, the Federal Reserve is a very good institution to point at.

MagicWishMonkey 5y ago

We're in this mess due to our never ending quest for more "efficiency" The government needs to recognize the fact that semiconductors are essential to national security and ensure we have the capability to produce our own.

bumby 5y ago
I think you're right, but it's partly because we weren't couching the quest for efficiency in the context of risk. I might be more time efficient by speeding everywhere, but that efficiency gain needs to be understood in terms of how much additional risk it incurs.
- hypertele-Xii 5y ago
  Moving fast and breaking things isn't national security. (I agree with you)
  - deleted 5y ago
    [deleted]

Slartie 5y ago

That sounds nice, but a singular entity within a government, entrusted with the necessary power to regulate the relevant parts of the market without too much coordination overhead with other government entities, is actually much more efficient at resolving market inefficiencies than the free market. Case in point: production of vaccines. That's also obvious: the inefficiency in governments originates largely from coordination overhead between many competing entities with overlapping responsibilities. Self-regulating systems like markets do not eliminate that overhead, they just use other means of coordination that trade some of the complexity overhead for a time overhead - instead of having to coordinate a complex set of rules, you now have to give the system enough time to "find" its stable state. But when time is of the essence, an intelligent, singular entity without the need for coordination with anyone besides the entities to be regulated can always outcompete the self-regulating system when it comes to short-term stabilization (though not necessarily with regard to long-term stabilization, but that's not the issue here).

freewilly1040 5y ago
The government did very little in managing vaccine production other than act as purchaser, how is this an example of them managing a market?
- Slartie 5y ago
  The US government regulated critical parts of the supply chain of raw materials and preproducts in order to ensure that US manufacturers have no sourcing problems. It then compelled the manufacturers into exclusively servicing the US purchase contracts first before fulfilling competing contracts from other global buyers with any of the finished product produced on US territory. I'd call that quite a lot of "market management". But as everyone could see it resulted in the fastest vaccination ramp-up worldwide (excluding Israel, which was a bit faster, but is also much smaller than the US and which had its own way to get "preferred" access to vaccine produced in the EU).
  - freewilly1040 5y ago
    > regulated critical parts of the supply chain of raw materials and preproducts I'm unfamiliar with this having happened, but if it did as you say that would definitely support your point. > It then compelled the manufacturers into exclusively servicing the US purchase contracts Wasn't this just a component of the purchasing contract? I would draw a distinction between cases where the gov was a purchaser and where it was not.

jimbokun 5y ago

This assumes an efficient global market, without interference from other state actors. If other countries are implementing protectionist policies, like keeping semiconductors for themselves or supplying other nations first to curry favors or improved relationships, for example, it might be in another nations interest to increase fab capacity with its borders to avoid being vulnerable to those political and diplomatic factors.