Bailing Out Detroit

Everybody’s blogging about the bailout of the auto industry. Jeffrey Tucker digs into history and looks at another once failing industry – the piano industry. This is a good approach – makes the economic analysis less emotional. The US piano industry was once a huge employer – and now it’s all but gone. No lasting damage was done. What does that imply about the bailout?

Today government is even more arrogant and absurd, and it actually believes that by passing legislation it can save the US car industry. It can subsidize and pay for uneconomic activities, and pay ever more every year. The government can also pay millions of people to make mud pies because mud pies are deemed to be an essential industry. You can do this, but at what cost and what would possibly be the point? Eventually, even the government will have to accord itself to the reality that economics reminds us of on a daily basis.

Whether it’s pianos, cars, or cheese , the economics is the same.

But things could perhaps be different. The US auto industry is built on an old old industrial model. There may be alternatives that would work better.


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One response to this post.

  1. Economics is not the same. It depends on the kind of market and industry characteristics. There is not one fits all solution. This is what I tried to explain Here to Prof. Mankiw, who should have been perhaps less emotional in his Parmigiano cheese’s post.

    Reply

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