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Wednesday, June 01, 2005

BusinessWeek ViewPoint: Corporations Need Subsidies to Encourage Innovation

This ViewPoint from BusinessWeek Online is bizarre. It first complains that government intervention does nothing but distort resource use:

… most ... current governmental incentives don't encourage wealth creation. … farming subsidies, enterprise zones that encourage locating factories or apartments in blighted neighborhoods, mortgage deductions, and even R&D tax credits ... merely kidnap economic activity from one region to another or foolishly reward effort instead of results…

No quarrel with the assertion that government intervention can cause distortions. But it’s the solution that is odd. What is the solution to inefficient government intervention? Government intervention!

But what if the government were to institute genuine productivity-enhancing incentives? Such incentives could kick in … whenever a company ... could profitably make and sell a product ... for 10% less that one that is already on the market. The greater the productivity improvement, the greater the subsidy. … giving creative innovators a double boost of profits, plus subsidy …

Are the subsidies intended to overcome the lack of competition and the incentive to innovate in these markets?  I wonder why BusinessWeek chose to run a column calling for corporate welfare, or, in the column’s language, subsidies?

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    Posted by on Wednesday, June 1, 2005 at 02:16 AM in Economics, Market Failure, Regulation | Permalink  TrackBack (0)  Comments (0)


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