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I actually agree, somewhat, with the idea that "green" industrial policy works best where it builds upon existing industrial capacities.  It's that idea of backward and forward linkages.

I suppose that industrial policy can use the location of an anchor firm, e.g. a turbine manufacturer, in order to draw suppliers to an area.  But without a potential supplier base that seems like quite a job.

For example, a history of auto transmission plants, and the matching supplier base, links well to wind turbine gearbox production.  The former is a step down gear, the latter a step up gear. The degree of complexity and tolerances are much higher in gearboxes, but still the existing industrial capacity matters. I don't think you really disagree with this, so I'm not sure if you are maybe overstating the neo-liberal tendency in the first piece.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Tue May 31st, 2011 at 11:43:35 AM EST
I've skimmed the report, but I don't have time for a point by point takedown. So this is going to be couched in generalities:

About the paper:

  1. The actual results in the paper are far less conclusive and described with less certainty by the authors themselves than in the summary.

  2. Yes, history cannot be denied. If you already have a history of precision metal engineering and relatively less in large scale silicon manufacture then your wind industry is going to do better out of state support than your solar, per euro of subsidy...

  3. Solar is still developmentally behind wind - the race for now is still to find the best solution, more than engineer the best implementation. The study treats the technologies as being at the same stage and that rather automatically produces the results seen.

I don't know if this is Jerome's point, but my point from all this is that market based analysis gives you nice short term optimisations, but tells you nothing about achieving your desired goals.

If we want a solar industry, we need to invest and develop the skills. The market may indicate that it is more efficient to spend that money on oil companies, for short term gain, but in the long term that is a dead end.

Basically it comes down to whether or not you believe in generative industrial policy. Outside of the US, the countries that have the background supply chain to do solar have it because they put up industrial policies to grow their silicon/electronics industries, many of them basically from scratch. I don't think that's an accident...

by Metatone (metatone [a|t] gmail (dot) com) on Tue May 31st, 2011 at 12:57:39 PM EST
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I think that you're right that photovoltaic solar is sui generis, one of a kind, in that it lacks the type of backward linkages that wind does.  So I suppose that it makes sense that they find that the multiplier effect of state aid is lower in in pv solar than wind. The baseline is lower so the "boost" is going to be less impressive in absolute terms.

That said, I dislike that they talk about solar cells but not concentrating solar power, where there are lots of backward linkages to metal and glassworking. What I do see is that these guys take a network view of the economy which at at odds with the atomized view that neo-liberalism gives.  

There's some sort of madness in the fact that neo-liberals tend to view that economic actors are homogenous and interchangeable, i.e. if all the automakers and their suppliers fail some other firm will go into that field.  It's just so analysis.

I've been thinking of how this relates to Durkheim and the division of labor recently.  The idea there is that it's the differences that keep the economy rolling.  The butcher cuts meat, the baker makes bread, and the candlestick maker gets us our candlesticks. They specialize because that is what they are best at. It's this specialization and the development of specialized equipment and skills that leads to efficiency.  

How does that square with the atomized view of the economy that neoliberals push? If the butcher goes out of business and the candlestick maker decides to try to step into that business they just aren't going to be as effective. I can't put my finger on it, or communicate it clearly, but there's a real paradox here.  

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Tue May 31st, 2011 at 01:43:40 PM EST
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No time for a proper response, but I agree totally with your general thrust.
by Metatone (metatone [a|t] gmail (dot) com) on Tue May 31st, 2011 at 02:25:03 PM EST
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That's what the assumption of negligible bankruptcy costs does to your model. If you construct a model with non-negligible bankruptcy costs and margin calls, then you get some interesting cascade effects. But since that's not an equilibrium model, it by definition cannot be Serious.

Negligible bankruptcy costs was not necessarily a completely insane assumption in Walras' time. But in today's capital-intensive production it most certainly is.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 03:08:05 PM EST
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