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Economics: Friend or Foe of Politics to Support Strategically Important Domestic Industries?

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  • Guido Schaefer

Abstract

Strategic goods (e.g., food and energy) are defined as necessary prerequisites for the consumption of all other goods in the economy. Private markets fail to provide efficient domestic supply because of externalities. Individuals do not consider that the consumption of a domestically produced strategic good increases domestic supply available to society if international supply is disrupted in a future crisis. Hence, there is a purely economic rationale for government support to domestic strategic industries. But political factors, such as lobbying and political short-termism, also critically influence the actual provision of strategic goods and the case for support. Copyright International Atlantic Economic Society 2005

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  • Guido Schaefer, 2005. "Economics: Friend or Foe of Politics to Support Strategically Important Domestic Industries?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(2), pages 193-200, June.
    • Handle: RePEc:kap:atlecj:v:33:y:2005:i:2:p:193-200
    DOI: 10.1007/s11293-005-3762-1
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    References listed on IDEAS

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    1. Ponomarev, Yuriy (Пономарев, Юрий) & Rey, Aleksey (Рей, Алексей) & Radchenko, Darya (Радченко, Дарья), 2018. "Investigation of the Relationship between the Intensity of International Trade and the Volatility of Paired Exchange Rates of the Russian Federation and its Trading Partners [Исследование Взаимосвя," Working Papers 061823, Russian Presidential Academy of National Economy and Public Administration.

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    Keywords

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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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