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

Guido Schaefer

Atlantic Economic Journal, 2005, vol. 33, issue 2, 193-200

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

Keywords: H23; H56 (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1007/s11293-005-3762-1

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