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Quotation of the Day…

… is from page 270 of Douglas Irwin’s 2017 volume, Clashing Over Commerce:

Unfortunately, infant industry policies are very difficult to assess: ex ante, it is almost impossible to know whether an industry is an “infant” that has the chance of growing up to be successful, and ex post, it is difficult to determine if import protection (as opposed to other factors) was required to allow it to develop.

DBx: Saying “infant industry” is easy; doing so is just as easy as unthinkingly accepting the claim that industries are sufficiently akin to biological organisms to render the argument for infant-industry protection by government plausible.  But not all analogies clarify thought; many distort it.  Analogizing industries to human infants is an analogy that distorts.

Among the many reasons this analogy is inapt and misleading is the fact that industries, as such, are abstractions that the human mind uses to classify different firms and producers.  Although often very useful, such classifications are creations of the human mind and not real entities with distinct existences.  (Define for me, for example, “the” transportation industry.  Does it include SpaceX?  What about FedEx?  Does it include bicycle retailers in urban areas?  How about drivers who pick up hitchhikers?)  What is, here, concrete in economic reality is the firm.  In market economies, groups of producers and firms that we classify as industries arise unplanned from the successes of individual firms, with each firm being the planned creation of its founders – of flesh and blood entrepreneurs and investors.

When each firm is created, it is from its conception and then birth under the care and protection of its founders, investors, and owners – its “parents,” if you will.  In other words, each firm from the start – not merely from its “infancy” but even when it is “in utero” – is cared for, nurtured, and nursed by flesh and blood individuals who have powerful incentives to ensure its health and to help it to grow and prosper.  For those who insist on analogies with humans, each firm also has an extended “family” of caregivers, akin to aunts and uncles, neighbors, and pediatricians – for example, banks willing to extend credit, downstream retailers willing to take a risk by being among the first companies to offer the firm’s goods for sale, consultants for hire, and trade associations that the owners and managers can join.

In short, no actual relevant economic entity is ever “born” and then abandoned in its “infancy,” left to fend for itself (whatever that might mean).  Each such entity – that is, each firm – has “parents” and caregivers from the start who work hard to ensure its survival, health, and growth.

Those who insist on analogizing industries to biological organisms would be more accurate if they described firms that seek protective tariffs and other special privileges from the state, not as helpless and adorable little infants, but instead as gangs of greedy thugs: predatory individuals who form themselves into groups and then roam the country threatening violence on innocent people who do business with individuals outside of the gang.  And these gang members blame their predatory behavior on some imaginary neglect as children.