and here is more evidence that we rushed the "Green energy revolution" a bit. I hope it comes and see some good progress in certain areas but we are far from there yet. Washington Post reporting
I think this highlights two points very well. 1. Giving subsidies/grants/perks etc directly to the companies is the worst way to do it. When we did it with solar companies they gambled way too much on future demand. When we did it with banks during the bailout they kept it in the vault to pay bonuses or hoarded the money and played the market instead of lending. If there is a market that is important enough to subsidize, the subsidy should be short lived and it should be structured so that it stimulates demand rather than supply. Find a way to encourage end users to adopt the preferred action rather than giving money to owners/investors and hoping they do the right/smart thing. 2. Demand is more important than supply. For all those that argue that the way to get our economy back on track is to let the "job producers" keep more cash so they can increase supply, this is an example of why those job producers are sitting on their cash right now. Until demand increases they aren't going to ramp up supply...because they know that demand is more important. It is also a warning against too much 'austerity'. Economies need demand and if you rapidly pull back on the government sector, you will deflate demand to the point that it will cripple the economy.
Stampede? did you read the link? Your post seems slightly confusing vis a vis the actual article. Are you aware this is a story on a company in China?
Yes. read the link...realize it is china, but I think it is relevant. Much like our efforts to spur certain industries, the chinese govt gave large sums of cash directly to the company who then (since the government was now taking a large part of the risk) used that cash to over supply a market that didn't have sufficient demand. While china's economy is more controlled and subsidized than our own it is still essentially a capitalist system. If the cash had been used to stimulate demand, perhaps by giving rebates to the end users or perhaps they just raised regular energy prices to make solar attractive as an alternative, then the customers would have chosen solar, and then the customers would have picked the best solar provider rather than the government picking the winner by giving the cash to the company. charlos: I really didn't say that supply is unnecessary. I said demand was more important. The economy will eventually need someone to supply what it's demanding in order for there to be an economy BUT demand can exist without supply...for a long time (eg. your teleporter example) but supply that exists without demand is the equation for bankruptcy. It is demand signals that drive innovation, startups, entrepeneurs most of the time. There is the occassional off-the-wall idea that creates supply before we even knew the product existed. But even then I would argue that the deman was there, just not expressed because it was deemed impossible to satisfy. so occassionally supply can lead demand by introducing intrepid new products. But even in that case, the supply will be short lived if it does not soon generate demand.
Stampede yes i see your point and agree I was just confused because the article was about a Chinese company that did not get any gov't help when they got into financial trouble and the bondholders and creditiors lost out
