Stats for nerds
1recommend
3mentions
3people
2009–2025years
33% recommend67% neutral
Mentions per year
What Hacker News says
- A monopolists can set prices however they want (in contrast to competitive supplier of commodities where there's a market price). They want to maximize profits and if marginal cost of sale is negligible (as is the case for patented drugs) the optimal price is determined by the demand curve. The demand curve depends on the price the buyer sees including tariffs. So the price post tariff is the same as the price without tariff. The monopolist absorbs the tariff, customer pays the same.
Yes, monopolist will still want to sell because they still make profit. They don't take a hit of 250%, their profits are just reduced by ~2.5x.
US has famously high drug prices due so cutting edge pharma makes much of its profits there.
This is all standard 101 International Economics, Paul Krugman has written the standard textbook for it, it's a fun read.
- Perhaps we had the same textbook, because that's also where I heard that from. Krugman and Obstfeld, International Economics?
- Are there any well-regarded economists who think the infant industry argument is a good argument?
Mankiw mentions it briefly in The Principles of Economics[1], which if I recall correctly is the most widely-used economics textbook, saying "Economists are often skeptical about such claims, largely because the infant-industry argument is difficult to implement in practice...many economists are skeptical about the infant-industry argument in principle...Protection is not necessary for an infant industry to grow."
Paul Krugman spends a few pages on it in International Economics: Theory and Policy[2], saying "The infant industry argument seems highly plausible, and in fact it has been persuasive to many governments. Yet economists have pointed out many pitfalls in the argument, suggesting that it must be used cautiously.
First, it is not always good to try to move today into the industries that will have a comparative advantage in the future...Second, protecting manufacturing does no good unless the protection itself helps make industry competitive
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More generally, the fact that it is costly and time-consuming to build up an industry is not an argument for government intervention unless there is some domestic market failure. If an industry is supposed to be able to earn high enough returns for capital, labor, and other factors of production to be worth developing, then why don't private investors develop the industry without government help?
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In practice it is difficult to evaluate which industries really warrant special treatment, and there are risks that a policy intended to promote development will end up being captured by special interests."
[1] Mankiw's textbook: http://books.google.com/books?id=oRgQ2goeFzwC&pg=PT222&#...
[2] http://books.google.com/books?id=L5DaCeXtNq0C&pg=PA257&#...
