In general on Blinder, I agree with Pai - he is probably the author with which I agreed the most on the fundamentals principles, and I found his extensions of these principles into the economic political sphere very compelling. While the problems are not particularly easy to solve (the conflict between economic, long-term, dispersed interests and the emphasis on short-term concentrated interests in politics is very deeply rooted), acknowledging them is an important step. Wish at least the introduction and 1st chapter were required reading in this country.
Specifically, I very much enjoyed Blinder's position on the relationship between pareto efficiency and these concentrated interests. While it is true that it is better - more efficient - if you can improve the position of one person without harming another's, this is rarely the case. Furthermore, these diffused costs that tend to fund the concentrated improvements can add up quickly, and are very difficult to undo. Once a group has successfully attained their concentrated interest, they will work very hard to keep it, and the many will rarely be in a position where they will counter it. In Greece, many of the protests are by workers in highly protected industries (such as the taxi drivers), who strike endlessly to preserve the current system, rather than to the more efficient open market.
Additionally, I thought Blinder's positions on protectionism had really interesting implications in terms of renewable energy. He counters the infant-industry argument for protectionism by pointing out that "if the future gains are really there for the taking, what prevents capitalists from starting the industry without protection, running it at a loss for a while, and then reaping substantial profits when the industry matures? The answer is: nothing" (129). Surely if the government is so strongly anticipating a huge need for renewable energy, that it expects solar to be able to meet, there are profits that some individual or company might be interested in making. Below is a graph of cost-per-unit over the past 2 years in the solar industry:
Specifically, I very much enjoyed Blinder's position on the relationship between pareto efficiency and these concentrated interests. While it is true that it is better - more efficient - if you can improve the position of one person without harming another's, this is rarely the case. Furthermore, these diffused costs that tend to fund the concentrated improvements can add up quickly, and are very difficult to undo. Once a group has successfully attained their concentrated interest, they will work very hard to keep it, and the many will rarely be in a position where they will counter it. In Greece, many of the protests are by workers in highly protected industries (such as the taxi drivers), who strike endlessly to preserve the current system, rather than to the more efficient open market.
Additionally, I thought Blinder's positions on protectionism had really interesting implications in terms of renewable energy. He counters the infant-industry argument for protectionism by pointing out that "if the future gains are really there for the taking, what prevents capitalists from starting the industry without protection, running it at a loss for a while, and then reaping substantial profits when the industry matures? The answer is: nothing" (129). Surely if the government is so strongly anticipating a huge need for renewable energy, that it expects solar to be able to meet, there are profits that some individual or company might be interested in making. Below is a graph of cost-per-unit over the past 2 years in the solar industry:
As you can see, prices started to drop more slowly, and then more quickly - the quicker rates associated with "the anticipated expiration of the U.S. government’s 1603 Treasury Program, which ended Dec. 31, 2011, [and] drove developers to commission projects before the end of the year." (http://cleantechnica.com/2012/03/15/us-solar-facts-charts/) While I am totally for supporting clean energy, Blinder at least made me open to the idea that government assistance for emerging industries may not actually do much other than keep costs artificially high (poorly adjusting incentives) and effectively redistribute from the many via taxation to the few who are running a presumably already profitable industry.
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