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Who Could Have Predicted that the Solyndra Deal Wouldn’t Work Out?

10/10/2011

If you answered “the private investors who refused to risk their own money on Solyndra,” pat yourself on the back. Matt Welch offers more.

One thing that is conspicuously absent from a lot of discussions of policies aimed at creating “green jobs” or providing “affordable housing” is a clear recognition of the information-revealing properties of markets, prices, profits, and losses. The fact that people aren’t willing to put their own money at risk suggests that this or that business plan probably isn’t a very good idea. Interventionism of this sort also involves two inconsistent premises. First, greedy people will do anything to make a buck. Second, those greedy people will leave money on the sidewalk because they are too ignorant to recognize great investments like Solyndra or Associated Steel.

We start talking about externalities in Econ 100 tomorrow, and a point that can’t be stressed often enough is that even if you grant all the assumptions about external costs and benefits, market failures, incomplete information, etc., you’re still a very long way from having demonstrated that intervention can fix it in any meaningful sense.

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Contact Art Carden

Art Carden is assistant professor of economics, Brock School of Business, Samford University, Birmingham, Alabama.