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Comment by cmsmith | Hacker News Reader

The image here of all the states falling over themselves to impress the popular kid seems straight out middle school, and I don't see much for the supporters of Tesla or the state to be proud of. The fact is that if all of these states had just told Tesla to screw off and not offered anything, the factory would be built in the most economically efficient spot in the US, boost the national economy, and provide jobs. And if Nevada didn't win this factory, it would win the next one - without paying $1.4B to do it.

Instead, Tesla used their outsize market influence to shake down the state for as much cash as possible. In the absence of these payoffs, states would have to compete on 'business-friendliness' by changing their tax structure or building permit process - improvements which would be good for all businesses. Instead we have one set of rules for those at the top of the pyramid and one set for everyone else.

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More likely, they would end up buying from a Chinese supplier, and the US would miss out on all that business. And two decades from now, China would be the center of the electric car world, instead of the western US.

And perhaps the extra expense and inefficiency of overseas manufacturing would've stopped the electric car industry from getting off the ground at all.

Do you have an idea of the economics of US vs. foreign production for a factory like this? I've been searching around a bit this morning but the articles don't discuss that.

Not shipping heavy batteries halfway around the world should help. But labor costs will be significantly higher in the US. Not sure if it'll come out to a wash or not.

Indeed -- if the batteries were being made in China, perhaps they'd start manufacturing the cars there too.

Musk has said that the incentives add up to 5% of the short term investments and 1% of the long term costs of actually running the factory. I could see relocating the factory from Texas to Nevada for that kind of savings, but moving it to China seems harder to imagine.

In that case the savings would probably be substantially larger. Of course then he'd have to deal with import tariffs.

Or maybe the factory just wouldn't have been an economically viable project and wouldn't have happened at all.

Well then it shouldn't have happened at all.

There are some projects that are not economically viable, but they absolutely need to be happening. The Apollo missions, public healthcare (in developed countries != USA), the entire US Interstate system, etc. etc. etc.

Making money is not the only reason to do something.

Sure. And those worthy projects are undertaken at public expense by the state, with public ownership. They are not to be undertaken by pouring public money into private coffers as arbitrary subsidies.

You'll be in favour of shutting down the army then? Short of pillage, they are never going to break even.

See other comment. In short: public projects should be public, and subsidizing a private business is not a public project.

Ok, I get you. To correct the previous metaphor, so from that position subsidizing the army is ok, however the army should develop all of its weapons in-house apart from what it can buy on the open market without offering any subsidies. Yes?

>To correct the previous metaphor, so from that position subsidizing the army is ok, however the army should develop all of its weapons in-house apart from what it can buy on the open market without offering any subsidies.

Yes. The state should not be in the business of paying private organizations to provide for the public good; it should perform the necessary functions itself.

I think I can see where you are coming from on this, the main reason I disagree is that I do not think there is a good line between public and private enterprises. Whatever you do always ends up being a little bit of both, no matter which box it claims to be in.

Also, the state is in the business of managing externalities, especially those for which market information is lacking.

Public subsidies of private businesses can sometimes make a lot of sense from this perspective as they are in effect a form of investment by the actor that is able to take the biggest risks, which given the market runs on historic data, is very useful when someone wants to try something that is particularly novel.

Now it can be a bad investment, either by not being useful, or by driving out other useful things, but this is true of all investment decisions, whether or not it is the state making the investment.

Another thing is that other than possibly in communist states, I am not sure that any country has cut private business entirely out of public projects, and they only did it by banning private business entirely, so I was wondering what evidence there is that your suggestion is a good idea economically.

Sounds pretty similar to what the NFL does anytime one of their stadiums turns 15. Some have argued their should be some sort of law barring states from doing this, due to the zero sum nature at the national level. I just don't see how you could write a law without all sorts of undesirable side effects.

Just don't allow exceptions and treat everybody the same when it comes to taxation.

The EU does have prohibitions on most aspects of state support of private enterprises, with a couple of notable exceptions, particularly the "cultural test". This has led to migration out of the EU for sectors which have tax breaks elsewhere (most visibly in techland this is videogames to Canada).

Having lived on both sides of this I've concluded the EU model is the right one. The one real exception becomes when an aggressive external party tries to use state backed product dumping to displace all other existing market participants before jacking the price back up again. In those cases you will need punitive tariffs on imports, but that should be the exception and not the rule.

This is nonsense. Agriculture is heavily subsidized in the EU. Companies in the EU can apply for grants and funding to improve competitiveness, stimulate R&D. The EU also has programs which lets local governments allocate the money in what they deem "key sectors in the local economy". Member states also recieve funding for community and area development. Example of that is free (or subsidized) insulation.

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