Keyu Jin: evaluation

Transcript context

…Okay. You mentioned the mayor economy. That seems like an incredibly powerful idea. And you also mentioned that perhaps you’re not sure exactly how perfectly efficient it is and what efficiency there means, how good are you at quickly figuring out the best ideas? That’s what an efficient market does. There’s a component to what you’re saying where you’re a little bit critical of do you really need 80 EV companies? But maybe you do. That seems like an incredible thing to do. So what are the pros and cons of this? Maybe you can speak to it a little bit more. I think it depends on the timing. If you’re starting something, starting a new emerging strategic sector like EVs or batteries or solar panels, you need the local governments to be involved to mobilize. The big push to coordinate the supply chains. If you wait for the markets to develop over time, it’s going to take a long time. Maybe they don’t even want to do it. Look at the US. The US is very, very behind on some of the new strategic sectors. But once you’ve reached a certain level of market competition, I think the state needs to withdraw or to retreat. Because ultimately the state is not the best at allocating resources, picking winners. You want the private actors, whether it’s the venture funds or through market competition, to ultimately decide who gets the most resources. But in the beginning, that big push is not really in any of the canonical models that I’ve studied in economics in the Western school of thought, state push, state mobilization, state initiation. That’s not there. But I think if you look at EVs, solar panels, even just thinking about the idea of reforms in the first place, that initial state push was vitally important. The other negative, although I think by and large positive aspect, is I don’t think that we need 80 cities to do their own EV brands, but to get started, maybe that’s what it would’ve taken to drive that incentive. And then ultimately, it’s up to the market to decide who are the last five remaining EV companies through market mechanisms. That’s Chinese-style industrial policy. Industrial policy was heavily criticized and again, if I talk to my Harvard professors, they’ll be very, very, very skeptical about the role of the state, especially in such a major way. But if you look at the Chinese experience, the evidence for success is all there. The cities that have pushed the most on supporting that particular sector ultimately did the best in terms of production, but also in terms of innovation, measured by patents. It’s all in the data. But the downside is that a lot of the capital is wasted. And this is what I also discussed in my book is that it is inefficient, although maybe it’s necessary. The amount of waste of investment plowed into these companies that will ultimately just go under, but also the misallocation- … Ultimately, just go under, but also the misallocation of resources, because it’s led by the state, are some of the downsides, but I guess on balance, it’s been positive, because look at China’s internal combustion engine effort. Nothing, right? Semiconductors. Thanks to Biden, thanks to Trump, it’s improved dramatically, but all these things that they tried to do before, they couldn’t do, but when it’s a new thing, like something that there’s no incumbent, no particular advantage in any country. Actually, China’s really spearheading these sectors. Can we linger a little bit more on this mayor economy? It just seems like such a powerful thing, where one mayor looks over to the next and looks, even just a trivially simple number like the GDP. Why don’t we do that in the United States or in the West more, just compete on GDP?…

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