I've heard two lines of reasoning used to justify those and similar expenses:
1. The government, which can be considered as a sovereign corporation, has a moral obligation to run at a loss because certain ventures are "inherently unprofitable"
2. If Tesla is a big success, the tax revenues from the increased capital in the market (directly from Tesla itself but also all the things it influences) will pay for the losses in the loans to other companies.
I don't particularly fancy Argument 1, but do you think Argument 2 holds any water? If Tesla pays back their loan and the others you mentioned are total washes, it's "only" about $1bn, what do you think about how hard is it realistically to make that back? Tesla already has a multi-billion dollar market cap and is looking to grow.
Well, so, I'm an empiricist on this. Absolutely one can point to companies like Tesla (or defense contractors in an earlier time) which received a ton of government money and by any objective measure did push technology forward.
But one can also point to companies like Google which received only $25M in venture funding and certainly went on to create ridiculous amounts of wealth by any measure. And I believe this is the ecosystem argument you're getting at, if I'm not mistaken?
So now it becomes a quantitative question. Economics is notoriously resistant to controlled experiments, but I think that in the main the experience of the 20th century has showed us that you want to have most wealth allocated by the market. If you look at all Eastern Bloc nations, the Soviet Union, North Korea, pre-Deng China, pre-reform Vietnam, and so on down the list...and then compare them to West Germany, South Korea, Taiwan, Hong Kong, and Singapore, you've got a pretty good case for less government intervention in the market.
The few countries that do government/tech investments reasonably well are pretty small countries like Singapore run by technically savvy guys, and there too the government is keenly aware of the fact that it needs to treat companies well or they will leave.
So, for what it's worth, regarding this point:
the tax revenues from the increased capital in the market
(directly from Tesla itself but also all the things it
influences)
Basically if the idea is that government involvement can create a favorable ecosystem, I think that an even more favorable ecosystem is one where the government just hangs back and lets the market punch it out ("laissez-nous faire"). Some companies will die and won't get bailouts. Some companies will look like they're on the ropes and then make an incredible comeback. But no company will be able to call in the government, the guy with the gun. Then it's not a fair fight anymore, and (extending the analogy) you scramble to get out of the ring/country because you can't win.
Put it this way: when the ref has bet $500M on your competitor, there is no point in playing.
Your Easter Bloc examples are a pretty good case against planned economies under oppressive dictatorial regimes, not against government grants to provide incentives for the market to move in certain directions.
> Then it's not a fair fight anymore
That's missing the point. Government interventions of the type in this thread are aimed at providing a fighting chance for the guy that doesn't have the money for a gym or a trainer, to see if his unorthodox ideas of how to fight will actually prove to be worth anything.
There might very well be arguments against these types of interventions, but it will have to be a different argument than against what we usually consider bailouts.
Bailouts for failed businesses employing well established existing technology is an entirely different beast.
Very nicely put. While I agree on almost all accounts, I think it's worth noting that while market forces are in general efficient allocations of capital, it may be possible to identify particular areas of research or technology that the market, for some reason or another, in not incentivized to pursue. The best historical example of this is the Manhattan project. Sure, given enough time, defense entrepreneurs would eventually research and develop the same technology, and maybe at a much lower cost. However, the time-value of obtaining the bomb first could arguably justify the enormous expenditure (something around $20 billion in today's dollars). Now, like I said, this is mostly playing devil's advocate -- as an economics student, I tend to agree with you for most investments. However, I do think that out of all potential investments, green energy has the best case for justifying spending these billions of dollars.
Put another way, if we could pay $50 billion to develop a renewable, clean energy source right now, then it would probably be worth it -- even if it would take Elon Musk only 10 years to do it and for $50 million.
1. The government, which can be considered as a sovereign corporation, has a moral obligation to run at a loss because certain ventures are "inherently unprofitable"
2. If Tesla is a big success, the tax revenues from the increased capital in the market (directly from Tesla itself but also all the things it influences) will pay for the losses in the loans to other companies.
I don't particularly fancy Argument 1, but do you think Argument 2 holds any water? If Tesla pays back their loan and the others you mentioned are total washes, it's "only" about $1bn, what do you think about how hard is it realistically to make that back? Tesla already has a multi-billion dollar market cap and is looking to grow.