Can Subsidies Discipline Capital?
The Biden Administration’s recent foray into industrial policy relies heavily on voluntary inducements to push firms to invest in renewable energy technology and domestic manufacturing. Some observers argue that this approach, commonly known as “derisking,” will yield paltry results: firms will pursue the same priorities they would have absent the legislation, just with a better financial return. Yet subsidies do not only alleviate risk; they also impose a new risk of falling behind competitors, and so mold the landscape of profitability into a disciplinary force itself.
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