The Costs of Economic Security

Abstract

For a strong economy the costs of economic security may be small. The strength of the economy already implies security. For a Japan, the costs of protection may be small precisely because of the efficiency of domestic production. For a weak economy the problem is more difficult and the costs will be greater. Costs may arise in various ways. There are the costs that are inherent in policy. In the case of economic security the inherent costs are those that are likely to arise from defending the current account and the value of the currency. There are the costs that arise from mistakes in the application of policy. Among these are the costs that will arise from the application of policies that are, by their very nature, accident prone. Such a policy is industrial policy. Where industrial intervention becomes a major ingredient of policy, it is likely to be accident-prone. But these days it is seen that even laissez-faire has costs. Under the guise of ‘benign neglect’, it has won praise from those who have won its dividends but blame from those who have paid its costs.