Infant-Industry Theory
Categories: Financial Theory
The infant-industry theory was first put forth by Hamilton...yes, the Hamilton. While he probably didn’t rake in dough rapping about it, he did argue using the infant-industry theory for trade protectionism.
Typical economic theory will tell you that trade protectionism hurts everyone. Quotas, taxes, and the like result in less efficiency and less utility for both the importer and the exporter in the trade relationship.
But the infant-industry theory argues otherwise.
The infant-industry theory is the theory that infant industries (still in their terrible twos) need some protection from global competition until they’re big enough to compete.
Like, Hercules...he wasn’t the Hercules as we know him overnight. He had to train like Rocky before he could beat the big guys. Hamilton is arguing similarly that we must not forget the time factor, and that size does matter...at least when it comes to trade.