Critiques Of Industrial Policy
The main critiques of industrial policy (as summarized in “The New Economics of Industrial Policy” ) boil down to two practical objections: informational shortcomings and political capture . Both lead to the worry tha...
The main critiques of industrial policy (as summarized in “The New Economics of Industrial Policy” ) boil down to two practical objections: informational shortcomings and political capture . Both lead to the worry that governments can’t “pick winners.” [[:cite[1]{ln=2}], [:cite[1]{ln=3}], [:cite[1]{ln=4}], [:cite[1]{ln=5}]] 1) Informational critique (governments don’t know enough) Even if the market failures that motivate intervention are real, the critique says that real world governments likely lack the knowledge to identify the location and magnitude of those failures well enough to choose the right targets .[:cite[1]{ln=3}] 2) Political capture critique (lobbying distorts policy) Even if governments could acquire the needed information, the political capture critique says industrial policy creates opportunities for lobbying and political influence , diverting policy toward self interested private benefits without expanding the overall social pie .[:cite[1]{ln=4}] 3) Knock on concern: “can’t pick winners” The combined implication of the two critiques is that governments cannot pick winners —not just because the theory is shaky, but because information and politics get in the way in practice.[:cite[1]{ln=5}]