Industrial Policy in America

Industrial Policy in America

Breaking the Taboo

Marco R. Di Tommaso and Stuart O. Schweitzer

In contrast to what observers have frequently argued, this timely and thought provoking book suggests that the concept of industrial policy is not alien to the American past and present. The debate on this topic in the US has always been full of contradictory rhetoric and policy practices, and the expert authors therefore acknowledge a need to rethink the traditional antagonist positions. They illustrate that contemporary markets continue to demand to be fixed by government policies, and governments continue to show how fixing-the-market policies might fail. The conclusion is that the future of industrial policy is about how to make both markets and governments better in their functioning, but that the real goal for industrial policy is to make better-market and better-government policies consistent with the goal of building a better society.

Chapter 2: Better markets, better government, better society

Marco R. Di Tommaso and Stuart O. Schweitzer

Subjects: economics and finance, industrial economics


In the previous chapter we illustrated the main reasons that might justify industrial policy (IP) interventions: that market failures might lead to outcomes that are inconsistent with a country’s societal goals, its national strategy of industrial development, or its desire to promote its preferred model of society. In this section we point out that, although these criteria are important, they cannot guarantee that in every such situation IP interventions will be successful because there is a risk of “government failure.” In fact, there is a sizeable literature that has suggested that the anticipation of government failure may reduce industrial policy’s domain. The traditional government failure literature argument in this field points out that it is possible that the consequences of policy failures may be worse than the benefit the interventions are supposed to offer, and this is why it may be preferable to avoid any kind of government intrusion in production dynamics! In the next pages we will discuss these arguments and offer our ideas and perspectives.

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