A review by inquiry_from_an_anti_library
Industrial Policy for the United States: Winning the Competition for Good Jobs and High-Value Industries by Ian Fletcher, Marc Fasteau

adventurous informative reflective tense medium-paced

3.0

Is This An Overview?

Industrial policy is a deliberate governmental support for industries.  For government to support innovation, commercialization, retention of advantageous industries, reduce foreign competition for internal markets, and to manage the exchange rate to balance trade.  Government intervention is needed due to limits of the markets, to have government supply that which the markets cannot.  The limits to free markets include externalities, a focus on short term investments, and limited production and innovation to what provides the firm with readily monetized products.

 

Firms that rely on markets tend to lose competitiveness to foreign firms which are supported by governments.  Loss of competitiveness that leads to a loss of jobs, wealth, and tax revenue which hinders national defense.  Effective industrial policy includes a proactive mobilization of resources, long term strategies, coordinated related policies, and are consistent enough for firms to know how to allocate investments.  Policies need to enable advantageous economic activities, which are activities that contain increasing returns, high income elasticity of demand, susceptibility to repeated improvement, competition not limited to on a basis of price, and can accumulate human capital.  Industrial policy enables a mixed economy that is part public, part free-market private, part regulated private.

 

Caveats?

This book can be difficult to read, as various parts of the book contain a more technical manual on industries and policies.  The book is a guide for those seeking to know what policies are available and industries affected, not an introductory book on economic development.

 

This book can be used by every state, not just the United Sates.  The book provides an economic history of various states, with various successes and failures in using industrial policy.  As every state can use the same policies, each state can reciprocate a policy that is being used against them.  Each state can reciprocate the denial of technology and limit the internal market to foreigners.  This can exacerbate conflicts rather than provide opportunities for cooperation. 

 

The way the ideas in the book are expressed have contradictions.  1) The authors claim that the U.S. is supporting free trade with a lack of government support, then proceed to show how much government has been involved in developing industries.  The authors critique should be about the difference between what is publicly claims and what is being done, rather than on lack of government intervention.  2) The author makes the claim that government intervention is needed, as government can potentially improve outcomes when the free market provides suboptimal outcomes.  If government is needed when markets produce suboptimal outcomes, then markets can be claimed to be needed when government produces suboptimal outcomes.  Within the economic history provided, the authors provide references to governments not being optimal.  3) For effective industrial policy, governments require predicting the future of how technology will evolve, and which markets would be profitable.  Then to support those industries and markets with various policies, such as educating people for those future needs.  The problem is that this claim requires government officials to be rational agents.  Effective government intervention requires the same conditions which Neoclassical economic perspective held, that people are omniscient and omnipotent.  These views are no longer considered acceptable assumptions in economics.