Industrial policy thinking is back - Not clear that this is good

 

Marketcrafters by Chris Hughes is a quick read featuring stories of individuals who used government to shape market direction. In general, the stories are positive, yet some individuals used their power to bend policy in ways that had adverse market effects. The overall theme of this book is that effective industrial policies can influence markets for positive economic outcomes, whether in housing, monetary policy, international finance, energy, or crisis response. Hughes makes the case that good policy leads to good outcomes, but he also shows that bad policy can have severe negative consequences. Hence, a new industrial policy view will not be effective in creating a better economy. My takeaway is that industrial policy should apply the precautionary principle and be careful not to bend markets to your will, because the law of unintended consequences may lead you down a path worse than a market solution.