A Short Guide to Thinking About Industrial Policy: Takeaways from the New Economics of Industrial Policy

The recent return of industrial policy has inspired a new economic literature on industrial policy. This chapter summarizes six high-level insights from this nascent literature. (1) Properly defined, industrial policy is a vast space. (2) Its use is widespread and on the rise. (3) Given the breadth and extent of industrial policy, sweeping, binary claims about it are unsustainable. (4) The emerging empirical picture is complex and should be. (5) Political economy is first order, and institutional details matter as much as technical details. (6) We should not discount the potential of smaller, contemporary transformations; best practices and policy lessons are likely in our backyard. We point to some recent experiences in developing countries. These takeaways are not exhaustive and point to a more nuanced, pragmatic body of knowledge.