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The conventional wisdom holds that U.S. political institutions are inhospitable to industrial policy. The authors call the conventional wisdom into question by making four claims: (1) the activities targeted by industrial policy are increasingly governed by decentralized production networks rather than markets or hierarchies, (2) “network failures” are therefore no less threatening to industrial dynamism than market or organizational failures, (3) the spatial and organizational decentralization of production have simultaneously increased the demand and broadened the support for American industrial policy, and (4) political decentralization is therefore likely to improve the functioning of industrial policies designed to combat network failures.
Schrank et al. (Tue,) studied this question.