Pitfalls in industrial policy

The term “industrial policy” refers to government interventions with market outcomes in economic activity. By the 1990s, advanced countries had rejected almost all industrial policies and relied on competition policy and the free market. But recently, industrial policy has become more popular. This paper covers some of the cautions applicable to industrial policy. Crucially important is the need for careful evaluation of proposed interventions, prevention of political interventions in management and engineering decisions, and ongoing willingness to evaluate performance in targets of industrial policy relative to intended purposes.