Industrial Policy Redux
| Peter Klein |
Keynesian economics is not the only once-discredited doctrine making a comeback following the financial crisis. Despite the well-publicized failures of MITI, Sematech, and similar ventures, people are now calling for a new US industrial policy. Here’s a former Shell executive writing in the WSJ about America’s “foolhardy fondness for ‘free market’ philosophies that tell us it’s OK to export all our jobs,” and complaining that “[w]e’ve never systematically used government incentives to help U.S. industry compete across the board. It’s time we did, like everyone else.” Oy vey. A more serious, but equally troubling, proposal comes from Nobel Laureate Edmund Phelps, calling for a “First National Bank of Innovation.” Writing in HBR, Phelps and Leo Tilman worry that high-risk, long-term investments aren’t getting adequate funding, but don’t explain exactly how government funders would compute NPV on anything other than political grounds (which suggests a new acronym: Net Political Value).