Industrial Policy: Love it or Hate it?
Industrial policy has been one of the most heated issues in the history of development. It was viewed as a tool to stimulate activity, but debating what and how to incentivize is the wrong question. Ricardo Hausmann says the new industrial policy is an information revelation process about the state of possibilities, the nature of the obstacles and figuring out whether you can sort out the obstacles so that these new activities can take over.
Hausmann explains why industrial policy is all about the increase of productivity and not profitability of firms. Productivity is a win-win and a sound basis for policy. Profitability is a win-lose and is not sustainable in any kind of decent political system.
Comment from our editors:
An excellent introduction to the new industrial policy. It is certainly a good introduction for beginners to further advanced material.
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