“Government favoritism in the form of subsidies, tariffs, and other interventions allocates resources (labor and capital) differently than the way resources are allocated by consumers spending their own money. Ordinarily, businesses—spending their investors’ money—compete for these consumer dollars. Industrial policy rests on the assumption that such market outcomes don’t adequately support higher causes such as national security. If that’s true, it’s all the justification industrial policy needs. Nothing needs to be said about jobs.”
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“As Noah Smith reminded his readers in a recent blog post, “Most of the actual production work will be done by robots, because we are a rich country with very high labor costs and lots of abundant capital and technology. Automated manufacturing is what we specialize in, not labor-intensive manufacturing.””
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“Be wary of those who push industrial policy as a means of job creation. It’s a short-sighted approach that distracts us from the more important question, which is whether hindering the market allocation of resources is truly justified for national security or other valid reasons.”