{"id":8939,"date":"2022-09-24T22:47:49","date_gmt":"2022-09-24T22:47:49","guid":{"rendered":"http:\/\/lonecandle.com\/?p=8939"},"modified":"2022-09-24T22:47:49","modified_gmt":"2022-09-24T22:47:49","slug":"industrial-policy-stifles-progress-when-congress-picks-winners-we-all-lose","status":"publish","type":"post","link":"https:\/\/lonecandle.com\/?p=8939","title":{"rendered":"Industrial Policy Stifles Progress When Congress picks winners, we all lose."},"content":{"rendered":"\n

\n\n“To armchair economists, industrial policy seems like a solution for the country’s economic woes: “Infuse money into Industry A, add trade protections for Industry B, protect workers in Industry C from automation, and the economy will soar! New technology will arrive sooner, domestic firms will outcompete foreigners, and steady employment will ensure a chicken in every pot.” That indeed was the thinking behind Depression-era policies which extended that crisis by seven years<\/a>.<\/p>\n\n\n\n

Economies are not deterministic like physics or chemistry. You can’t pull a lever to achieve a particular effect. A better analog is biological or ecological systems, where there are second- and third-order effects to any given stimulus.<\/p>\n\n\n\n

Think about the reintroduction of wolves<\/a> to Yellowstone National Park: Increased predatory pressure keeps elk herds on the move, leaving more young willow trees for beavers. Growing beaver populations dam more waterways, altering the habitat and spurring additional difficult-to-predict effects. That’s economic policy: You must plan for unexpected downstream effects (pun intended).<\/p>\n\n\n\n

That thinking has been missing in Congress this past month. I don’t know what microchip subsidies or a mistitled inflation-fighting bill will ultimately do, but neither do our elected officials.<\/p>\n\n\n\n

Compounding the problem is that people, not some agnostic supercomputer, determine which industries and companies are considered worthy of a boost. Humans are subject to influence and pressure, turning industrial policy into a contest of who can secure the most government favoritism\u2014a political game of Hungry Hungry Hippos<\/a>.<\/p>\n\n\n\n

Policies protecting companies from competitive pressure, like subsidies or tariffs, allow them to take their eye off the ball. This “X-inefficiency<\/a>” means they’re less efficient and pay less attention to customers’ desires.”<\/p>\n\n\n\n

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Industrial Policy Stifles Progress<\/a><\/blockquote>