The first problem for the government in carrying out an industrial policy is that we actually know precious little about identifying, before the fact, a “winning” industrial structure. There does not exist a set of economic criteria that determine what gives different countries preeminence in particular lines of business. Nor is it at all clear what the substantive criteria would be for deciding which older industries to protect or restructure.
DBx: This point – so simple, so obvious, and so important – is nevertheless completely ignored by Marco Rubio, Oren Cass, Daniel McCarthy, and other advocates of industrial policy. Industrial-policy advocates merely assume that government officials possess (or can come to possess) such knowledge, and that these officials will be immune to the political pressures that would press them to use their power in support of special interests rather than to further (what they believe to be) the public interest. But there is absolutely no basis for either of these assumptions. In fact, each assumption is ludicrous; neither is supported either by history or theory. Yet for industrial policy to have any hope of success, both assumptions would have to hold in reality.