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National Review
National Review
1 Sep 2023
Veronique de Rugy


NextImg:The Corner: Arnold Kling on Industrial Policy

Arnold Kling is always worth reading. Today, he has a post up which makes a very important point about industrial policy:

Remember that whatever the theoretical rationale for government economic intervention, the political impetus is to subsidize demand and restrict supply. That is the combination of policies that rewards the interests of domestic producers, even if it detracts from achieving the stated objective of the policy.

The government is subsidizing the demand for solar-energy projects and restricting the supply of the solar panels needed for those projects. The net effect may or may not be to increase the use of solar power. But it certainly will increase the cost of solar power, and it will feed the profits of domestic producers. . . .

Industrial policy is never made in a vacuum, fine-tuned to achieve some theoretical optimum. It contends with legacy policies, special interests, and irrational quasi-religious believers.

This last paragraph is so true.

Read the whole thing here.