What kind of industrial policy does America need?

That idea is making a big comeback, but let’s make sure we understand the status quo first.  So runs my latest Bloomberg column, here is one excerpt:

Perhaps most important, it should be recognized that the U.S. already has an industrial policy — and has for some time. It is a collection of programs and policies at the federal and state level, many of which are highly imperfect, and so the focus should be on fixing what is already in place.

The first and perhaps most significant component of U.S. industrial policy is a high level of defense spending, much higher than that of any other country. The spinoffs of this spending famously include the internet of course, but also early advances in computers and some later advances in aviation. Today’s orbiting network of satellites is in part a spinoff from the space program, which was partially motivated by military concerns.

It’s not yet clear whether current defense spinoffs will prove as innovative and as potent as those  of the past, but there are some reasons to be skeptical. Procurement cycles for weapons can stretch to a dozen years or more, yet technologies are changing far more quickly.

So if I were designing an “industrial policy” for America, my first priority would be to improve and “unstick” its procurement cycles. There may well be bureaucratic reasons that this is difficult to do. But if it can’t be done, then perhaps the U.S. shouldn’t be setting its sights on a more ambitious industrial policy.

I also consider the NIH and the biomedical establishment, and America’s extensive system of state colleges and universities, as part of what is already a quite ambitious “industrial policy,” even if we don’t always call it that.


On procurement, the issue is not bureaucratic but the avoidance of political accountability. Bureaucracy in procurement "evolves" in line with tendency of elected politicians throwing officers under the bus, rather than take accountability for their decisions. So bureaucracy builds in procurement to add yet another form showing that all risks continuously being identified, managed and mitigated and that everyone at every level is aware of this (sign here, here, and here) and that there has been multiple rounds of consultation.

You want better procurement? Increase political accountability and throw less officials under the bus.

First rule of procurement: cover your ass.

rule no. 2 uncover the asses&
learn to recognize postmodernscam/scamartists behavior
-master! arts university of florida asks a fairly incoherent question
interrupts a fairly coherent answer& and then prevaricates for
the camera/optics!
+1! postmodren

When I studied project and program management I noticed many case studies came out of military projects including procurement. Among the most important issues are stakeholder involvement and signoff in addition to scope creep. One helps to prevent the other. Building a nuclear submarine or a stealth bomber is an immensely complicated process.

The defense spending is remarkable not only because of the yearly budget but also due to its longevity. Varies from year to year, but 30-50% of Boeing's yearly revenue is defense and space contracts. Concerning space, NASA is 100% applied industrial policy.

The DOE's national labs are also important. My anecdote: 2 weeks ago we lost in an open tender to a guy who worked at Lawrence Berkeley lab and now setup his consulting business :/

The extensive system of universities is also friendly to biotechnology. Scientists in China are "free" to modify the genes in babies, but GMO corn yields better profits.

Finally there are less efficient deals as the NY state with Tesla/Solar City plant in Buffalo. Sadly, this is precisely what people think industrial policy means.

I would add Solyndra.

Back in 1981 I was part of a team NASA put together to advise them on how to upgrade their computing infrastructure.

We had to deal with things like the length of NASA’s procurement cycle, which was approaching the length of a generation of computer tech. That means that by the time a request had been approved, the approved technology was all but obsolete. And then there was the peculiar fact that government personnel policy had a slot for mathematicians and one for electronic engineers, but no slots for computer scientists or programmers. So how could NASA hire the people it needed?

Industrial policy involves lots more than government capital spending. It's first and foremost about policies and strategies intended to encourage investment in productive capital. We have lost our way, and China's version of state capitalism, with an industrial policy on steroids, is leaving us in its wake. We can't rely on rising asset prices as the path to prosperity, with policies designed to achieve it, while bemoaning the absence of investment in productive capital. There's a vast space between China's version of state capitalism and our own profligacy. A good start for closing the gap would require economists to offer sober assessments and proposals rather than more defenses of tax cuts for the wealthy and rationalizations for the deterioration of America's infrastructure and the hollowing out of American industry. Cowen is presenting an either/or choice for industrial policy, one that is hardly a choice at all, which may not be his intent but has the effect.


From the Fed, manufacturing output US.


Sorry, but manufacturing sector - real output presents a misleading picture of manufacturing because it fails to account for the rising percentage of imported intermediate goods used in the manufacturing process. Indeed, much of the good news we read about manufacturing (growth of output, capital to labor ratio, productivity, and rate of return) is attributable to lower cost imported intermediate goods. Moreover, research (Houseman et al.) indicates that the official data misstate price developments for intermediate goods that have moved from domestic production to foreign production. According to this research, prices of imports from developing countries have lower prices for intermediates than measured. Overstating the intermediary import prices tends to understate real imports and thereby the contribution of imports to output. As a result, total factor productivity, output, and labor productivity in manufacturing are biased upward. My comment, however, was not just about manufacturing, but investment and production in all sectors of the economy.


You’re obviously citing the Upjohn Institute’s publications. Labor Econ remains the red headed step child for a good reason.

It was published in JEP, which should be a giant red flag. The AER, it ain’t. It’s purpose is to “bridge the gap between general interest press” and economics. Yikes !

Regardless, we don’t need to quibble over the merits of your source. See, The Fed also tracks intermediate production in the US!


Evil! You use investment like Keynes!

Keynes investment drives down asset prices and destroys wealth!

The industrial policy for four decades has been to export the zero economic profit production and expand the high economic profit, eg rent seeking and monopoly scarcity activity.

While it was US industrial policy, driven by/via DoD, that created flat panel technology, the US never invested in factories because paying workers costs too much, and high labor costs destroy wealth, and wealth destruction kills jobs.

That's why all (affordable) big screen TVs are made in China. China's industrial policy is Keynesian: destroy wealth by paying ever more workers ever higher wages.

Making solar panels is symbiotic to big screen TVs. Both require engineers and technicians skilled in building huge clean rooms filled with robots, which quickly become obsolete by better and bigger clean rooms filled with better robots.

You can't have the labor force to build semiconductor factories unless you constantly pay workers to build semiconductor factories. US industrial policy is based on high profits from not building factories to create scarcity to generate scarcity profits. That means the US will not build factories because China is building too many and destroying wealth as defined by US industrial policy.

If you do not have factories, you have no idea how to design products that require factories.

+ 100

Your best post ever, IMHO.

Wage share of GDP and consumption share of GDP both high US, low China (relative each other and OECD) and dropped during Chinas highest GDP growth rate phase: https://www.piie.com/blogs/china-economic-watch/chinas-rebalance-reflected-rising-wage-share-gdp

China’s Urban-industrial policy is ok. Japan,Germany and the US set the global ppf curve. China is smart in that they play copy cat well. But they aren’t actively doing things productivity wise that the US can’t do.

Also they have a landscape riddled with failed cities and mal investment. If anything China’s state sponsored capitalism lacks innovation, good urbanism, and solid investment. It’s a clumsy, authoritarian capitalism with poorly defined property rights, horrific pollution, wasted investment, and a total lack of originality.

The idea that it will have the same affect upon the world as US capitalism circa 1860-1929 is a joke.....

I am not sure that China is a world leader in finance, but they are doing things in small business loans based on mobile payments and AI that are more advanced than anything the US is doing. Also, it is strange to think of the US doing urbanism better than China. Maybe China isn’t the best, but suburbs in the US are maybe the most financially extravagant and wasteful form of Urbanism that I can think of. Millions upon millions of very, very expensive and very lightly used lane miles of roads isn’t exactly an efficient use of capital.

No argument from me that post war suburbanism in America has been an epic failure.

American planners obsession with Corbusier set this country WAY BACK. In a way, post war urban planning is another type of FAILED industrial policy in America....

Reinforced concrete buildings, concrete slabs on pylons, for dense housing units is a bad idea?

So you want more Levittowns, eg stick built homes?

"No argument from me that post war suburbanism in America has been an epic failure." Feels like a Yogi Berra moment here.

I hear the Soviets largely fixed that suburbanism issue.

"We have lost our way, and China's version of state capitalism, with an industrial policy on steroids, is leaving us in its wake."

No it isn't it's crippling China with unproductive investments.

China seems to be better at industrial policy than anybody else yet was oddly left out of this piece.

"The plan focuses on high-tech fields including the pharmaceutical industry, automotive industry, aerospace industry, semiconductors, IT and robotics etc"


"many students with a master’s degree end up tending bar or driving an Uber."

That is not necessarily the fault of higher education but of anemic wages all around. America's fastest growing jobs pay $24K. Some businesses are claiming we have a shortage of workers but wages don't seem to go up as we expect from the laws of supply and demand.


A masters degree in gender studies doesn’t pay as well as a masters in accounting. It probably will not pay as well within any form of social organization....

I’ve known people with degrees in biology that tend bar. Note that even if they didn’t get great grades, they still passed organic chemistry, which means that they do pass a certain bar of intelligence and discipline.

There are biology majors and biology majors. Some are driven by scientific curiosity, which is fine. Some are driven by a complete desire to reach medical school, which is also fine. Some .. well lazy premed doesn't really work.

And biology research quickly enters a moral blackhole.

Cloning humans, CRISPR to prevent AIDS transmission, or trying to find any genes that have effects on a person’s life. Genes are irrelevant to everyone but the differently abled.

It’s time to shut down gene research. We know enough. Anything beyond this point will lead to pseudoscience and reactionary politics.

My impression is that career earnings data is much more available to HS students, and that they are making different decisions these days.

Most Popular College Majors Over 40 Years

Certainly (potential) teachers are not being so massively over-produced.

Looking at that chart, maybe Business displaced Education as the big popular generic major. Surely that's good.

It's interesting that in the Mammon-worshipping US potential career earnings are more important than interests and abilities. Maybe that's why there are so many incompetents employed in important positions. Prestigious vocations that often produce fabulous incomes, like the law, finance, business, etc., attract mediocre and uninspired students hoping to maximize their lifetime incomes. The subsequent failures end up populating the ranks of middle management and the bureaucracy, guaranteeing a continuing level of mediocrity that insures a certain amount of "Great Stagnation".

In the best possible case, kids balance the two. They have a list of interests and abilities, and they have a list of mid-career earnings. The sweet spot satisfies both.

This would be a course-correction from the old "follow your dream."

Here's a review by David Leonhardt of Nicholas Lemann's new book "Transaction Man": https://www.nytimes.com/2019/09/10/books/review/transaction-man-nicholas-lemann.html It offers a model for an industrial policy that could appeal to Cowen: Lemann praises big business. And could appeal to many who are critical of big business: Lemann praises countervailing power to keep big business in check. One might give the book the sub-title Back to the Future. Sure, the book is a nostalgic look back to a time of shared prosperity, but wherever the inspiration comes from, it's better than the bleak future most people see for themselves and their children. No, I don't expect Cowen and his ideological soulmates to jump on this bandwagon, for it would require them to admit what they would never admit. But for the open minded, Lemann offers a sober assessment of the present and a proposal for a better future, a future modeled after the past.

Galbrathianism sucks. The age of shared US prosperity of 1945-1970 also featured a Western Europe DESTROYED by world war and a total lack of the under skilled immigrants that have characterized US immigration since the 1950’s.

So unless you want to be super inhuman and not allow Latin American or Caribbean immigrants into the US, then it’s gonna be hard to hold those Gini coefficients down....

So unless you want to be super inhuman and not allow Latin American or Caribbean immigrants into the US,

Your problem, really, is that you're under the illusion that it is 'super inhuman' to expect people to not colonize some other country. The dimensions of the immigrant pipeline from Latin America and the Caribbean is properly a common assessment of what's in it for us. The effect of immigration on national welfare is small and largely repairs to the immigrants themselves and to people who are already affluent, Bryan Caplan's trillion-dollar-bill fantasy notwithstanding.

With three exceptions, all the countries in this hemisphere are constitutional states (the three exceptions have all had their admirers among partisan Democrats) and with few exceptions have real income levels characteristic of this country in the 1940s. There biggest defect is high rates of street crime. Resettling part of their population in California isn't going to correct that.

" The dimensions of the immigrant pipeline from Latin America and the Caribbean is properly a common assessment of what's in it for us. "

There is no 'us'. My right to hire cheap imported labour does not depend on 'our welfare'.

"Bryan Caplan's trillion-dollar-bill fantasy notwithstanding."

It's not a fantasy it's economic fact. That you don't like it is tough cheese. Dubai demonstrates everyday what America is missing out on.

"There is no 'us'. My right to hire cheap imported labour does not depend on 'our welfare'."

The US is a welfare state. If that cheap labor isn't paying more in taxes than they're receiving in benefits, then yes it absolutely is a matter of public policy and debate.

We're a Democratic Republic and the voters get a say. And as you say above: 'That you don't like it is tough cheese. '

Take your fake golden age of 'shared prosperity' and shove it. More like 'shared delusions' and for that matter terrible cars, expensive home appliances, inferior television, inferior standards of living, worse consumer choice in general, inaccessible air travel.

Agriculture is an industry: why no mention of the bonkers federal policies for that industry?

I think Tyler was being charitable to the Industrial policy advocates by not picking that low hanging fruit...

Many countries subsidize agriculture; and to call it industrial policy really stretches the meaning of "industrial".

1) So what?

2) It's not a stretch at all. Agriculture is industrial.

"1) So what?"

Because it answers the question that dearieme asked. Specifically, why there's, "no mention of the bonkers federal policies for that industry". If everyone does it, then it's the baseline and not particularly remarkable.

Tyler also didn't mention governmental K-12 education. Even though one of the primary purposes of that is to create a literate skilled work force. I think he should have added that to the list too. He probably left it off for the same reason he left off agriculture.

"2) It's not a stretch at all. Agriculture is industrial."

Ok, fair point. Clearly, agriculture is, from an American perspective, highly mechanized and we have an "industrial" policy of encouraging mass production at low prices which results in massive exports.

... discussion of "Industrial Policy" is pointless jabber if there is no clear, standard definition of what an "Industrial Policy" is.

That definition is obviously lacking here, so guess what remains here.

"That definition is obviously lacking here, so guess what remains here."

+1, without a clear definition, nobody is going to be able to come to any general conclusion, because everyone is going to be thinking of different examples.

Is Public Education an Industrial policy? (if you are including spending on colleges, why not spending on other schools).

What about government subsidized Healthcare? (clearly that changes the cost structure of a lot of industries)

What about local the legal system? (Is making defenders pay an implicit subsidy for large businesses?)

To operate on the frontiers of the real economy, on its margins, is more risky than to operate in its established center, but also much more important for its future.
When imposing risk weighted bank capital requirements, the regulators unethically ignored that so, before any “industrial policy” creativity, get rid of that bank regulation.

Caution: Typical Reactionary MR Nit Picking Below!

The space program was PARTIALLY motivated by military concerns?!?!

Nit picking completed. Carry on. Enjoy the rest of your day. All of you including the Mouse.

Wasn't it motivated not by being easy but by being hard; by serving to organize and measure the best of our energies and skills, by being a challenge we were willing to accept, unwilling to postpone, and one we intended to win, and the others, too?

I thank President Captain Bolsonaro for having squashed an attempt to raise taxes. "No new taxes", he tweeted. It os good to know someone is there looking out for the common man.

I think I soiled my underpants.

That is the communist impersonator.

It got in my shoes too!

Singapore has an industrial policy very much connected to its trade policy, which is to run current account trade surpluses. Singapore has per capita GDP PPP about 50% higher than that of the United States.

So for a city-state, having an industrial, macroeconomic and trade policy has been effective.

I think for the United States picking winners is too hard and too politicized. I would rather see a 20% across-the-board tariff on manufactured Imports, and let it go at that. The tariff would roughly balance the subsidies that other nations provide to manufacturing.

By the way, the IMF has advocated that the US move its current account trade deficit closer to balance, to avoid financial instabilities.

What an utterly idiotic and immoral idea. Here's a counterproposal: tax your own imports and keep your hand and your economic illiteracy out of my wallet.

CNTRL + F + "patent" = phrase not found. Nuff said.

But it's true what TC says, and Vaclav Smil is smiling now...

CNTRL+ F + "public domain" = phrase not found, so we are both disappointed.

Seriously, a good article overall, and the emphasis on state level education is not that far from an endorsement of public knowledge.


Clearly you don't understand patents. The point of patents is to get stuff into the public domain, after the expiration period (good patents that is, not present policy). Did you know many inventions have been lost and had to be reinvented? Roman concrete (fly ash + quick lime, which is hard to make since you have to heat at high temperatures and low O2 levels, and keep humidity out once made, it's not just burning limestone like some people think). Flight (speculative). A book on my bookshelf has a list of such inventions. Even trade secrets are lost: a woman at Monterrey CA's aquarium not too long ago trained sharks to do tricks, like swimming in formation, synchronized swimming, very hard to do, like herding cats, and when she died the secret died with her. You do know we'd have Flying Cars (TM) and a cure for cancer if we had better patent policy? You'd like that more than today's Rob Peter to Pay Paul policy, right? (Bonus trivia: I once heard a joke, half true, that said if you want to pay Paul after robbing Peter, under the theory it keeps Paul 'off the streets', at least require Paul to prove he's capable of committing crime, not just talking about it, lol).

Did you bury the lead with "if we had better patent policy?"

I see a place for patents, but I am a bit inclined to see current IP policy as a glass a bit less than half full. Especially on the copyright side, where extended corporate ownership is blocking much of that migration to public domain.

I did like the Niskanen suggestions though.

I did think this was a bold suggestion, new to me:

"No infringement in the case of independent invention."

Yes, bold but rather conventional for people in the field IMO. I've also heard "open examination" (public sourcing examination), "laid-open examination" (no examination, done for certain patents in JP and GER already), "team examination" (done in the EPO already, assembly line division of labor does make sense) and BTW "no infringement in the case of independent invention" is already the standard for copyrights. I'd also like to have a separate patent for actual reduction to practice (building a ' working model', the 19th century requirement, and still the standard in the USA for certain recombinant DNA inventions) rather than just constructive reduction to practice (paper patents). Also abolishing the patent bar (patent lawyers and agents) would help cut costs, and an official 'rocket docket' expressly for fast patent appeals, as they have in Germany and in some federal district courts (so they say) in the USA.

Not to mention AlexT's "prize fund" and allowing multiple awards for simultaneous invention, not just 'first past the gate gets all' (very common, did you know Newton's inverse square law was anticipated by others? true). And abolishing 35 USC 101 where you can't patent a so-called 'discovery' of nature like a law of physics or math equation (absurd, nothing is 'discovered' but rather these models are all invented).

Well, anonymous, you're one of the few people actually somewhat interested in patents, which is great, it puts you in the top 1% in the intelligentsia. Thanks for the Niskanen Center paper cite.

Tax policy is the fundamental driver of all industrial policy. The cornerstone of US industrial policy is to severely punish US domestic producers with high tax rates and distortionary tax code provisions, anarchic product liability, and insane regulatory regimes, while simultaneously demanding untaxed and even subsidized imports from foreign producers. Under this industrial policy it is only too easy for the Chinese Communist Party to decide which of its domestic industries to subsidize and eliminate US competition. Tyler deems opposition to this state of affairs as lower quality governance from his grossly overpaid state job in Northern Virginia at a Confucius Institute hosting third tier university. Oh well, at least he creates a silver lining for a nuclear strike on DC. Repeal the corporate tax code, replace with a standard European VAT: the only industrial policy the US would ever need.

And US firms happily use those subsidized, cheep, non taxed, Chinese imputes to create US

EU industrial policy is also a joke. Those countries are all poorer except for a handful of outliers like Luxembourg, Switzerland and Norway.

In a diverse country of 325 million people, why mimicking the policies of poorer, smaller, more homogenized nations states is a good idea is beyond me.

TC's been going on and on about "progress studies" so much of late, a surprise that he abandons "progress" so soon to talk up "innovation".

(Curious coincidence: producers at WBUR's "On Point" plan in today's second hour to discuss whether Tech Mania for "innovation" is far overrated [to the exclusion of "systems maintenance"], which would seem a belated response to pushes for "progress studies", tech and Tech Mania, and all the glorious outcomes gifted to us by our ever-gluttonous Military-Industrial Complex, the same one whose advent our 34th President kindly warned us of almost sixty years ago.)

What status do "Military-Industrial Complex Studies" enjoy today in our glorified and well-informed institutions of post-secondary training?

Amen, we have a massive industrial policy, it is just that we call it tax policy.

If you think the internet has government origins, you might as well just stay in bed all day, and not bother anyone. Consider it as a community service.

We see the industrial policy at work when we look at the effective tax rate on corporations and see it is only about half the statutory rate.

We see it when large multinationals pay an effective rate of near zero while small firms pay nearly the statutory rate.

Then get rid of the preferences.

We see the industrial policy when we see that the effective tax rate is about half the statutory rate.

We see it when large multinational firms pay a tax rate of nearly zero while small firms pay nearly the statutory rate.

+1 Every small business needs a foreign IP sub to move the profits offshore.

What galls me is when a large multinational firm I represented acquired a smaller firm and counted the synergies to include tax reduction of the acquired firm.

"What kind of industrial policy does America need?"


The idea that government can correctly decide which things are winners and which losers is beyond stupid. A bunch of C students aren't smart enough for starters.

Another priceless contribution from Bob's parents' basement

Where is the USA's entry in 5G hardware, that it can table after it bullies other countries not to purchase Huawei's?


I think what you are missing is the modern global competitive capitalist marketplace appears to be driving birth rates down and slowing family formation. And social conservatives sense the economy is helping grow our families. (Or we are not in the post-ww2 boom where what is good for GM is good nation mentality anymore.)

1) Outside of Israel name a competitive nation with a high rate. South Korea birth rates are HALF of replacement levels. And falling birth rates should concern libertarians because future labor supply will decline!

2) The reality is US birth rates continue to fall even in a better economy. (However, we should the primary drop has been in single motherhood and young people waiting until they are ready for children.)

This post needs some humility, particularly as it comes to industrial policy and funding it through the defense establishment and while ignoring the market distorting DC industrial complex.

Here's why. Let's look at some of those industrial policies, and their history.

Back in the late 70's, the government and oil industry proposed loan guaranties for synthetic fuel plants--that would get the synfuel from crushed rock. Fortunately, that failed to go forward, despite the push by the oil industry. They even tried the national security/defense argument and wanted it as a defense investment ,,,,later, with some academic research, we had fracking, without underwriting an industry.

Or, if you want more reasons for humility, go back and read books on industrial policy from the early 80's under Reagan. (I have been reviewing some of these books for background on creating some industry case studies for use in a graduate class on pricing and strategy).

Start with the book: American Industry and international Competition: Government Policies and Corporate Strategies (Cornell 1983) edited by Zysman and Tyson.

Chapter: The Politics of Competitive Erosion of the US Steel Industry (failure by US firms to invest in new technology in the 60's when Japan did, followed by tariffs to protect our inefficient industry...sound familiar? It's familiar to Secretary Ross, because that's how he made some money with tariff protection)

Another chapter: The Decline of the American Color TV Industry....and proposals to protect it with Orderly Marketing Agreements with Japan. That was a winner.

Another chapter: Trade and Development in the Electronic Semiconductor Industry: Japanese Challenge and American Response (later history of tariffs and a US government sponsored MITI like program that went nowhere but it did get an antitrust exemption for government reviewed joint conduct);

How 'bout the chapter on the Politics of Protection in the US Textile and Apparel Industry, or the Chapter on Adjustments in the US Footware Industry Remember those industries? We'll Make America Great Again with textiles and shoes!!! We just needed an industrial policy!

But, what I like are industrial policies that never go away: like tax break after tax break for the oil industry, sold on the notion that this will make us Independent!!!.....But, now that we export oil and natural gas, no one comes back an says...Do we still need those tax breaks?

A producer and promoter of that sort of literature was Robert Reich (who had at least one collaboration with HRC's chum Ira Magaziner). RM Kaus was once on some sort of policy task force with him when Reich worked for the Federal Trade Commission and said he in his youth could be screamingly funny. Now he's gone insane. Reich was all over the place on PBS programs and in magazine literature, pitching to people who had no idea that he was then employed as a law professor, and had zero background in any department of economics or business.

You seemed to omit Tyler Cohen from your list of Industrial Policy promoters. And, the article he wrote highlighted conservatives who promoted it.

You seem to ignore the Big One--President Donald J. Trump--and his tariffs which costs you a $1,000 per year.

Can you get a MAGA hat that isn't made in China?

You seem to ignore the Big One--President Donald J. Trump--

Trump takes a more combative stance in trade negotiations than his predecessors. That doesn't bother me. It bothers the moderators, who will support any 1,000 page compendium-of-carve-outs which is labeled a 'free trade' treaty. Which tells you that the discourse about 'free trade' isn't actually about free trade.

Trade has very modest effects on overall welfare most places and AFAICS, we've pretty much picked all the fruit on that tree except what's so high up we'll get killed if we fall off the ladder. We might do something about the tax architecture. Which would require the United States Congress actually accomplish something other than tossing bon bons at their donors. Fat chance.

Tariffs are not industrial policy?

Saying so does not make it so.

"Trade has very modest effects on overall welfare most places"

That's a lie, and your preference for a 'combative' trade stance is as unsurprising as your mendacity regarding trade agreements.

Caning, Actually, to the extent Reich promoted education and research as a way forward, I would agree with that but be skeptical of corporate assistance programs which I don't think he promoted. I think he was more in the coordination of government programs side but haven't checked recently so could be wrong.

which I don't think he promoted.

The common blather at the time favored tripartite boards and public capital. Which I believe he did support, as did Felix Rohatyn and Robert Kuttner. A dissenter was Reich's editor, Michael Kinsley, who thought it imprudent for Walter Mondale and the AFL - CIO to advocate arranging a swath of industries as centrally governed cartels.

I'm sorry, but in looking at Reich's Wiki entry I find no support for your assertions as to what he would do. I find the items I first mentioned.

Feel free to go to his Wiki entry and point out support for your claim. It certainly didn't make it to a public Wiki page.

Those who forget history are doomed to repeat it?

Industrial policy subverts the output gap. When an output gap becomes public, like the hefty fines levied on Google, a stigma jeopardizes well-being. With healthcare, the output gap is a knowledge gap.

Next to-none.

1. Eliminate the tax preferences, limit federal research programs to in-house and contract research in service to agencies' institutional missions, to lumpy things which require assembling a great deal of capital stock like the space program, and to a few crown jewels like the Smithsonian. Limit federal pipelines to colleges and universities to scholarship programs for veterans and federal employees and to Medicare re-imbursements to university medical centers.

2. Eliminate state government support for research as well bar crown jewels like the state library and episodic grants to state university endowments which would require voter approval. Limit state support of public colleges and universities to redemption of vouchers for tuition and room-and-board and to insurance re-imbursements for university medical centers.

3. You arguably have to be contentious over trade to counter-balance other countries' subsidies. That's just what you all don't want, right?

It's almost as if what you really want is more bon bons for faculty.

Actually, I would promote and sponsor more research through universities, but limit graduate student support on with the research to US nationals or nationals of US allies. Having many research institutions work on problems is better than having an opaque system managed by DOD handing out research contracts to firms with former Generals on their board.

If publicly funded public university research is for the public domain, it doesn't really matter who works on it.

It is this misbegotten public university as private research arm that causes messes. See also the real underlying problems at the MIT Media Lab.

Your assumption is that public funded research is in the public domain.

No, it isn't. Patents developed by the University are owned by the University and licensed. You can place restrictions on licensing to whom if you want.

Basic research is public domain (in the sense you cannot recapture unless patented or trade secret protected), but that's not what we are talking about. Who does work on it does matter if it trains someone who steals the property or goes back home with a technological edge.

That is either an uninformed or a misleading answer.

University research is done under a great number of funding and intellectual property models. The same as anywhere, really.

There may be work with tight control by new IP owners.

There may be work with a range of licensing options. To name one, there is the venerable BSD license.

And then there is work directly for the Public Domain. My Boyz:


As I say, governments, universities, businesses, and individuals may choose any of these.

But if any has demonstrated power in the last 50 years, it has been open models on the Internet.

Berkeley had a big part in kicking that off. Their model, descendants of the BSDL, form our infrastructure.

Take this site for example. It's driven by WordPress (FOSS) which is in turn powered by PHP (FOSS) and mySQL (FOSS) and most likely running on a Linux (FOSS) network.

(Used by more than 60 million websites, including 33.6% of the top 10 million websites as of April 2019, WordPress is the most popular website management system in the world.)

I'm sorry, but I know quite a bit about this subject. Your comment does not dispute my assertions, particularly when you acknowledge that there are many paths within the licensing sphere for government funded research grants. In fact, some of the models today require the researcher to plan ahead on how the technology can be reduced to practice and marketed. Robotic engineers take classes sponsored by the NSF on marketing.

Actually, I would promote and sponsor more research through universities, b

You've been sucking on which teat?

It is this misbegotten public university as private research arm that causes messes. S

No, that's the miniscandal that interests you. It's not the real scandal.

Do you believe in ROI?

That public efforts may achieve ROI even while generating knowledge in the public domain?

(I asked, on The Internet.)

Caning, You seem to believe that if you give a government contract to Boeing to develop or invent something it is different than giving the research support to a University to do the same thing.

You got your teats mixed up. Call defense spending a teat and we'll talk. University research is also an investment in human capital. By the way, calling something a teat is just name calling and does not address an issue, including efficiency and spillover effects.

" University research is also an investment in human capital. "

A crappy investment. I'm a cog in that system and the money is worse than wasted. Oceans of poor research; reams of mediocre labs.

Caning, You seem to believe that if you give a government contract to Boeing to develop or invent something it is different than giving the research support to a University to do the same thing.

Yes I do, and I'm right. Boeing bids on the contract to provide equipment which serves an end the public agency has. The military buys aerospace equipment. There is no private military, nor can there be. The NSF passes out patronage to professors to fulfill the ends of committees of professors who have their own shticks an career goals. There's no great reason to believe there are economies of scale which dictate the central government do this. You want money for your research program, hit up your institutions, hit up some private foundation, or persuade your state legislator to put an initiative on the ballot.

"You arguably have to be contentious over trade to counter-balance other countries' subsidies. "

No you don't at all. Subsidies are a gift from other countries' taxpayers. You only need eat them.

I think a careful separation of concerns is necessary to delineate how to separate failures in policy from failures in execution, regardless of what is meant by 'public' and 'private'. I also think the innovative contributions to industrial capabilities have been far greater from open sourced assets such as software over the last 40 years than from either military or educational sources.

--Singapore and Hong Kong started off equally dirt poor. [Alwn Young] Both are Chinese. Singapore had an industrial policy, financed by a high forced savings rate. Per capita gdp in 1997, when Hong Kong became ruled by the PR China, was above Singapore's, to say nothing of consumption per capita.

--MITI, in its heyday, was shooting about 50-50 [forgot the reference]. It's goodbye was a technically well functioning analogue HDTV. Economic value = zero.

-- At best, industrial policy is defensible for backward countries. It's worse than useless for countries at the technological frontier. Will get taken over by the interest groups.

--It is already perfectly legal to defend oneself against subsidized imports with an equivalent tariff, called a countervailing duty.

Will get taken over by the interest groups.

In this country, for sure. Alice Amsden made the argument that a concatenation of circumstances in South Korea allowed improved performance through planning and mercantilist measures, but unless I misunderstood her thesis, the model wasn't for export.

Correct: Authoritarians, threatened from without, and far behind, like S. Korea, have a chance of pulling this off. The US, western Europe, and now Japan, have none.

[I would only add that S. Korea's industrial policy is largely misunderstood. Except for a relatively short phase, it can be boiled down to "free trade for exporters". But that, too, takes self discipline.]

"The spinoffs of this spending famously include..." the other side of the ledger are $2-4 Tn (but who's counting) Afghanistan, Iraq wars and continued sunk costs, MIC and NatSec, omni-fear lobbying, militarized police departments, dumber and boring (patriotic!) MSM to ensure embedded access.

Funny how the government gets (takes) credit for innovations like the internet that was not designed or planned by the government.

The innovation was using package switching instead of standard connection practice of the phone system to connect a bunch of supercomputers. Computer data didn't need direct connections like phone service but high data rates in short pulses. It was invented to solve a specific problem not create the internet as we know it today.

If it was designed with real vision, it would be a lot more secure with better traceability to prevent hacks. No great vision, but just a lot of smart people having a lot of fun.

'Packet' switching.


Heh heh

No. No industrial policy is needed besides unilateral free trade, IP protection, and clear simple pollution laws.

"What kind of industrial policy does America need?"

The US has always done well with a broad industrial policy that supports business without trying to have Politicians pick specific goals.

Elements of US Federal industrial policy:
Broad based public education system
Targeted University system (with split emphasis on publicly funded research and excellence in education)
Agricultural system (with price supports for farm products during down turns)
Military-Industrial complex (significant amount of applied technology research)
Significant tax incentives for research and capital spending
Lower corporate taxes (recent development and to some extent undermines the research and capex tax incentives)
Long term Federal push for "free" trade (granted this has been a corrupt process that's produced quite of bit of managed trade, but still the net has been lower average tariffs and higher levels of international trade)
Importation of low skilled labor (resulting in a large supply and lower wages)
Importation of high skilled labor (much smaller but explicit with H1B visas and implicit with Universities geared to educate a large amount of foreign students)
Export-Import Bank (small but pretty explicit)
Health care system designed around work force and incentivizing work

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