A 'Good' Industrial Policy is Impossible: With an Application to AB5 and Contractors
40 Pages Posted: 3 Nov 2021 Last revised: 10 Mar 2022
Date Written: October 26, 2021
There are three categories of outcomes for industrial planning: the profit/market test, the political test, and expert-driven planning. An investigation of the history of the argument for industrial plans reveals that the chief obstacle is political failure, not market failure. For the sake of illustration, this paper argues that a "good" (ie, expert-driven top-down plan) is politically impossible, or at a minimum unsustainable, in a democracy. If (as many planner seem to believe) the politically-selected outcome is even worse than the market-selected outcome, the argument for industrial plans is called into question.
Keywords: industrial planning, market failure, public choice
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