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EconTalk · December 9, 2024 · 65m
Why Industrial Policy Is (Almost) Always a Bad Idea
Scott Sumner on why government attempts to pick economic winners almost always fail. The knowledge required to direct industrial development is dispersed across millions of actors — no central planner can aggregate it.
This summary was generated from show notes and public descriptions, not from a full transcript review. Details may contain inaccuracies.
Canon
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Sumner: industrial policy fails because governments try to control outcomes that are fundamentally uncontrollable. The Hayekian insight: the knowledge needed to direct an economy is dispersed and can't be centralized.
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Sumner: studying the biographies of failed central planners (from Soviet commissars to Japanese MITI bureaucrats) reveals a consistent pattern: initial confidence, early success, followed by catastrophic misallocation as complexity outstrips understanding.
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