Is the Profit or the Loss an Insufficient Signal?

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Profit is not a really good measure of whether a business deserves to be sustained or not. So you need some, you might want to bring in a different measure, say the critics. The usual set of market failures are not at the core of the argument for industrial policy. And we need government action to put a thumb on the scale one way or the other.

Economist and political scientist Michael Munger of Duke University talks about industrial policy with EconTalk host Russ Roberts. Munger argues that in a democracy, the default outcome for industrial policy is crony capitalism--attempts to improve on that outcome either by appointing experts or eliminating cronyism are going to fail for political reasons. The conversation concludes with a discussion of the reliability of Munger's claim and what options are left for dissatisfied reformers.