Is There a Difference Between Government and the Profit and Loss System?

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Mike Mongrony: The usual argument that people on our side of the fence make is that sure capitalism is flawed, but before you can invoke government as an alternative, you have to remember that government is flawed too. He says it's true there could be some problems with the incentives facing the political actors. So we just need to give them a different set of incentives, he says. But in theory, governments could learn, react, change and so on, Contalk argues.

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.