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EconTalk
Why Industrial Policy Is (Almost) Always a Bad Idea (with Scott Sumner)
Dec 9, 2024
Scott Sumner, a prominent economist known for advocating nominal GDP targeting, delves into the pitfalls of industrial policy and tariffs. He argues that tariffs often harm rather than help the economy, citing historical fears, like those concerning Japan's rise, which were overblown. Sumner critiques the simplistic notions linking trade to job losses, emphasizes the importance of innovation over manufacturing, and warns against geopolitical anxieties regarding China. His insights advocate for deregulation and promoting educated workforces as a balanced response to economic challenges.
01:29:13
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Quick takeaways
- Scott Sumner argues that tariffs and industrial policy often stem from a misunderstanding of economic principles, leading to harmful economic outcomes.
- The misconception that imports harm domestic industries ignores the benefits of lower prices and increased competition essential for economic welfare.
Deep dives
Understanding Industrial Policy
Industrial policy generally refers to government actions aimed at altering patterns of economic activity, often to attain specific national goals. This includes reshaping trade flows, addressing environmental issues, and tackling regional economic challenges. However, the term lacks a precise definition and can encompass a wide range of policies that aim to influence market outcomes contrary to free-market principles. For many advocates, industrial policy is a means to correct perceived market failures, but it is often criticized for not understanding fundamental economic theories.
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