The Problem of Political Influence Can Be Solved With Appropriate Institutional Design

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The author argues that a committee of experts would be better than markets at setting industrial policy. But he says it is impossible to implement such an idea in majoritarian democracy. He proposes three alternative states: laissez-faire investment in markets with regulatory agencies like the EPA or FTC. And then we get big corporations and labor who benefit from concentrated corporate and labor interests, he writes.

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.