Réka Juhász is a professor of economics at the University of British Columbia, and she studies what's known as industrial policy. That's the general term for whenever the government tries to promote specific sectors of the economy. The idea is that they might be able to supercharge growth by giving money to certain kinds of businesses, or by putting up trade barriers to protect certain industries. Economists have long been against it. Industrial policy has been called a "taboo" subject, and "one of the most toxic phrases" in economics. The mainstream view has been that industrial policy is inefficient, even harmful. For a long time, politicians largely accepted that view. But in the past several years, countries have started to embrace industrial policy—most notably in the United States. Under President Biden, the U.S. is set to spend hundreds of billions of dollars on industrial policy, to fund things like microchip manufacturing and clean energy projects. It's one of the most ambitious tests of industrial policy in U.S. history. And the billion dollar question is ... will it work? On today's show, Réka takes us on a fun, nerdy journey to explain the theory behind industrial policy, why it's so controversial, and where President Biden's big experiment might be headed. Help support Planet Money and get bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney. Learn more about sponsor message choices: podcastchoices.com/adchoices NPR Privacy Policy
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There are certain ideas in economics that have a scandalous reputation, like when it comes to how to run a countrys economy.
There is one thing that economists have said governments should never, ever, ever do.
It was considered a kind of ludicrous, crazy idea.
Thats Rekha Juhaus.
Shes a professor of economics at the University of British Columbia.
And this ludicrous, crazy idea shes talking about, she studies, it is called industrial policy.
That is the general term for whenever the government tries to promote specific sectors of the economy.
The idea is maybe they can supercharge economic growth by giving money to certain kinds of businesses or by putting up trade barriers to protect certain industries.
Now, economists have long argued against this.
Was it fair to say that economists hated industrial policy?
Yes, I think it is fair to say, yeah.
Economists for the World bank have said that few phrases elicit such strong reactions as industrial policy.
Its been called a taboo subject, one of the most toxic phrases in economics.
Some have even said that to economists, its a road to perdition.
Industrial policy is so controversial, its the policy that shall not be named.
The mainstream view in economics has been that industrial policy is inefficient, even harmful, that governments shouldnt try to mess with what the economy produces because thatll just waste money or prop up bad businesses.
And for decades, ever since the free market revolution of the 1980s, politicians largely accepted that view.
I mean, they would still slip in a tariff here or a subsidy there, but by and large, there was this almost global industrial policy bad.
But in, like, the past five, seven years or so, a lot of countries have really started to go rogue.