The Revival of Industrial Policy: Should Governments Pick Winners? - EP243

Economics Explored

This episode explores the resurgence of industrial policy in the US and Australia. We critically analyze whether government interventions can truly shape industries or if they are doomed to repeat past mistakes, such as those experienced during the 1970s and with the Concorde project. The episode includes clips featuring Saxon Davidson from the Institute of Public Affairs and Eamonn Butler from the Adam Smith Institute.

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What’s covered in EP243

• Introduction to Industrial policy and its potential consequences. (0:00)
• Budget, inflation, and economic policies in Australia. (8:34)
• Climate change policy and government incentives for renewable energy. (13:59)
• Australian economy, productivity, and government intervention. (19:44)
• UK's economic struggles in the 1970s, including strikes. (29:41)
• The failure of the Concorde supersonic jet project. (35:59)
• Failures of activist industrial policy - e.g. in Australia's car industry. (49:16)

Takeaways

1. Revival of Industrial Policy: Governments in the US and Australia are reintroducing industrial policies to shape their economies, sparking debate among economists.
2. Historical Lessons: The economic turmoil of the 1970s and failures such as the Concorde serve as cautionary tales against heavy government intervention in industry.
3. Climate Policy Challenges: The push for renewable energy in Australia raises concerns about the rapid transition and its impact on the economy and energy grid reliability.
4. Productivity Focus: Effective economic policies should enhance productivity through structural reforms rather than picking winners.
5. Government's Role: While there is a place for government to address market failures, extensive intervention often leads to inefficiencies and unintended consequences.

Links relevant to the conversation

Australian Taxpayers’ Alliance Budget Chat:

https://www.youtube.com/live/MYX35Lk_ZYA?si=0kJzBt47Yh_5sUnS

Gene’s CIS issues analysis paper on the Australian budget, co-authored with Robert Carling:

https://www.cis.org.au/publication/budget-fails-important-policy-tests/

Episode with Eamonn Butler on Thatcher:

https://economics-explained.simplecast.com/episodes/adam-smith-and-margaret-thatcher-with-dr-eamonn-butler-1oXNvQg_

Episode on Concorde:

https://economicsexplored.com/2022/03/20/concordes-economic-lessons-a-closer-look-ep131/

Previous episodes on Australia’s energy transition:

https://economicsexplored.com/2023/08/24/australias-net-zero-transition-successes-challenges-w-andrew-murdoch-arche-energy-ep202/

https://economicsexplored.com/2022/12/19/aussie-energy-crisis-net-zero-transition-w-josh-stabler-energy-edge-ep170/

Australia’s Hydrogen Production and Critical Minerals Tax Incentives:

https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/hydrogen-production-and-critical-minerals-tax-incentives

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Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au.

Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.