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1 results

  • 12 - Entrepreneurship and Industrial Policy

  • from Part III - Uncertainty of Innovation and Industrial Policy
  • Weiying Zhang, Peking University, Beijing
  • Translated by Matthew Dale
  • Book:
    Re-Understanding Entrepreneurship
    Published online:
    02 May 2024
    Print publication:
    02 May 2024, pp 219-240

  • Summary

    This chapter first argues that the disagreement between advocates and opponents of industrial policy is actually a disagreement between the two different market theory paradigms. One is the “neoclassical economics paradigm” and the other is the “Mises–Hayek paradigm.” The chapter then analyzes the challenges faced by industrial policy from the perspectives of both cognitive limitation and incentive distortion. The basic conclusion is that industrial policy is destined to fail. Ignorance of entrepreneurship is the fatal weakness of industrial policy advocates. The two primary justifications for industrial policy are “externalities” and the “coordination failure” of the market. With a correct understanding of entrepreneurship, however, these two justifications are untenable. The chapter also argues that the “comparative advantage strategy” of a nation is endogenously created by entrepreneurs, not determined by so-called “endowments.”