Ernest Liu on Industrial Policy

Follow the link for the full summary: bcf.princeton.edu/events/erne...
On Thursday, June 20, Ernest Liu joined Markus’ Academy for a conversation on Industrial Policy. Ernest Liu is an Assistant Professor of Economics and the Class of 1936 Bicentennial Preceptor at Princeton University.
A summary in three bullets
○ Industrial policy often aims at using selective interventions to improve aggregate efficiency. But it is hard to empirically measure the effectiveness of industrial policy in aggregate. We can use network theory to measure its aggregate effects and to identify key sectors and technologies
○ The talk covers four papers that highlight different economic mechanisms that can operate within networks, with varying policy recommendations
○ (1) Upstream sectors should be targeted when market imperfections accumulate along the supply chain; (2) cross-region externalities highlight the suboptimal incentives of local planners; (3) central sectors should be targeted to leverage knowledge spillovers; (4) in the presence of coordination problems, downstream sectors should be targeted to maximize incentives along the supply chain
Timestamps:
[0:00] Markus’ introduction and poll questions
[7:31] Industrial policy and networks
[14:36] Subsidizing upstream sectors to promote development (Liu, 2019)
[44:11] Local incentives in multi-region economies (Chen et al., 2024)
[54:32] Innovation networks and R&D allocation (Lui and Ma, 2024)
[1:16:12] Coordination failures in the green transition and Conclusion (Aghion et al., 2024)

[@BobQuigley]

We fail to understand the implications of living in a world with 8 billion precious humans. In addition every year another 80 million, 2X population of Canada, join us. We continue to use governance/government models from our barbaric past. The rules of the 20th century, bloodiest in world history, continue to fail civilization. Example is industrial policies which ignore the on the ground facts. Most nations have little to no raw materials let alone an industrial base. In this time of resource depletion including the use of 100 billion barrels of oil equivalent fossil fuels energy annually. There is no Fossil Fuels Fairy refilling the holes. This foolish push to build huge industrial parks that duplicate existing plants as a way to punish other nations doubles down on greenhouse gases pollution for no significant returns other than national pride and defense industries. Currently we're adding 51 billion tons of greenhouse gases pollution annually. Trapping heat equivalent energy released by detonating 7 Hiroshima type nukes every single second for over thirty years. We're connected as never before. Science shows that we're not only related to each other, we're related to the entire biosphere. We need a new model that recognizes at first we are human!!