Monday, May 03, 2004

Industrial Policy

Industrial Policy has been post-Berlin Wall code for all sorts of government involvements in the economy. When the Japanese economy was doing well in the 1980s, socialists clung to IP, making much of the example of Japan's MITI, even though socialists had just experienced a bad decade (or century).

Much less was heard about the merits of IP when Japan's economy floundered in the 1990s. In fact, the term IP is not much used in the US anymore but, of course, its essence is all around us.

Some of our most regulated markets are land and housing in cities. Land use and land improvement is routinely thought to be the province of local (or state) governments -- which are thought to be implementing some sort of master plan. The nomenclature resonates with just enough people who put normal skepticism aside -- or who may see an opportunity for gain. This is why IP is simply the politicization of markets -- with all of the attendant problems.

Put Eminent Domain Abuse through Google and thousands of sites come up. Most depict episodes that restrict property rights, limit liberties, diminish market efficiency and raise serious equity concerns. What's not to dislike?

Can there be eminent domain without eminent domain abuse. Perhaps not. Bruce Benson has argued that holdout problems are not, by themselves, potent enough to warrant eminent domain powers. Perhaps the only way to limit eminent domain abuse is to jettison eminent domain.