Industrial Policy is a red-hot topic once again with many policymakers and pundits of different ideological leanings lining up to support ambitious new state planning for various sectors — especially 5G, artificial intelligence, and semiconductors. A remarkably bipartisan array of people and organizations are advocating for government to flex its muscle and begin directing more spending and decision-making in various technological areas. They all suggest some sort of big plan is needed, and it is not uncommon for these industrial policy advocates to suggest that hundreds of billions will need to be spent in pursuit of those plans.
Others disagree, however, and I’ll be using this post to catalog some of their concerns on an ongoing basis. Some of the criticisms listed here are portions of longer essays, many of which highlight other types of steps that governments can take to spur innovative activities. Industrial policy is an amorphous term with many definitions of a broad spectrum of possible proposals. Almost everyone believes in
some form of industrial policy if you define the term broadly enough. But, as I argued in a September 2020 essay “On Defining ‘Industrial Policy‘,” I believe it is important to narrow the focus of the term such that we can continue to use the term in a rational way. Toward that end, I believe a proper understanding of industrial policy refers to targeted and directed efforts to plan for specific future industrial outputs and outcomes.
The collection of essays below is merely an attempt to highlight some of the general concerns about the most ambitious calls for expansive industrial policy, many of which harken back to debates I was covering in the late 1980s and early 1990s, when I first started a career in policy analysis. During that time, Japan and South Korea were the primary countries of concern cited by industrial policy advocates. Today, it is China’s growing economic standing that is fueling calls for ambitious state-led targeted investments in “strategic” sectors and technologies. To a lesser extent, grandiose European industrial policy proposals are also prompting new US counter-proposals.
All this activity is what has given rise to many of the critiques listed below. If you have suggestions for other essays I might add to this list, please feel free to pass them along. FYI: There’s no particular order here.
Yesterday’s Supreme Court decision in Citizens United v. FEC essentially stands for the proposition that free speech is free speech regardless of the speaker. The 5-4 majority for the Court ruled that “We find no basis for the proposition that, in the context of political speech, the Government may impose restrictions on certain disfavored speakers. Both history and logic lead us to this conclusion.” (at 25) Echoing its early decision in Bellotti, the Court noted that “Political speech is ‘indispensable to decisionmaking in a democracy, and this is no less true because the speech comes from a corporation rather than an individual.’” (at 33) “All speakers, including individuals and the media, use money amassed from the economic marketplace to fund their speech. The First Amendment protects the resulting speech, even if it was enabled by economic transactions with persons or entities who disagree with the speaker’s ideas.” (at 35) “There is simply no support for the view that the First Amendment, as originally understood, would permit the suppression of political speech by media corporations.” (at 37)
Somehow this has proven controversial, even radical, to some. But, as George Will correctly notes, “This was radical only because after nearly four decades of such ‘reform’ the First Amendment has come to seem radical. Which, indeed, it is. The Supreme Court on Thursday restored First Amendment protection to the core speech that it was designed to protect — political speech.” Essentially, the decision gets Congress out of the game of picking who, or what platform, deserves full First Amendment protection when it comes to uttering political speech. And there’s nothing radical about that.
Indeed, as Justice Kennedy noted for the majority, there is nothing surprising about this reasoning once you realize that almost every other type legislative or regulatory speech restriction has been struck down as a violation of the First Amendment. “The law before us is an outright ban [on political speech], backed by criminal sanctions,” Kennedy noted (at 20). “If the First Amendment has any force, it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech.” (at 33) Think about this for a second: Criminal sanctions or jail time for political speech! How in the world did we get to the point in this nation where criminalizing political speech became acceptable to our legislators? Ignoring the obvious answer—it’s all about protecting incumbents—what is really “radical” here is not that the Supreme Court setting us back on the right path, but that our legislative branch has veered so far off of it.
To my suggestion that there is a qualitative difference between law and code, Prof. Lessig says:
I’ve argued that things aren’t quite a simple as some libertarians would suggest. That there’s not just bad law. There’s bad code. That we don’t need to worry just about Mussolini. We also need to worry about DRM or the code AT&T deploys to help the government spy upon users. That public threats to liberty can be complemented by private threats to liberty. And that the libertarian must be focused on both. […]
Of course, law is law. Who could be oblivious to that? And who would need a book to explain it? But the fact that “law is law” does not imply that it has a “much greater impact in shaping markets and human behavior.” Sometimes it does — especially when that “law” is delivered by a B1 bomber. But ask the RIAA whether it is law or code that is having a “greater impact in shaping markets” for music. Or ask the makers of Second Life whether the citizens of that space find themselves more constrained by the commercial code of their geo-jurisdiction or by the fact that the software code of Second Life doesn’t permit you simply to walk away (so to speak) with another person’s scepter. Whether and when law is more effective than code is an empirical matter — something to be studied, and considered, not dismissed by banalities spruced up with italics.
Well, I beg the professor’s pardon for excessive use of italics. [I won’t ask for an apology for misspelling my last name in his piece!] Regardless, it’s obvious that we’ll just never see eye-to-eye on the crucial distinction between law and code. Again, as I stated in my essay: “With code, escape is possible. Law, by contrast, tends to lock in and limit; spontaneous evolution is supplanted by the stagnation of top-down, one-size-fits-all regulatory schemes.”
Lessig largely dismisses much of this with that last line above, suggesting that we just need to keep studying the matter to determine the right mix of what works best. To be clear, while I’m all for studying the impact of law vs. code as “an empirical matter,” that in turn begs the question of how we define effectiveness or success. I suspect that the professor and I would have a “values clash” over some rather important first principles in that regard. This is, of course, a conflict of visions that we see throughout the history of philosophy; a conflict between those who put the individual and the individual’s rights at the core of any ethical political system versus those who would place the rights of “the community,” “the public” or some other amorphous grouping(s) at the center of everything. It’s a classic libertarian vs. communitarian / collectivist debate.
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The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.