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Innovation and Industrial Policies
Innovation between Risk and Reward Set coordinated by
Bernard Guilhon and Sandra Montchaud
Joël-Thomas Ravix Marc Deschamps
First published 2019 in Great Britain and the United States by ISTE Ltd and John Wiley & Sons, Inc.
Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licenses issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned address:
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John Wiley & Sons, Inc.
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© ISTE Ltd 2019
The rights of Joël-Thomas Ravix and Marc Deschamps to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
Library of Congress Control Number: 2019946976
British Library Cataloguing-in-Publication Data
A CIP record for this book is available from the British Library
ISBN 978-1-78630-072-0
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Acknowledgements
During the preparation and writing of this book, we had the opportunity to interact with many colleagues and professionals from the public and private sectors. We would naturally like to thank them for their time.
The authors also thank their respective laboratories, GREDEG and CRESE, as well as BETA and OFCE-Sciences Po. We would like to express our warmest thanks more directly to those who have agreed to review the entire book, or parts of it, namely: Sylvain Béal (University of Bourgogne –Franche-Comté and CRESE), Julie Beugnot (University of Bourgogne –Franche-Comté and CRESE), Patrice Bougette (University of Nice Sophia Antipolis and GREDEG), Nicolas Mouchnino (SFIC), Julien Pillot (Inseec U, University of Paris-Saclay and RITM), Olivier Sautel (Deloitte Economic Advisory), and Céline Savard-Chambard (University of Lorraine – EEIGM). For this English version of our book, we are indebted to Jenny Helstroffer (University of Lorraine and BETA) and Alexandra Jordan.
Of course, none of them, nor their institutions, can be held responsible for the opinions we express or for any errors or shortcomings that may remain.
Introduction
Over the past 20 years, expanding globalization and the development of information and communication technologies have contributed significantly to the idea that innovation is now the key to business’ competitiveness and the growth process of contemporary economies. However, at the same time, constraints created by the internationalization of value chains have gradually transformed controversy over international company relocations into a more alarming debate on the de-industrialization of the French economy (Fontagné and Lorenzi 2005). In addition to the problem of whether such a phenomenon of “industrial disengagement” is “a reality or a statistical chimera” (Cohen and Buigues 2014, p. 17), this debate was exacerbated by the 2008 crisis, the effects of which, first financial and then economic, largely contributed to discredit the idea that markets are still efficient, to the extent that any public intervention in the economic field could only be useless at best, at worst dangerous. Indeed, many economists consider that the crisis has largely demonstrated that markets are not necessarily efficient and the literature makes the argument that without strong government intervention in the industrial sector, market economies could collapse (Stiglitz et al. 2013).
This convergence of views leads not only to justifying the introduction of incentives for innovation, and therefore a genuine innovation policy, but above all to call for a return to industrial policy. It thus confirms ex post a relatively long-held intuition which, about 30 years ago, made some economists say of a previous crisis:
Science and technology policies have taken over or are taking over from more traditional industrial policies. Faced with the impasses
of the crisis, solutions are sought through technology and innovation (Bellon and De Bandt 1991, p. 839).
Once again, the question arises as to whether innovation policy (a modern version of science and technology policies) has now become an essential component of industrial policy or whether it fully replaces it since, as the Commission nationale d’évaluation des politiques d’innovation (CNEPI) states in its 2016 report, “the very idea of innovation policy is in fact relatively recent and results from borrowing from both science and technology policy and industrial policy” (CNEPI 2016, p. 12).
In recent years, the concepts of innovation and industrial policy have changed considerably, probably because of the major changes that have affected the world economy, but especially under the influence of new analyses of the determinants of economic growth. In addition to the questions concerning the links between innovation policy and industrial policy, there are now also questions about the new justifications and new methods of public intervention, induced by these theoretical advances, which raise new questions about the procedures for evaluating these policies.
The purpose of this book is to propose some answers to all these questions. More precisely, it is a question of clarifying not only the theoretical foundations of each of these policies, but also the analytical problems posed by their articulation and evolution. However, before addressing these questions, which will be the subject of future chapters, it is useful, as an introduction, to begin by going back to the historical evolution of the meaning of the words “innovation” and “industry”.
It is indeed possible to note with Benoît Godin (2017) that, contrary to its current meaning and until the 18th Century, the term innovation had a pejorative and fatal connotation. In particular, this observation becomes clear if we consult Antoine Furetière’s Dictionnaire universel (1690), which defines the verb “innovate” as the act of “changing something already established to replace it with a new one” and an “innovation” as the “change of a custom, of something long-established”. This idea of change is perceived negatively because it is mainly associated with the political domain which, at that time, was entirely dominated by the unrest caused by religious wars. That is why Furetière notes: “In good politics, all innovations are dangerous. Innovations in religion lead to schisms, civil wars”.
Such a conception is still present in the Encyclopédie of D’Alembert and Diderot where the innovation article, written by Louis de Jaucourt, refers to the idea of “novelty, or important change that is made in the political government of a State, against the use and rules of its constitution. These kinds of innovations are always deformities in the political order” (Jaucourt 1766b, p. 755).
In this almost unanimous condemnation, Sir Francis Bacon is in a way an exception, since he was undoubtedly the first to introduce a shift in the 18th Century to relativize the negative and polemical use of the word “innovation”. Indeed, he devotes one of his Essays or Consels, Civil and Moral (1625) to the question of “Innovations”, in which he states that “all this is true if time stood still; which contrariwise moveth so round that a forward retention of custom is as turbulent a thing as an innovation” (Bacon 1625, p. 433). Bacon also advises that we should, like nature, favor slow and gradual innovations over sudden and radical ones:
Men in their innovations would follow the example of time itself, which indeed innovateth greatly, but quietly, and by degrees scarce to be perceived. For otherwise, whatsoever is new is unlooked for; and ever it mends some, and pairs others; and he that is holpen takes it for a fortune, and thanks the time; and he that is hurt, for a wrong, and imputeth it to the author (ibid.).
It is undoubtedly also because of Bacon’s influence that the idea of progress emerged in the 18th Century, particularly under the action of Turgot and even more so under Condorcet, and that the word innovation began to take on a more positive meaning. Thus, referring to the criticisms addressed to Turgot by his detractors, Condorcet writes:
We have not understood in these reproaches the one of loving innovation, because this reproach can only be made in good faith by men left to the most shameful ignorance. One only has to look around to see that all peoples have an urgent interest in seeing great innovations happen. The taste for new things is, like the spirit of the system, one of those vague accusations that fools and rascals never tire of repeating against men who have spirit or virtues. Why innovate, then? said a general farmer
naively in 1775; are we not well? (Condorcet 1786, p. 156, note 1).
More generally, Condorcet often uses the word “innovation” in the various praises he wrote as Secretary of the Academy of Sciences from 1773 and as Secretary of the French Academy from 1782. Thus, with regard to D’Alembert, he indicates that he had attracted the criticism of “those men in whose eyes the truth seems only a dangerous innovation” (Condorcet 1847d, p. 69). Similarly, he notes that Jussieu had shown the usefulness of a thorough knowledge of botany because it was “a reliable guide in the knowledge of remedies, and it could lead to useful innovations in the art of healing” (Condorcet 1779, p. 245). But it is in his praise of Duhamel du Monceau that we find both the old and the new meaning of the word innovation:
The art of farming is like manufacturing: all arts that are exercised only to a level barely more than men need. There is no innovation without advances, without risks (Condorcet 1847b, pp. 616–617).
About the difficulties encountered by Jacques Vaucanson, Condorcet writes in his eulogy: “The obstacles of every kind that stand in the way of any useful innovation derive their main strength from the prejudices of those to whom we want to do good” (Condorcet 1847c, p. 654). It is because of the introduction of this modern understanding of the idea of innovation that Condorcet is occasionally presented as the creator of the theory of innovation (Billoret 1989).
However, the rehabilitation of the term “innovation” is only really achieved by Jeremy Bentham who, in his Traités des sophismes politiques1 (1816) edited by Etienne Dumont, denounces nostalgia as a sophism and denounces using nostalgia “to fight useful innovations or to defend vicious institutions” (Bentham 1816, p. 2). In particular, it devotes its entire fourth chapter to refuting “The fear of innovation”, showing its absurdity:
1 NOTE: Traités des sophismes politiques (Treaties of Political Sophisms) is a book of extracts taken from many works by Bentham, translated into French. No English language version of this collection exists.
If the reason to condemn a measure is its novelty, that same reason should have condemned everything that exists. To say that something is bad because it is new is to say that all things are bad, at least in their beginning; because everything that is old has been new: everything that is establishment has been innovation. By adopting this so-called argument, you are in contradiction with yourself a thousand times a day (ibid., pp. 43–44).
Yet, it should be stressed that it took, for the concept of innovation, more than a century to really establish itself in the thinking and vocabulary of French economists. The term is in fact absent from Charles Coquelin and Gilbert-Urbain Guillaumin’s Dictionnaire de l’économie politique (1852); it is not mentioned either in the second edition of the Nouveau Dictionnaire d’économie politique by Léon Say and Joseph Chailley (1900). It was only about ten years later that this notion was really introduced into economic analysis by Joseph Schumpeter with his Theory of Economic Development, the first German edition of which dates back to 1911. But the economic use of the word innovation only began to spread well after 1934, the date the English translation of Schumpeter’s book was published. As Dominique Guellec (2009) points out, it was not until the 1960s that the first work on innovation began to develop under the leadership of Richard Nelson (1959), Kenneth Arrow (1962) and many others (NBER 1962).
The semantics of the word “industry” is marked by a different evolution even though, initially, it is not completely unrelated to the word “innovation”. Indeed, questioning the history of this word, Henri Sée (1925) pointed out that it retained its traditional meaning of “invention” or “knowhow” until the end of the 18th Century and that it would therefore be necessary to wait until the publication in 1819 of Jean-Antoine Chaptal’s book, entitled De l'industrie française, to find the word used in its modern sense. However, this point of view was contested shortly afterwards by Henri Hauser (1925) who defended the idea that the new meaning of the term “industry” could already be found in earlier texts, as is the case with Jean-Marie Roland de La Platière in his “Discours préliminaire” of the volume of the Encyclopédie méthodique. Manufactures, arts et métiers (1790). He then reinforced his argument in the last chapter of his book, Les débuts du capitalisme (1927), based on work by Turgot, Lemercier de La Rivière and Baudeau. However, he still failed to convince Henri Sée (1928, p. 326), who considers some of the examples selected to be questionable.
A few years later, Paul Harsin summarized this debate by pointing out that in the 18th Century, the word “industry” could in fact have three different meanings. The first is “the classical meaning of invention, of knowhow” (Harsin 1930, p. 235). For him, this is “the common meaning, if not in the spoken language, then at least in written language” (ibid.). In its second sense, “the word is identified with trade, and opposed to agriculture” (ibid., p. 236). Harsin offers several illustrations citing administrative texts, but also writing by Boisguilbert and Vauban. Finally, the third meaning is the “absolutely modern sense of industrial enterprise” (ibid., p. 237). Although these three meanings of the word “industry” coexisted at that time, Harsin concludes:
It seems that it was popular usage that, as early as the 18th Century, qualified the word to designate a special branch of economic production: that of the processing of raw materials (ibid., p. 242).
However, the polysemy of the word “industry”, identified by Paul Harsin and later taken up by Michael James (1977), remains incomplete. It neglects two other meanings, common in the 18th Century, that link its origin to the Latin industria. For example, the Abrégé du dictionnaire de Trévoux defines the word industry in the following terms:
Dexterity, invention; ability to make something, a purpose or a job succeed. It is sometimes considered simply as art, as work. People who survive by their own eloquence, such as scoundrels, flatterers, scroungers, opinion leaders, etc., are called Knights of Industry in a negative sense (Berthelin 1762, p. 568).
The first of these two meanings is that of “work”, but this more precisely designates the activity leading to the realization of something. Indeed, Say and Chailley’s Nouveau dictionnaire d’économie politique (1900, II, p. 66) discards the error of taking the word “industry” as a simple synonym for the word “work”, because these two terms have clearly distinct meanings: “Work refers to the pure and simple exercise of man’s physical forces or intellectual faculties”. However, work alone is not enough for production, capital and natural agents must also be involved; and “this set of combinations can only be correctly referred to by the word industry; the term work would not fit it” (ibid., pp. 66–67). Joseph Schumpeter points out that this is an old-fashioned conception since “the scholastics doctors [...]
distinguished the businessman’s industria from the workman’s labor” (1954, pp. 554–555). It is in this sense that the word is still used by Jean-Baptiste Say when he speaks of “this intelligent work that is referred to as industry” (Say 1840, I, p. 24); or again, when he indicates that it is necessary “that industrious man possess products that already exist, without which his industry, however skilled it may be assumed, would remain in inaction” (Say 1841, p. 68). This distinction between industria and labor is important for two reasons. On the one hand, it makes it possible to differentiate the activity of the entrepreneur from the work of the simple employee, as Adam Smith indicates in particular:
The profits of stock, it may perhaps be thought are only a different name for the wages of a particular sort of labor, the labor of inspection and direction. They are, however, altogether different, are regulated by quite different principles, and bear no proportion to the quantity, the hardship, or the ingenuity of this supposed labor of inspection and direction. They are regulated altogether by the value of the stock employed, and are greater or smaller in proportion to the extent of this stock (Smith 1976, I, p. 66).
On the other hand, in this sense of the word, “industry” is also associated with the idea of skill, ingenuity and even cunning. Also, it is not surprising that Richard Cantillon includes “thieves” in what he calls “entrepreneurs who do their own work without any funding” (Cantillon 1952, pp. 31–32).
Such a conception then logically leads us to the second meaning of the word “industry”, which is mentioned in the Abrégé du dictionnaire de Trévoux. The latter refers to a forgotten meaning of the term (Fontaine 1992) since it contains, as was already the case for the word “innovation”, a pejorative meaning related to the idea that know-how, dexterity or skill can be associated with dishonest or unfair actions. The idea that industry would be harmful is partially present in the physiocratic thesis of the sterility of industry and commerce. However, although physiocrats do not really condemn these two activities, they nonetheless condemn the dangers they create because they contribute to the development of luxury at the expense of agriculture. While the condemnation is primarily based on economic logic, that of net proceeds, it nevertheless has moral repercussions. Also, more than industry, it is the behavior of the industrialist that is perceived in a negative way.
In this regard, Philippe Fontaine (1992, p. 24) shows that it was undoubtedly the development of industrialism at the beginning of the 19th Century and the celebration of industrial virtues that precipitated the elimination of the pejorative sense of “industry”. To illustrate his point, he quotes Charles Dunoyer who, in his 1825 book, L'industrie et la morale considérées dans leurs rapports avec la liberté, writes:
Let us be careful not to confuse those who work with people who intrigue, and industrious men, with the knights of industry. If they need more than one vice in order to prosper, those who succeed cannot do without the moral qualities that embody a good man (Dunoyer 1825, p. 105).
The links that unite the semantic evolution of the words “innovation” and “industry” appear even more clearly if we refer to the entry for “industry” in the Encyclopédie. Written by Louis de Jaucourt, this article begins by specifying that:
industry, taken in a metaphysical sense, is [...] a faculty of the soul, whose object rolls over the mechanical productions and operations, which are the fruit of invention, and not simply of imitation, skill and routine, as in the ordinary works of artisans (Jaucourt 1766a, p. 694).
Jaucourt adds that industry is the daughter of invention, because: the quiet and extensive imagination, easy penetration and quick design, give industry. Those who are very industrious do not always have a sure taste, nor a high level of genius. I say more, ordinary geniuses, geniuses who are not very good at researching, discovering, grasping abstract ideas, can have a lot of industry (ibid.).
Jaucourt then discusses the areas of political law and trade in which: this word means two things; either simple hand work, or inventions of the mind in useful machines, in relation to arts and crafts; industry sometimes contains one or the other of these two things, and often brings them both together (ibid.).
By associating labor and industria, work and invention, to make them two sides of the same coin, that of industry, Louis de Jaucourt takes up the cause of economic development and refuses to “object to the utility of industrial inventions” (ibid., p. 695).
Despite its brevity, this detour through the history of ideas and economic thought shows that trying to explain the links between industrial policy and innovation policy seems to prevent innovation and industry from being separated, which means that the movement, dynamics or even the evolution of economic phenomena must be at the heart of our approach. This idea will serve as a guiding principle for this book since we will deal with the current foundations of innovation and industrial policy, placing them in their historical context. Above all, we will highlight the decisive influence of the evolution of the economic concepts and theories that serve as their justification. In this perspective, the main objective is to show that, in recent years, it is in fact competition policy that has gradually established itself as a unified framework for defining and constraining both industrial policy and innovation policy, particularly at the European Union level. Thus, to the traditional notion of industrial policy stricto sensu, whose objective was to strengthen the competitiveness of companies and economic activities for reasons of national independence, technological autonomy, bankruptcy of private initiative, decline of traditional activities, or even territorial balance, has in fact been replaced by an industrial policy aimed mainly at correcting market failures linked to information imperfections, the existence of externalities and public goods, or the presence of increasing returns to scale, both in research and innovation and in industrial matters. Within competition policy, innovation policy and industrial policy are presented as two particular and most often independent sub-domains. The reasons for this relative autonomy and its implications will be presented and analyzed in detail in the first two chapters.
The third and final chapter will be devoted to an analysis of the coherence problems, both theoretical and practical, arising from the definition and implementation of such a concept, which consists of submitting innovation and industrial policy to the criteria of competition policy. The aim will be to understand how to reconcile and articulate a horizontal logic reflecting the need for a sustained effort in favor of innovation and research, and a vertical logic of greater support for industry, both compatible and consistent with the establishment of a competitive environment, favoring the shift from a topdown logic to a bottom-up logic in order to ensure a real change in the way
public action is governed. In other words, the new question that emerges is how the recent orientations and options taken by innovation policy are likely to really promote the development of industry, without contradicting the established principles of competition policy. In this perspective, the three areas we propose to develop in this book are: industrial policy and competition (Chapter 1), competition and innovation policy (Chapter 2) and reindustrialization through innovation (Chapter 3).
1
Industrial Policy and Competition
Economic historians generally agree that about nine thousand years ago, the world underwent a first mutation with the beginning of the first agricultural revolution characterized by the domestication of certain animals, which thus allowed mankind to transition from hunter-gatherers into farmers. From the second half of the 18th Century onwards, three industrial revolutions followed one another. The first, generally dated between 1760 and 1840, marked the era of mechanized production with, in particular, the invention of the weaving machine, the steam engine and the construction of the railways. The Second Industrial Revolution, between the end of the 19th Century and the Second World War, allowed mass production thanks to the control of electricity as well as coal and the creation of assembly lines. Finally, from the 1960s onwards, a third industrial revolution took place with electronics and information technology.
It is these developments that make it possible to live better in today’s world than at any other time in history. Today, people are doing better, are richer and live longer, as Angus Deaton (2013) points out. In a striking summary, he notes that “today in sub-Saharan Africa, children are more likely to survive to age 5 than were English children born in 1918” (Deaton 2013, p. 8). The historian David Landes (1988, p. 5) had already marked this progress by indicating the following trait: “The Englishman of 1750 was closer in material things to Caesar’s legionnaires than to his own greatgrandchildren”. As an illustration, the correlation between the changing world population and scientific discoveries can be seen in Robert Fogel’s (1999) graph, which is taken up by the World Bank (2008), as shown in Figure 1.1.
Figure 1.1. World population growth and some major events in the history of technology between -9000 BCE and today (source: World Bank 2008, p. 108)
Yet, despite this prodigious change, the world today faces two major, interrelated facts that began in the 1970s in industrialized countries: the increase in inequality within each country (Bourguignon 2012; Deaton 2016) and the deceleration of economic growth. This second situation had not yet arisen 10 years ago thanks to developments in emerging countries such as BRIC (Brazil-Russia-India-China), which were driving global growth, even though it was generally agreed that they were only catching up with more industrialized countries. However, since the Great Recession, the world economy has grown at a rate of about 3 to 3.5% per year, which is below the post-Second World War average.
In all industrialized countries, the problem of economic growth refers to the question of industry. Once the “engine” of growth, these countries are now experiencing deindustrialization; that is, simultaneously a decline in industry’s share of value-added creation, a decline in the active population in
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with plant closures, relocation, job losses, brownfields and the decline of their country.
By consensus, economists agree that this evolution has its origin in the conjunction of three main explanatory factors:
– rapid progress in industrial sector productivity;
– the outsourcing by industrial companies of certain activities to companies in the service sector (the so-called “servitization” phenomenon);
– the loss of industrial activity to other territories due to international competition.
According to Lila Demmou (2010), the first two factors contributed 30% and 25% respectively to the destruction of industrial jobs over the period 1980–2007, with foreign competition accounting for nearly 45%.
While everyone now agrees on the general observation that France is deindustrialized, as evidenced in particular by the reports of Jean-Louis Beffa or Louis Gallois (Beffa 2004; Gallois 2012), the same cannot be said for the assessment of this development. Two blocks face each other, as Cohen and Buigues (2014) point out.
On the one hand, some consider this to be a development similar to that of agriculture. At the beginning of the 19th Century, two thirds of production came from agriculture, whereas it accounted for only 2.16% of value added in 2016. However, no one today believes that it is necessary to launch an agricultural reconquest and return to the place it previously occupied in the French economy. A France composed of fewer but better-equipped farmers corresponds, as Agnès Bénassy-Quéré (2012) points out, to a higher per capita income for farmers and cheaper food. Farmers of the past went to the factory and contributed to the development of a mass manufacturing industry leading to technological innovation and lower prices. From this perspective, deindustrialization would be the product of a “law of economic evolution by which, the richer a country gets, the fewer industrial products and the more services it consumes, the more it abandons routine tasks to keep the sophisticated tasks of creation, design, development, but also marketing and commercialization”, according to the presentation of this argument by Cohen and Buigues (Cohen and Buigues 2014, p. 38).
In support of this position, we can find in particular the analysis of Jagdish Bhagwati (2007), who advocates an agnosticism in terms of specialization; the analysis by Patrick Artus and Marie-Paule Virard (2008) for whom the weight of industry will inevitably decrease in developed countries as a result of capital migration to emerging countries that have lower production costs, increased domestic demand and significant productivity thanks to technological catch-up; or Augustin Landier and David Thesmar’s (2013) analysis, according to which the higher a country’s standard of living is, the less weight industry has.
On the other hand, other authors consider that deindustrialization is a serious and worrying phenomenon because it could not only undermine the potential for innovation, but also lead to a permanent external deficit caused by the difference left over from a deficit in the balance of goods for which the exports of services cannot compensate. This analysis, to which Cohen and Buigues (2014) subscribe, is based on the fact that industry is at the heart of the innovation and R&D process. They cite in particular the analysis developed by Suzanne Berger (2013), according to which deindustrialization can lead, beyond a certain threshold, to the dismantling of a productive ecosystem. Indeed, when it is no longer possible to travel back and forth between scientific laboratories and factories, incremental innovation is prevented. However, if such a spiral starts, France will be marginalized in terms of technological innovation, which will also have an impact on increasing productivity in other sectors, since industry remains the main source of productivity for both agriculture and services.
In view of these elements, Cohen and Buigues (2014, p. 66) clearly oppose the fabless fab strategy (i.e. an industry without a factory) and stress that “there is no autonomous development of high value-added services against a background of complete deindustrialization”. In the same vein, Bénassy-Quéré (2012) points out that deindustrialization raises three problems:
– services are on average traded less between countries than industrial or agricultural goods;
– productivity growth in services is slower than in industry; – services may not have the same capacity to drive growth as industry or agriculture.
In the face of this disagreement over the seriousness and consequences of deindustrialization for the French economy, questions relating to the need, objectives and modalities of an industrial policy are also clearly the subject of heated debate. However, in many respects, it can be considered that Jean Tirole’s (2016) treatment of these issues provides a synthesis of the current dominant view among economists.
Three points deserve to be highlighted at this level. First, Tirole chooses to address the issue of industrial policy in a chapter entitled “Competition and Industrial Policy”, thus revealing both a link between the latter and a hierarchy. Second, after stressing the virtues of competition and competition policy, he asks whether competition is always a good thing, and writes clearly: “The answer to this question is unequivocally ‘no’” (ibid., p. 477). Third, he points out that “anyone who asks about ‘industrial policy’ must first think about the nature of ‘market failure’; otherwise, one wonders why the State intervenes. But simply analyzing a market failure is not enough” (ibid., p. 481). Then he adds:
There is also evidence that competitively neutral industrial policies appear to be more favorable to growth than other industrial policies (ibid., p. 481).
Then comes the author’s final position on industrial policy, which is set out on the basis of an observation and then provides “guidelines”. The observation, taken from Dani Rodrik, is as follows: “Whether or not we like industrial policy, governments will continue to make it and the subject will not disappear overnight” (ibid., p. 488). In practical terms, Tirole then states that the aim is to “make these initiatives as successful as possible, even if we know that our knowledge in this area will continue to evolve in the future” (ibid., p. 488), and proposes to adopt seven guidelines on this subject:
1) identify the reason for the market failure and respond;
2) use independent and qualified expertise to select projects and recipients of public funds (protected ex ante evaluation of policy intervention);
3) be attentive to supply and not only to demand;
4) adopt a neutral industrial policy in terms of competition;
5) evaluate ex post and disseminate the results of the evaluations;
