Is industrial policy making a comeback? Congressional legislation and industry representatives have encouraged the US government to put federal funds toward shoring up the domestic semiconductor industry to compete with China. Europe likewise appears poised to spend large sums of government money on its chip industry as part of a reaction to the global chip shortage.

While free-market advocates who previously warned against heavy government spending seem to be on board, there are others who say the market is already on a corrective path. Is a national investment in semiconductor chips the right answer to today’s chip shortage? Are the security risks at hand pressing enough to prioritize a long-term investment in chip production on US soil?

On this episode of “Explain to Shane,” Shane and AEI Senior Fellow Claude Barfield co-interview Karl Wennberg, an innovation policy researcher and professor at the Stockholm School of Economics, on the pitfalls of industrial policy — even in vulnerable sectors. The three of them also discuss Karl’s upcoming book, “Questioning the Entrepreneurial State: Status-quo, Pitfalls, and the Need for Credible Innovation Policy” (Springer, 2022).