RATIONALE FOR INDUSTRIAL POLICY


Economies of scale - minimum scale of operation whose expansion accomodates increases in investment, demand, etc.

Informational asymmetries - lack of information to make an effective use of resources.

Public goods - nonexcludable goods necessary for viability of investment (e.g., infrastructure, clean air, national defense, etc.).

Externalities - provision of public and/or private goods (targeted assistance) designed to promote "secondary" or "linkage" effects on the economy.