The punchline: we can pursue Hamiltonian ends by Brandeisian means. Build up strategic industries, but ensure that today's winners can be challenged tomorrow. Easier said than done!
If you've read this far, I would greatly value your comments on the draft
3) Avoid cross-subsidy—limit the pick to the business line you actually want to support, not the whole conglomerate. (4) Reduce exit costs—make sure the winner can survive without ongoing govt support, so bailouts aren't baked in.
The framework has four pillars. (1) Encourage entry—keep the door open for new firms, including ones that don't exist yet. (2) Require modularity—structure deals so assets and responsibilities can be handed off to challengers later.
(The ideal of temporary monopoly has an eminent pedigree in the history of political economy. See Schumpeter, Hamilton, Unger, Aghion and Howitt.)
"Anti-entrenchment industrial policy" is my attempt to sketch a solution to the dilemma. Accept that picking winners is sometimes necessary—but attach a plan for generating competition where there initially wasn't any. Temporary monopoly, not permanent monopoly.
This is not an easy problem to solve. The industries that most need industrial policy are exactly the ones with too few domestic firms. You can't distribute a CHIPS Act grant across 50 chipmakers if only 4 can build leading-edge fabs. Sometimes (often!) you have to pick a winner.
Entrenchment has a few big costs. First, it dampens innovation. Second, it breeds dependency and bailouts. Third, it undermines resilience by relying too much on a handful of firms.
The problem that results from this is entrenchment. The picked winner gets advantages over rivals, the govt grows dependent on that firm, switching costs pile up, and before long you're throwing good money after bad. See: consolidation of defense primes.
I use "picking winners" as a description of an inevitable process, not a pejorative. When the govt subsidizes critical minerals, funds semiconductor fabs, or awards defense contracts, very few firms qualify. A policy meant to lift industries becomes a policy for lifting firms.
So many debates about whether industrial policy is good or bad. I take it as a given. The more interesting question is, if govt is going to shape markets, how do we keep those markets dynamic?
New draft! "Picking Winners: Industrial Policy and Monopoly." Govts inevitably funnel industrial policy to a handful of firms. I propose "anti-entrenchment industrial policy," a framework for picking winners without getting stuck with them.
Oil crisis is a fitting moment to share that my paper with Doni Bloomfield, The Law and Economics of Resilience, is now live: wustllawreview.org/2026/03/25/t...
I'll continue to make the case that policy resilience doesn't mean invincibility, and we shouldn't overinterpret when an otherwise effective policy succumbs to American Maosim.
bsky.app/profile/ilmi...
This is a logical fallacy. A resilient strategy is not an invincible one. IRA may fail but note it's over the shocked objections of the market. One cannot ignore the decades of tax credit extension, for example, and then cherry pick a black swan data point.
Awesome stuff in here. Turns out a lot of my favorite people are “LPE-adjacent”
I assume the next step is we start publishing our own journal
Great reporting. For more detail on the public-private electricity generation structures available under new Mexican laws, I found this helpful: www.projectfinance.law/publications...
I like a number of the people involved in this, but it's amusing to see the Tax Foundation folks (who are ideologically aligned) ripping apart the tax policy chapter (by Oren Cass) over on Twitter for a number of basic factual and conceptual errors. Cass is reminding us all the value of expertise...
Very DC, even the grocery stores getting in on abundance discourse
Excellent essay by @joeldodge07.bsky.social. "Everything bagel liberalism" might be a useful critique in theory but the examples critics have relied on (like childcare in CHIPS) are super weak. The firms got a good deal and the public got basic protections. washingtonmonthly.com/2025/04/24/i...
Yes of course, calling it cost of service was a joke meant to highlight the perhaps surprisingly tight relationship between (average, not marginal) cost and price here
Yes, LCOE includes the capital investment. It doesn't include cushion for disruptions. And indeed recent PPA prices have risen along with supply chain disruptions etc. But I think the general point about lack of market power here stands.
Remarkable graph from Berkeley Lab's annual report on solar deployment (through 2023). PPA prices have closely tracked the cost of electricity, suggesting very low profit margins for merchant generators. Tempting to call it cost of service regulation.
Too kind! Thank you!
A sign of decreased interest in ESG signaling more than a sign of green projects ending (though that may also come) - see paper on emptiness of green bond commitments papers.ssrn.com/sol3/papers....
@lingchenscholar.bsky.social chatgpt is absolutely convinced that you have published an article about the local politics and regional rivalries of China's semiconductor industry. While this seems totally hallucinatory, I'm sure many of us would be grateful for such an article!
I think individual people are acting no differently than they would have on twitter but it adds up to something different because there aren’t many conservatives around. Not sure it’s something individuals can be expected to change.