Since 2008 it is no secret that the United States has experienced significant economic turmoil from economic shocks such as the housing crash, covid, and on-going wars across the Atlantic. These shocks caused a reaction from policy makers called "Homeland economics". The supply chain issues from covid and the energy crisis from Russia's war on Ukraine have created the want to strenghten domestic production, so that future disruptions are avoided. Predictions of future pandemics and international conflict seem like good reasons to prepare our economy with foresight. The means of "Homeland economics" lie in industrial policy. Industrial policies include subsidies, tax-breaks, or protective regulations for domestic producers, including incentives for firms to "re-shore" production back to the USA. With the goal of fortifying the economy for long-term success and creating sustained benefits felt by society, the use of government regulation often fails to follow through on its original intentions.
George Stigler wrote, "As a rule, regulation is acquired by the industry and designed and operated for its benefit". When these industrial policies are created they look to model successful usages of regulation such as China or South Korea; however, without proper implementation regulation fails to benefit society. From the many examples given by Bill Gurley's presentation, it is evident that more often than not, regulation is not implemented correctly and consequently benefits the bigger, incumbent firms. Homeland economics looks to stabilize inflation and increase domestic innovation and production in industries like green-energy and microchip manufacturing; however, it is likely inflation and price levels would increase if global trade is restricted; and furthermore, domestic innovation could be snuffed out by unintended barriers while production would be controlled by a limited number of firms. Overall, I believe that trying to prepare our economy for a tumultuous future is a worthwhile cause; however, with the wrong policies in place Stigler's model suggests that private interests would out-gain public interest causing a net loss for society. If the true goal is for societal benefits and not special interests, the industrial policies in place cannot restrict entry into the markets and prices must be determined by market forces, otherwise is likely that few will benefit and most will pay.
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