A Conceptual Framework for Productive Development Policies

Abstract

Chapter 1 made the case that the relevant question is not whether productive development policies (PDPs) should be pursued; rather, the question is how. What types of policies can help address the many market failures that beset the process of productive development—without repeating the errors of the past—and pave the way for a better future? In this regard, the oft-cited image of a pendulum, by which past industrial policies have swung out of vogue and are now back in fashion, is simply not appropriate. It would be more accurate to say that certain well-designed policy interventions may be worthwhile; they have stood the test of time, or can be crafted to meet new challenges. Other types, however, may lack proper conceptual justification or may be too risky to implement effectively. What types of policies should be favored? Which ones should be set aside? There is a need to rethink PDPs, to screen them in order to separate the wheat from the chaff. Rethinking these policies starts with a proper conceptual framework.