A complexity economics framework for 21st-century industrial policy

Abstract

The last decades have seen a renewed interest in industrial policy. Unlike previous approaches, 21st-Century Industrial Policy strives for a synthesis going beyond both market-fundamentalist and dirigiste approaches. So far, however, this peculiar nature prevented it from fitting within any specific theoretical frame. The main objective of this paper is to show that Complexity Economics is a valid candidate for theoretical frame for 21st-Century Industrial Policy. In order to do so, I will lay the foundations for a first connection between two research programmes that so far proceeded indifferently from one another. I will show that the main features of 21st-Century Industrial Policy can be easily derived from the general axioms of Complexity Economics, and that thus 21st-Century Industrial Policy can be micro-founded on Complexity Economics. This re-foundation is instrumental in giving coherence to Industrial Policy, better defining its tools and scopes, and identifying avenues of further development.