It may be argued that Japan’s explicit promotion of its microchip indu

It may be argued that Japan’s explicit promotion of its microchip industry was an excellent example of successful industrial policy.

What criteria would you apply to determine whether such a policy is or is not successful? Judging from your own stated criteria, was Japan’s exercise successful? Why or why not? What information would a government require in order to increase the probability that its industrial policy would promote long term self-generated economic growth?

ANSWER

It is argued that Japan’s subsidies to its nascent microchip industry was an important factor in putting Japan on the world map in this area. However, a minimal criteria for a successful industrial policy would be that the infant industry mature, and that it prove to be a profitable area of the country’s comparative advantage. In this case, one might argue that the latter part of the above statement was not fulfilled, since the microchip industry was adopted by so many countries, that it became a “commodity.” That is, it became a product with a very low profit margin, which was not really a good use of Japan’s resources, given their alternative uses.