The Incoherence of Modest Industrial Policy

This essay argues that the notion of modest industrial policy, the idea that governments can lead structural transformation but remain modest, cautious, and adaptive, is incoherent and self-defeating. The very conditions that are said to demand modesty—radical uncertainty, complexity, and bounded knowledge—also render structural transformation implausible. If policymakers admit they are operating in unknown territory, then the idea that they can steer society in a coherent direction becomes less a policy strategy and more an article of faith. Yet this is precisely the tightrope today’s leading theorists attempt to walk. Dani Rodrik advocates a learning-oriented industrial policy while still gesturing toward ambitious structural change, seemingly hoping that modest means will deliver immodest ends. Mariana Mazzucato, for her part, insists the state must “pick a direction” and align society accordingly, but assures us this will be done inclusively and experimentally—as if consensus and coordination might emerge spontaneously on command. These contradictions are not incidental; they strike at the heart of the project. Industrial policy cannot be both radically uncertain and confidently directional. In the end, one cannot promise a revolution with a shrug. Advocates must choose: either scale down their ambitions or be honest about the scale of authority their vision requires.