The Industrial Policy Debate of 2016: Justin Yifu Lin vs. Zhang Weiying (Part 1)

"I have still not seen an example of a developing country that did not employ industrial policy and yet caught up with developed countries." - Lin Yifu

In 81 B.C., the foremost scholars of the Western Han assembled in Chang’an to debate the statesman Sang Hongyang on the government’s salt and iron monopolies. These exchanges were later recorded as the famous Discourses on Salt and Iron (《盐铁论》).While Sang argued in favour of state-led development of these industries and the system of “equitable supply” (均输) as a means to restrain magnates and distribute goods across the realm, the scholars criticised these measures for “competing with the people for profit” (与民争利) and producing tools unsuited to the needs of people in different regions.

Ideologies shift, and few economists today would share the basic suspicion both sides held towards private capital accumulation. Yet some of the fundamental questions—how to ensure the provision of public goods and how government intervention shapes incentives—remain central to modern economic debates. The “Industrial Policy Debate” (《产业政策之争》) of 2016, between Peking University economists Justin Yifu Li…