"Krugman realized that trade took place not only because countries were different but also because there were advantages to specialization. If one country was the first to begin manufacturing airplanes, say, it might accumulate an advantage in economies of scale so large that it would be difficult for another country to break into the industry later on, even though there might not be anything about the first country that made it particularly well suited to airplane-making."
"One implication of Krugman’s theory was that, contrary to economic orthodoxy, industrial policy might have its benefits. If the location of a new industry was essentially arbitrary, then a government, by subsidizing and protecting its emergence, could enable it to gain such a lasting advantage that other countries would find it difficult to catch up."
..."in practice, he believed, it was so difficult to determine which industry should receive government help, at the expense of all the others—so difficult to predict an industry’s future, and so difficult to determine merit when powerful interests would be trying to influence that determination—that in the end industrial policy would be likely to benefit mostly the owners of a few businesses and hurt everybody else."
What Krugman says seems to be true... It might be the Phonecians dying cloth purple and locking in the trade for years, high tech in Silicon Valley, or Air France surviving and thriving after years of government subsidy. I think people should be extremely wary of government subsidy but I do wonder if there might be a practical case to be made for combining Craig Venter's shotgun approach to data collection that I discuss in the below post and some form of widespread, across the board, small scale subsidy to burgeoning industry. I'm sure this has been heavily dealt with in economic literature, but I do wonder.
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