Política industrial: una propuesta de política a la luz de la tensión entre fallas de mercado y fallas de gobierno

In this policy paper, we review the market failures that justify industrial policy, empirical evidence of successes and failures, criticism from public choice theory and different government failures that hinder the implementation of intervention policies. Finally, we make a series of recommendations regarding the institutional framework needed to carry out successful productive development policies. Our first point is that the emphasis should be on public policy promoting entrepreneurship and production processes, rather than policies aimed at specific sectors. Second, we argue that an optimal institutional framework for public policy is one that has the ability to balance the market failures that justify active policies, with government failures that increase the costs of implementation. The evaluation exercise of these dilemmas requires technical capacity to assess market failures and shield the political process to minimize government failures. We believe that Colombia already has the skeleton of such institutions in the National Planning Department DNP, which should be renamed and conceptualized as National Department of Public Policy (DPP). The DPP should be the executive branche´s "think tank" and must accomplish four functions: 1) design public policies emphasizing horizontal aspects based on the identification of market failures, 2) serve as coordinator of public policy and policy action of the different ministries, government agencies and programs at the national and sub-national levels, with particular emphasis on the local level, 3) evaluate public policies and their impact, promoting the termination of ineffective programs and the restructuring of underperforming programs and 4) reduce the risk of public policy capture by interest groups serving as economic policy advisor to the executive branch.