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This chapter considers policy issues. Given the potential benefits of soft innovation it is natural to consider whether government can speed up or extend such activity. However, this is not necessarily welfare desirable. The real issue concerns whether markets will or will not, unaided, produce the welfare optimal outcome. The literature considered shows that this question cannot be answered irrefutably in either direction. Market failure is thus not a strong ground on which to base policy intervention. Alternatively, international comparisons of soft innovation performance may be used by governments as a basis for policy. The chapter shows that the UK is not the international leader in soft innovation. Looking at returns to the Community Innovation Survey provides some insight into barriers to innovations and may be argued to support certain policy interventions. There is also only limited evidence on the potential effectiveness of policies.

This final chapter summarizes the evidence and identifies remaining questions. It argues that obesity policy is as much a question of social choice as of biology. It gives the key points raised by the book. It claims that obesity poses a modern day challenge to understanding human health and welfare and that it may be due to technological change. Obesity policy needs economics for risk assessment and management. It also offers that obesity cannot be changed by information policy alone but with a combination of fat taxes and thin subsidies.

Mechanization — a key trend of pre-WWI technical advances — intensified in all industrial sectors and reached new levels with automation and robotization after WWII. Major advances made in coal mining, oil and gas extraction, and in key manufacturing sectors such as car making benefited not only from ingenious robotization, but also from new methods of organization and flexible production. Agriculture also became much less labor intensive thanks to new high energy subsidies for machines and agrochemicals (fertilizers, pesticides, insecticides).

This chapter discusses relationships between the macro economy and economic policy, and the environmental and resource situation in developing countries. It focuses on the distortive effects of energy and resource subsidies, poorly managed monetary policy leading to exchange rate instability and high interest rates, and financial crises which often lead to too shortsighted policies and behavior regarding the management of environment and resources.

This essay traces the history of market mechanisms and describes their theoretical advantages over prescriptive regulation. It gives an overview of the lessons learned about market instruments thus far, among them that there is an ongoing need for both flexibility and simplicity and for more effective monitoring and enforcement. It argues that there remain important limitations to the success of market instruments, including that firms are not yet well equipped to fully utilize them. The chapter concludes with predictions about the conditions under which such instruments are most likely to succeed.

This essay studies a very large and important example of an environmental subsidy program — the Conservation Reserve Program (CRP). The CRP was introduced in 1985. It investigates how much less efficient, if any, a command-and-control (CAC) form of regulation would have been. That is, it seeks to assess the policy as implemented relative to a fundamentally different form of regulation — CAC. It then studies the ex post performance of this incentive-based instrument. In so doing, it provides information on the degree to which market-based incentive programs, as they have actually been implemented, have or have not lived up to the original optimism with which economists viewed such instruments.

The Commission promotes a competitive technology and related industrial policy through its coordination Framework Programmes. Commission funding is concentrated on a variety of Information Society Technologies. This chapter examines its role through two case studies of advanced television broadcasting technologies projects: High Definition Television (HDTV) and Digital Video Broadcasting (DVB). Competing leadership candidates with the Commission for HDTV included the French and Dutch national governments and major firms based on government-industry collusion in the service of competitiveness. The HDTV flagship project to meet the Japanese and American challenge, supported by the Commission and Council of Ministers with subsidies, was a failure of European technology policy. The DVB firm-led consortium has by contrast been market-driven and successful without public subsidy.

This chapter considers the reasons behind successive Italian governments’ decision to continue their support of small firms after 1945, and how this has shaped the structure of the economy. The relationship between local banks and small firms is analysed further, considering the claim made by the literature that Italy’s banks present high levels of inefficiency.

This chapter examines how different reforms were chosen and implemented in various transition countries. It focuses on price and subsidy policy reform, property rights reform and farm restructuring, and liberalization and the development of market institutions.

This chapter explains the effects of the different reforms which were chosen and implemented in various transition countries. It provides evidence on the effects of price and subsidy policy reform, property rights reform and farm restructuring, liberalization and the development of market institutions, and on the effects of the interaction between these reforms.

This chapter argues that the software industry in Israel evolved as a second IT industry following the successful development of the hardware sector. The main competitive advantage that enabled the development of the local software industry was Israel's R&D capabilities, which are diffused throughout the innovation system with their source being the strong academic research apparatus. The chapter also argues that it was the conscious aim of the Israeli state to develop exactly such an industry, and shows that at critical times the state, through the OCS, started catalytic programs to spurred private technological entrepreneurship.

This chapter aims to contribute to the debate on financial system reform. The first part describes what is perceived to be a massive regulatory failure, a breakdown that goes all the way from regulatory fundamentals to prudential implementation. The second part discusses some implications of recent events for financial sector regulation. It argues that to avoid a repetition of the financial crisis, we need both to change public policies that contributed to the crisis (particularly the mortgage crisis) and to institute financial reforms. Desirable reforms of public policy regarding real estate lending include promoting consumer protection and reducing subsidies. Financial regulation must also be international. The creation of supranational regulatory structures has become increasingly urgent in a world in which institutions and counterparties are truly international.

This chapter examines the issue of the identification of the beneficiaries, i.e., the persons that benefit from the advantage granted through the subsidy or State aid. After a few introductory remarks, two case-studies are used to show the complexities of this question. The first focuses on so-called ‘input’ or ‘upstream’ subsidies, the second on the identification issues in the context of the sale of companies or assets.

This chapter presents an empirical analysis of contemporary Norwegian innovation policy with a particular emphasis on research and development (R&D). It investigates whether and to what extent the ‘national champions' strategy’ identified in the historical analysis in Chapter 4 persists in more recent policymaking. In the analysis, it is found that national champions are more inclined to get access to both development and research subsidies from Norwegian technology programs. The results also suggest that subsidies for ‘research’ within firms increase firm-financed R&D spending while subsidies for ‘development’ substitute such R&D.

The history of British industrial policy since the Second World War falls into two distinct periods, with the dividing line being the election of Margaret Thatcher as Prime Minister in May 1979. In the first period, an explicit objective was to create and support large companies in what were thought to be strategic industries, in the hope that they would hold their own in world markets against American, Japanese, and European competitors. Aerospace, automobiles, computers, and electronics were among the industries that were supported in this way, sometimes through government-induced mergers, sometimes through subsidies for research and development. These policies were based on wishful thinking about the link between size and international competitiveness, and there was a failure to recognise the difficulty of making large-scale mergers work. Most of the ‘national champions’ created in the 1960s and 1970s came to grief. Government intervention in industry was anathema to Margaret Thatcher's Conservative government, and industrial policy in the 1980s shifted towards horizontal, non-selective measures aimed at improving the business climate as a whole, not at promoting particular industries. Some elements of the old policy survived (for example, continuing support for the aircraft industry), but for the most part the government allowed the structure of industry to be determined by market forces. This implied, among other things, an enthusiastic welcome for foreign investment, even if it involved the take-over of large British industrial companies. When Labour returned to office in 1997, there was no return to the interventionism of the earlier post-war decades — no rescues of ‘lame ducks’, and no attempt to halt the decline of the manufacturing sector. While some observers believed that the absence of industrial policy had weakened the British economy, there was little political support for a change of direction.

Chapter 3 begins by accounting for the roots of agricultural exceptionalism in the GATT, and shows how it was spelt out in GATT trade rules. The remainder of the chapter examines the specific provisions of the Uruguay Round Agreement on Agriculture (URAA), demonstrating the erosion of agricultural exceptionalism in comparison to the ‘old’ GATT provisions, but also showing how the URAA allowed WTO member states considerable leeway to maintain high levels of agricultural support and protection. It details the three pillars of the URAA: market access and tariffication; domestic support with its green, blue, and amber boxes; and constraints on export subsidies.