Industrial policy in the modern definition that one encounters usually is the concept of an industrial policy or strategy of a country(or in other words the state), which is designed to encourage the growth and development of an area of an economy or the economy as a whole. In more factual terms it is a policy in which the government favors certain industries by offering subsidies and cheap loans. Like every government policy or strategy, there are pitfalls. What are the pitfalls of industrial policy?
There are two main pitfalls other than the main one which is that industrial policy is a state-interventionist policy. The first of these pitfalls is that it removes the incentive from a favored firm to be entrepreneurial. The second of which is the truth that it becomes difficult for other firms that are not favored by industrial policy to compete with firms that are. Thus, these are some of the main pitfalls of industrial policy.