picking winners

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The idea that governments can promote economic development by selecting particular projects for financial and technical support. This form of industrial strategy only promotes economic growth if the government is better than private investors at picking projects likely to succeed. The strategy runs two risks: the government may support projects which would have been adopted anyway, so that its support merely makes them more profitable; or it may pick too high a proportion of unsuccessful projects. The alternative is for governments to concentrate on providing general technical education to produce a skilled labour force, and promoting efficient financial markets to provide capital, and leave private businesses to select the most suitable particular projects for development.

Subjects: Economics.

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