ABSTRACT
The problem-solving approach is discrete and compartmentalized, the structural approach is systemic. In the structural approach, the focus of attention is on the structure of the system, and the workings of that structure—not on individual, isolated problems within the system. The goal of the structural approach is to ensure the smooth workings of the system and the attainment of system goals. The failure of the problem-solving approach is the failure to view the firms, industries, and sectors that make up the economy as a system. The problem-solving approach separates and isolates segments of the economy, reducing the system to merely a set of components. The chapter provides the description of the structural approach through the back door by starting with its near miss—the reallocation approach. Reallocation industrial policy is, in part, a reaction to the problem-solving approach. The major benefit of the structural approach to industrial policy is that it overcomes the flaws of the problem-solving and reallocation approaches.
