ABSTRACT
This chapter is intended as a critical analysis of a claim frequently made nowadays in discussions about the role of government in economic policy. Perhaps the clearest articulation of the claim that I have found in the literature is the following statement by David Crane, an economics journalist and prominent advocate of activist industrial policy:
If technology, in the form of innovation, ideas and knowledge, is a key factor in economic growth then it follows that governments can do a great deal to facilitate growth…. In addition [to policies that support education, training and basic research] governments have a vital role to play in facilitating pre-competitive research and development with industry and in assisting the actual commercialization of new goods and services. The risks are so high in the development of new technologies today that companies often cannot undertake these efforts on their own; similarly the spillover effects of new technology can be significant so that companies making the expenditures on technological development may not capture all or a large part of the benefits…. The importance of risk sharing between industry and government is well understood in Japan, the United States and Europe but much less so in Canada.2
