Preventing The Next Shortage: A Framework For Industrial Policy

Executive Summary

Four Steps

Step 1: Understanding and Monitoring Semiconductor Supply Chains

Source: Venture Outsource

“What vehicle manufacturers are finding are parts within parts within parts within parts that are sourced from a single-source Japanese manufacturer.”

Source: National Academies Press.

An example of cascading failure in a supply chain: filled shapes represent normal flows, empty shapes represent breakdowns at nodes. The supplier breakdown on day 1 turns into a manufacturer breakdown on day 3 and a shortage for consumers on day 12.

Source: BEA Input-Output Tables

Step 2: Establishing Clear Goals for Policy

Step 3: Smoothing Financial Uncertainty

Source: Bureau of Labor Statistics (BLS)

Step 4: Building Durable Institutions

“The distinguishing feature of industrial policy lies in efforts to provide some form of goal-directed analysis and decision-making for whatever it is that government ends up doing that affects business decisions and behavior, directly or indirectly, and thus national economic performance.”

In Conclusion

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We write, crunch #’s, and tweet about the labor market and economic policy.

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