Final answer:
Industry policy misconceptions include the idea that long-established industries should receive government support when in fact, this support often ends up being misallocated and leads to prolonged dependence on subsidies rather than competitive market strength.
Step-by-step explanation:
Common misperceptions about industry policy often stem from the infant industry argument, which suggests that new industries should be subsidized or protected until they are established. However, critics argue that support is frequently misallocated to long-established industries with political influence, as opposed to nurturing new, potentially vibrant industries.
It is recommended that support should be temporary and designed to transition industries towards market competition rather than continuous reliance on government subsidies and trade protection. A delicate balance is required to selectively apply protectionism without harming other sectors, like the computer industry, and to have explicit guidelines for when such policies will be phased out, with consideration that there are many tools available for government support beyond protectionism alone.
Implementing these strategies is challenging due to political influences, which often affect the selection of beneficiary industries and the timing of when to withdraw support. Being aware of the intricacies and potential drawbacks of government intervention in key industries is critical for creating effective industry policies.