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Traditional economics says the market is guided by the forces of supply and demand. Customers decide what they want to buy, and private enterprise responds to that need.

So what makes government think that it's smarter than capitalism? Why offer tax breaks to Hollywood or incentives to build silicon chip factories in Arizona? Why those industries and not others? And when does the free market fail and need government to step in?

Today, we discuss what happens when the government really wants to get its hands dirty and shape the direction of the economy, even decide which companies should prosper and which ones should fail, through industrial policy.

Check out our Summer School video cheat sheet on the origins of money at the Planet Money TikTok.

The series is hosted by Robert Smith and produced by Eric Mennel. Our project manager is Devin Mellor. This episode was edited by Planet Money Executive Producer Alex Goldmark and fact-checked by Emily Crawford.

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Govt 5: The many ways governments influence industry (Industrial Policy)

Planet Money Summer School