This is Planet Money from NPR.

Welcome back to Planet Money Summer School.

We're hanging out here every Wednesday until Labor Day, just like an ice cream

truck that plays a catchy jingle of knowledge.

In the first half of our short political economy semester, we talked about the things

that the government pretty much has to do, provide basic infrastructure, pay for things the market

won't provide, like national defense and a social safety net, and set the rules of competition.

But today, we discuss what happens when the government really wants to get their hands dirty

and shape the direction of the economy.

Even decide which companies should prosper and which one should fail.

This is class number five, industrial policy.

Traditional economics says that 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 of all places?

Why those industries and not others?

Joining us to help answer that question is Professor Juan Ricard Ugat, who teaches political science at Loyola University, Maryland.

Welcome back, Juan.

It's great to be back, Robert.

You're coming to us from Barcelona. Why Barcelona? I was born and raised in a city called

Girona, which is about 60 miles away, both of them in Catalonia, where I'm from. Excellent,

because today's class is very international in focus. In the global economy, every country wants the world to buy their products. But there's a challenge. How do you build up your car industry, let's say, when Japan and America are already so good at it? How do you develop tech companies when the U.S. has so much of the talent in Silicon Valley?

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