The Prisoner's Dilemma of Global Industrial Policies: Evolutionary Analysis of Interventionism from the Perspective of Excessive Transition Costs and Positive Cognitive Feedback

Abstract

Mainstream trade economics interprets global industrial subsidies and state intervention through a static prisoner's dilemma framework, assuming fixed institutional rules and stable actor beliefs. This static paradigm fails to explain the dynamic resurgence of interventionism, the collapse of laissez-faire consensus, and the continuous self-expansion of global industrial policy. Based on evolutionary game theory and Austrian spontaneous order theory, this paper constructs a dynamic framework featuring endogenous belief drift, critical phase transition, irreversible industrial niche preemption, and institutional path dependence. Beyond well-documented static market distortions, this paper elaborates two neglected core mechanisms. First, state-led premature industrial advancement generates significant excessive transition costs. Forced industrial iteration under immature technological and institutional conditions requires massive redundant input to compensate for systemic deficiencies, inevitably resulting in endogenous social resource waste that does not exist in spontaneous market evolution. Second, extending Misesian intervention spiral, Higgs crisis ratchet, and Pierson policy feedback theories, this paper proposes a positive cognitive feedback mechanism: temporary policy successes strengthen institutional confidence in centralized governance and normalize discretionary intervention. Furthermore, this paper reveals the fundamental game root of the global industrial prisoner's dilemma. Economies are fully aware that premature intervention causes domestic efficiency loss and resource waste. Nevertheless, individual states actively promote industrial policies to seize global industrial niches, monopolize technological standards, and obtain cross-border industrial rents that outweigh domestic losses. Rational choices of individual economies trigger collective irrationality worldwide, forcing universal intervention and irreversible global industrial arms races. This paper breaks static theoretical limitations and provides a new evolutionary interpretation for the restructuring of global industrial governance.