She notes that in these areas the notion of a principled or ideological commitment to free trade is already a minority view. She notes that this new middle position already provides a range of justifications for government interventions in both the domestic economy and the regime of world trade. This view had held that specialization and free trade were the right policies for any country, irrespective of what its competitors did. His work incorporates imperfect competition and increasing returns to scale into trade models. The country that moves first into a new field with these characteristics wins.
Technology policies can help private producers make the move.
In these ways, Krugman's own development has taken him toward justification on theoretical grounds of a limited industrial policy. B ut Krugman has not abandoned free trade. He fears, along with the whole professional establishment, that when it comes to trade, the government will fail to follow through. Even if the correct principles for applying subsidies and protection are scrupulously respected, government is unlikely to do the calculations correctly. Worse, the correct principles themselves will be quickly forgotten.