New Economic Liberties Paper Series Unpacks Importance of Competition in U.S. Industrial Policy

October 16, 2023 Press Release

Washington, D.C. — As the Biden administration works to revive industrial policy in the U.S., the American Economic Liberties Project today launched its new Industrial Policy Paper Series to address competition concerns that could undermine successful implementation of these critical new policies—starting with “Lessons From the Heat Pump Market: Why Market Structure Analysis Matters for Effective Industrial Policy Design and Implementation.”

“The administration’s turn to industrial policy marks a significant win for those who believe government is a key pillar for building a resilient and just economy, yet its success hinges on maintaining competition as these key sectors are supported,” said Erik Peinert, Research Manager and Editor at the American Economic Liberties Project. “Without competition, these large-scale subsidies worsen our current concentration crisis and undermine the policy’s success. At the same time, poorly-conceived competitive pressures risk pushing industries offshore once key guardrails expire. Our new paper series aims to shine a light on these complex market dynamics in relevant markets and guide policymakers away from these pitfalls.”

In the leadoff paper in the series, “Lessons From the Heat Pump Market: Why Market Structure Analysis Matters for Effective Industrial Policy Design and Implementation,” Michael Murray examines the market for residential heat pumps, an energy-saving technology supported by the Inflation Reduction Act (IRA). Because the IRA supports heat pumps in the form of demand-side subsidies—which pay for part of the cost to a final buyer in purchasing the technology—the IRA itself largely overlooks the market structure and supply chain for the manufacturing and installation of heat pumps, from global manufacturers all the way down to local installers.

The paper, covered exclusively in The American Prospect, reveals several concerning trends in the market for heat pumps, including a trend of consolidation among large manufacturers and private equity acquisitions of local installers and distributors, highlighting the risk is that IRA subsidies may be captured by consolidating interests in the heat pump supply chain, increasing consumer prices and limiting adoption of the new technology. The paper makes several recommendations to promote competition, including limiting shareholder compensation, promoting productive capacity, and mandating interoperability standards for residential heating.

Read Lessons From the Heat Pump Market: Why Market Structure Analysis Matters for Effective Industrial Policy Design and Implementation here.

Learn more about Economic Liberties here.


The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.