This Working Paper is one of a series of draft chapters of a book currently under preparation with the provisional title of The Adaptive Economy; Adjustment Policies in Low-income Countries.

What is the appropriate balance between the 'invisible hand' of the market and what has unkindly been called the 'invisible foot' of state policy interventions in the pursuit of the adaptive economy? This question has been a recurring one in this series of Working Papers, particularly in Nos. 31 and 32. It is taken up again here in the context of the two crucially important sectors of production, agriculture and manufacturing. In the case of agriculture the discussion centres around the uses and limitations of price incentives as instruments of adjustment policy. For manufacturing it is raised more fundamentally, by way of questions about whether the state has more than a passive role in the pursuit of industrialisation.