Mazzucato’s central message is that standard accounts of the economic role of the state are incomplete. These accounts focus on the provision of public goods and the state’s role in compensating for negative externalities and other market failures. But Mazzucato believes economists and the public need a better understanding of the role of states in driving economic innovation. She argues that government spending has been most effective when that spending is directed towards large missions, and that missions such as putting a man on the moon or tackling climate change require strong government intervention. Mazzucato builds on her account of mission-oriented investment to explain how to develop public-private partnerships that are symbiotic rather than parasitic.
Mazzucato also discusses the problems of predation and value extraction, but resists the idea that the problem consists entirely in a contrast between a bloated and extractive financial sector, on the one hand, and a productive real economy on the other. Private sector firms in the real economy can be just as extractive as financial sector firms, if the former use earnings to overpay management and send large profits to shareholders instead of investing them in long-term, research driven projects. Mazzucato argues that if we don’t have a good story about value creation, we can’t even understand the processes of rent extraction and predatory behavior, and that the full story of value creation in the modern world requires more attention to the high-risk, long-term investment missions that have been carried out by governments.
Rugged Egalitarianism
Dan Kervick
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