Peter Taaff — Parasitic capitalism exposed [Book Review]

Mariana Mazzucato’s new book is a detailed exposé of the parasitic character of modern capitalism, drawing on Karl Marx’s theory of the source of value creation. But understanding the law of value is only a first step to providing an alternative to a system that cannot overcome its inevitable tendency for periodic crises and which needs to be overthrown, argues Peter Taaffe.

Socialism Today
Parasitic capitalism exposed

Peter Taaff | general secretary of the Socialist Party of England and Wales and member of the International Executive Committee of the Committee for a Workers' International

Nature — How to retool our concept of value – Mariana Mazzucato

Must-read in full. It's short and to the point.

The meaning of "value" is one of the most pertinent questions in economics and political economy. Michael Hudson has been emphasizing this for some time, as have Marxists and Marxian. Consideration of value of other than as price revealed in competitive markets is ruled out in conventional economics by methodological assumptions.

What we value and how we value it is one of the most contested, misunderstood and important ideas in economics. Economist Mariana Mazzucato’s comprehensive The Value of Everything explores how ideas about what value is, where it comes from and how it should be distributed have changed in the past 400 years, and why value matters now more than ever. Mazzucato emphasizes the need to reopen debate to make economies more productive, equitable and sustainable. The 2008 financial crisis was just a taste of looming problems — climate disruption, massive biodiversity and ecosystem-services decline, even the possible collapse of Western civilization — unless we learn to value what really matters.

Early economists focused on the production of value from land (François Quesnay and the ‘physiocrats’), labour (Adam Smith to Karl Marx) and capital. In this view, value determines price (Four decades ago, I described this in terms of embodied energy: see R. Costanza Science 210, 1219–1224; 1980). By contrast, the current mainstream ‘marginalist’ concept bases value on market exchanges: price, as revealed by the interaction of supply and demand in markets, determines value, and the only things that have value are those that fetch a price.

This has major implications for ideas about the distinction between value creation and value extraction, the nature of unearned income (‘rent’) and how value should be distributed....

Nature
How to retool our concept of value — Mariana Mazzucato
Robert Costanza

Zac Tate — Capitalism is losing support. It is time for a new deal.

The financial crisis has led many to question the legitimacy of capitalism. The verdict, 10 years on, has not been favourable. In an opinion poll by YouGov, three-quarters of German adults, two-thirds of Britons and over half of Americans believe that, “the poor get poorer and the rich get richer in capitalist economies”.

Their sense of injustice is not only a reaction to bank bailouts, years of austerity and corporate scandals. The challenge is fundamental. There is a growing awareness in the rich world that most of the benefits of technology and globalization flow to people who own investible capital and to the well-educated, while the costs are borne by unskilled workers, local producers and people who have little property and savings.

The problem, however, is not capitalism itself. Instead, the issue lies with policies that extended the role of the free market beyond sensible limits. These have undermined the essential bargain between labour and capital, and pushed those with few assets into precarious working lives.

Rawer forms of capitalism are unsustainable if too many people do not have capital. Restoring faith in the system requires making amends, and rethinking how capitalism creates and distributes value....

Here we go again. These are the issue that Keynes faced at the time of the Great Depression. He came forward to save capitalism from socialism by moderating it.

This article is a useful backgrounder.

In this situation, demands for fairness have centered around two ideas. Either there must be a significant redistribution of wealth so that everyone has a fair stake in the economy. Or policymakers must reintroduce protections against market forces for those without the insurance of investible capital. Thomas Piketty, in his bestselling book Capital, advances the first solution; Dani Rodrik, in Straight Talk on Trade, promotes the second.

Each of these should be considered as parts of a new deal on capitalism. But there is also a third strand that looks to the future and responds to the thirst for something new. It says that capitalism itself must be redesigned. Private enterprise and public policy need to be realigned to the creation of public value and this requires changing how we think about economics....

In 2016, Mazzucato published Rethinking Capitalism, a collection of articles from distinguished thinkers who challenge the conventional wisdom on a range of topics from fiscal policy to inequality. It concludes that many of our economic theories are not only inadequate but lead to poor policies that often have harmful impacts.

Mazzucato argues that to nurture public value, the state has a key role to play. The state uniquely has the time-horizon and the financial and organizational capacity to create and shape new markets. Embedded in the innovation process with firms and research institutes, it can also influence both the rate and direction of technological development.…

Unfortunately, no mention of MMT and the fiscal space its understanding opens up to use.

World Economic Form
Capitalism is losing support. It is time for a new deal.
Zac Tate | Economic strategist, Hottinger Group

See also

A Goldman Sachs banker [Bobby Vedra] has likened the UK under Jeremy Corbyn to “Cuba without the sunshine” in a nervy attack on the Labour leader at the Super Investor private-equity conference in Amsterdam.

The London Economic
UK would be like “Cuba without the sunshine” under Corbyn – says fat cat banker

Jack Peat

Jean-Claude Worms — Science And The Entrepreneurial State

The title of this post is adapted from Mariana Mazzucato’s book “The Entrepreneurial State,” published in 2013, and in which she successfully – at least in my view – debunks a number myths that modern capitalism has impressed upon most of us concerning the role of private entrepreneurs in innovation. I am attempting below to link that discussion with the need for public investments in science.

I hope I will be forgiven for extensively quoting from Mazzucato's brilliant work.

SCIENCE IS RISKY

This statement is true inasmuch as science cannot really guarantee a return on investment, at least not in financial terms within a predictable timeframe. It does not serve this purpose. Science is a “public good, difficult to appropriate” (Mazzucato 2013).

Science Connect

Science And The Entrepreneurial State

Dr. Jean-Claude Worms

Julia Mead — Why Millennials Aren’t Afraid of Socialism

So we will be the opposition—but we’re not starting from scratch.... Heterodox economists like Ha-Joon Chang, Mariana Mazzucato, and Stephanie Kelton are reshaping their discipline.

Julia Mead is a 22 year old.

The Nation
Why Millennials Aren’t Afraid of Socialism
Julia Mead

Capitalism in the Time of Trump? — Lynn Parramore interviews Mariana Mazzucato

Mariana Mazzucato, Professor of the Economics of Innovation at the Science Policy Research Unit of the University of Sussex and author of The Entrepreneurial State: debunking public vs. private sector myths, has made a passionate case for the government’s active role in the economy —sending the old laissez faire notion that markets can run themselves into the dustbin where it belongs. In a new book co-edited with Michael Jacobs, Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth, she offers a bold new vision for contemporary capitalism that works for the people and the planet. What chance does this vision have in the age of Trump and Brexit? Mazzucato shares her view.

INET
Capitalism in the Time of Trump?
Lynn Parramore interviews Mariana Mazzucato, Professor of Economics, University of Sussex

Mariana Mazzucato — An Entrepreneurial Society Needs an Entrepreneurial State

Innovation-led growth can square a circle that is challenging modern capitalism: how to generate sustained and sustainable economic growth, built on high-value, well-paying jobs. This is at the core of entrepreneurial societies, and it is a good objective. The problem is how to get there. Although many countries have set the goal, few have achieved it.

The reason for this elusiveness lies in widespread misunderstandings about how innovation-led growth has been achieved in the past. These misunderstandings have allowed the wrong narratives to drive policy making, with individual entrepreneurs and companies as the central characters of the story. Left unchallenged, this narrative leads to counterproductive policy making and a distribution of rewards from growth that doesn’t reflect the actual distribution of risks.

An entrepreneurial society needs an entrepreneurial state, one that through visionary and strategic public investments, distributed across the innovation chain, can create animal spiritsin private businesses. Entrepreneurs then see growth opportunities, and business investment follows.

Harvard Business Review
An Entrepreneurial Society Needs an Entrepreneurial State

Mariana Mazzucato | R.M. Phillips Professor in the Economics of Innovation at SPRU University of Sussex, UK

Christopher Colford — Toward a more durable form of globalization, beyond 'neoliberal' negligence

The World Bank approvingly notices "disruptive theory" in macroeconomics.

The World Bank
Toward a more durable form of globalization, beyond 'neoliberal' negligence

Christopher Colford | Communications Officer at The World Bank, in its Financial and Private Sector Development Network

Michael Stephens — New Book: Rethinking Capitalism

A new book edited by Michael Jacobs and Mariana Mazzucato and featuring contributions from Joseph Stiglitz, L. Randall Wray, Stephanie Kelton, and others will be released tomorrow:

Multiplier Effect
New Book: Rethinking Capitalism
Michael Stephens

Izabella Kaminska — Fintech and banking risk; cognitive dissonance de semaine

Thank god for the stream-lined logic of Mariana Mazzucato, innovation economist at Sussex University, who was on hand on Wednesday in the fintech session to remind the evangelists how financial innovation tends to increase not diminish rent extraction from the economic system.

Must-read on financing innovation. If pressed for time, you can just skip down to the above quote and read the rest on MM.

Short-termism goes hand and hand with rent-seeking. Real innovation rather than puff is long haul, the result of strategic investment.

The Financial Times — FT Alphaville
Fintech and banking risk; cognitive dissonance de semaine
Izabella Kaminska

Mariana Mazzucato — Everything You Should Know about Government, Innovation, and Entrepreneurship

When you argue that the role of the state in the economy is more than a ‘facilitator’, a ‘de-risker’, a regulator, a spender or an administrator–you will get a big reaction. After all, these assumptions have been at the heart of economic policy in countries around the world for the last half-century or more. We like to pretend that the state is at best useful for fixing different types of market failures – an idea that justifies the need for the state to fund basic science, a classic ‘public good’.

But the reality, as I explain in my work on The Entrepreneurial State: debunking public vs private sector myths, the state has actively shaped and created markets, not just fixed them. It has done so by being an active investor along the whole innovation chain: not only in basic research but also even in downstream areas like applied research and early stage financing of companies. Ignoring this key market shaping and market creating role (not only market fixing) is having today two effects: (1) it is hurting future innovation possibilities (making some countries think they can simply use public money to indirectly incentivize private sector investment), and (2) it is contributing to the increase in inequality.…

Must-read.

Evonomics
Everything You Should Know about Government, Innovation, and Entrepreneurship
Mariana Mazzucato | RM Phillips Professor in the Economics of Innovation at the University of Sussex, SPRU

Mariana Mazzucato — Jeremy Corbyn’s Necessary Agenda

When the Labour Party lost the election last May, it received considerable criticism – even from its own frontbenchers – for failing to embrace the business community as “wealth creators.” But while businesses clearly create wealth, so do workers, public institutions, and civil-society organizations, which, through dynamic partnerships, drive long-term growth and productivity. Indeed, a progressive economic agenda must begin with the recognition that wealth creation is a collective process and that market outcomes are the product of how these various “wealth creators” interact.

We must drop the false dichotomy of governments versus markets and begin to think more clearly about the market outcomes we want. There is plenty to learn from public investments that were mission-oriented, instead of focused on “facilitating” or “incentivizing” business. Policy should actively shape and create markets, not just fix them when they go wrong.…

Project Syndicate
Jeremy Corbyn’s Necessary Agenda
Mariana Mazzucato | Professor of the Economics of Innovation at the Science Policy Research Unit of the University of Sussex, and author of The Entrepreneurial State: Debunking Public vs. Private Sector Myths

Tyler Cowen — Lunch with Mariana Mazzucato‚

Mariana Mazzucato (short bio) who writes on innovation and government investment, impresses even Tyler, which is surprising since her hit book is entitle, The Entrepreneurial State (2013).

She also has four children and I can testify she is what they call “a commanding presence.” In Singapore not long ago I told her she should have her own TV show, and I would not be surprised if this someday came to pass.

I'm sure that Tyler Cowen has his reservations though. Tim Worstall expresses his in The Intellectual Hole At The Heart Of Mariana Mazzucato's "Entrepreneurial State" at Forbes. She responds in 

Mariana Mazzucato Responds To Tim Worstall, in which Warstall replies.

She has also been collaborating with Randy Wray on financing investment.

Marginal Revolution
Lunch with Mariana Mazzucato
Tyler Cowen | Holbert C. Harris Chair of Economics at George Mason University and serves as chairman and general director of the Mercatus Center

Michael Stephens — Working Paper Roundup 5/15/2015

 Of special note:

Mariana Mazzucato and L. Randall Wray

Financing the Capital Development of the Economy: A Keynes-Schumpeter-Minsky Synthesis 

“Over [the postwar] period, the financial system grew rapidly relative to the nonfinancial sector … To a large degree, this was because finance, instead of financing the capital development of the economy, was financing itself. At the same time, the capital development of the economy suffered perceptibly. If we apply a broad definition—to include technological advances, rising labor productivity, public and private infrastructure, innovations, and the advance of human knowledge—the rate of growth of capacity has slowed. …

The key goal of this paper is to reconsider and discuss the role of finance … that is, how to restructure it to serve the ‘real’ economy, rather than itself, in order to produce both innovation-led growth and full employment. This requires bringing together the thinking of Keynes, Minsky, and Schumpeter, as well as understanding the role of the public sector as doing much more than fixing static market failures.”

Multiplier Effect
Working Paper Roundup 5/15/2015
Michael Stephens

Dani Rodrik — From Welfare State to Innovation State

Mariana Mazzucato. public investment, and inclusive capitalism. 

The present and foreseeable problem is that most economists and policy people are thinking in terms of the market state. It proved not to work in the early days of industrial capitalism and it's proving not to work again now in the knowledge age of digital capitalism. Capital is about capital formation, and capital formation increases productivity owing to technological innovation, displacing workers. Only the state can deal with this, since private sector markets are unable to handle it and firms, unwilling.

Project Syndicate
From Welfare State to Innovation State

Dani Rodrik is Professor of Social Science at the Institute for Advanced Study, Princeton, New Jersey

Randy Wray — Mazzucato: The Entrepreneurial State

I’ve been meaning to write a blog on a book by my friend, Mariana Mazzucato, titled The E State. It is essential reading for anyone who wants to understand the role played by government in encouraging innovation. For so many years we’ve been sold the notion that our nation’s Undertakers (also called Entrepreneurs or Capitalists) are the lions who drive growth through innovation. Actually, according to her well-documented book, Mariana shows they are nothing but domesticated pussycats, who have to be dragged along by the entrepreneurial State. The State innovates, doing the hard stuff and even guaranteeing markets; the pussycats merely make profits off the State’s initiatives.

Economonitor — Great Leap Forward
Mazzucato: The Entrepreneurial State
L. Randall Wray | Professor of Economics and Research Director of the Center for Full Employment and Price Stability, University of Missouri–Kansas City

Smacking down one of the chief myths of neoliberal "capitalism." 

The downside of that too much government-led innovation is military-related. For example, Ike even justified the interstate highway system based on logistical support needed for national security.

Michael Stephens — Reorienting Fiscal Policy and Understanding Currency Sovereignty

From Mariana Mazzucato’s “Rethinking the State” video series:

Pavlina Tcherneva discusses the implications of the Great Financial Crisis of 2007 for employment outcomes and fiscal policy. She argues that the current view of Keynesian fiscal policies is based on a misreading of Keynes. Simply boosting demand — through what should be understood as trickle-down fiscal policy — is not sufficient to promote inclusive growth. Keynes originally called for a more targeted approach, including “on the spot employment,” as the means to achieve full employment and equitable and sustainable growth.
[See also her recent working paper on this theme.]

L. Randall Wray argues that rethinking the State requires rethinking the relationship between the State and its currency. His analysis starts with the observation that money is based on State power (“currency sovereignty”): it is an “IOU” from the State — a liability — implying that fiscal constraints are in fact artificially created. In this sense, the State cannot run out of money, as it creates and enforces its own IOUs. Governments could — and should — afford to invest more in innovation and technology development to promote the capital development of the economy.

Multiplier Effect
Reorienting Fiscal Policy and Understanding Currency Sovereignty
Michael Stephens

Dan Kervick — I Have Seen the Next Big Thing, and it is Mariana Mazzucato

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

I Have Seen the Next Big Thing, and it is Mariana Mazzucato

Dan Kervick

Ross Eisenbrey — Government–Not Business–Has Been the Source of Breakthrough Innovation

Mariana Mazzucato, a professor of economics at the University of Sussex, has been making the point very effectively in lectures and a new book, The Entrepreneurial State, that the real innovation engine in the global economy is not business, nor the market, but the government. A recent story about Mazzucato in Forbes cites her view that long-term, patient capital–provided by government–is the absolute prerequisite for breakthrough innovation.

Who knew? What do firms that utilize this public contribution pay for it? Nothing other than taxes on the profits from breakthrough innovation. And they are continually objecting to high taxation inhibiting innovation. Another neoliberal myth goes down in flames.

EPI
Government–Not Business–Has Been the Source of Breakthrough Innovation
Ross Eisenbrey
(h/t Mark Thoma at Economist's View)