At first I thought, well, if the Cato Institute attacked her, she must be on to something good.
Then I read why they attack her...
"She has written that governments and state-backed investment entities should “socialize both the risks and rewards.” She has suggested the state obtain a return on public investments through royalties or equity stakes"
...and I decided to learn more about her. Because the people who fund Cato like things just the way they are, That's why Cato exists.
111
Yes; this economist has it right.
Government R&D built the internet, wireless communication and the computer.... and the foundations for the genetic biotech revolution as well. And the space exploration / satellite technologies.
What silicon valley entrepreneurs have accomplished is to build businesses around these foundations. Apple. Google, Microsoft and Amazon did not develop the foundations of their technology domains - they built on top of the work done by others mostly funded by government R&D dollars in universities and government organizations.
The real question is how does the government extract value? Our political system is built on "favors". Elected officials do "favors" to the rich and ambitious by giving them these technologies virtually free; the entrepreneurs if successful return the "favors" at election time with generous donations.
Unfortunately both parties are culpable. One way to "fix" this is to get equity in exchange for technology licenses; the other is to go back to a better tax formula where the wealthy pay more than their secretaries.
161
Republicans like the idea of having a businessman for President (apparently even a very bad businessman like our present president). And they admire venture capitalists who are doing well if one in five projects really pay off. But they scream bloody murder if individual government project don't pan out. They have been restricting R&D and other government efforts that made America great in the mid- and late 20th century. Trump's myopic zero sum views are destroying America's future. It is a very appealing (and business-like) idea for government to get some pay-back for projects it has intiated that then lead to financially successful private enterprises.
133
@Michael wrote: "Republicans like the idea of having a businessman for President (apparently even a very bad businessman like our present president)."
They are antagonistic to government. Trump bankrupting the government is the plan.
The intent is to have business dominant over government.
(The Democrats want government to have power over business).
21
Thanks,
I'm still laughing at the idea of the Cato institute accusing someone of cherry-picking facts...
249
It's about time. The negative framing of government and positive framing of free market enterprise has seeped too deep into our culture. We need to learn balance. We need to understand what governments can do and what markets can do, and then for each problem, we need unbiased exploration for the best blend of government and market strategies. There is no universal red or blue answer. Each problem is different.
235
One of her key points that we all need to think about is that the government doesn't just "spend" money, but rather it "invests" in programs that have the potential to improve the lives of all Americans -- be it in roads, schools, healthcare, energy. Those are investments in the nation's future, not wasted money, as the GOP would like to convince us all.
The one big exception I can think of is the millions of dollars the government spends on the president's golf trips each weekend. Now that really is a waste of taxpayer money.
357
@avrds A bigger exception is the trillions spent on blowing up people and places worldwide. An endeavor at which we are indisputably the very best. Total devastation for those destroyed (why aren't they more appreciative), and a waste of trillions that could go to build infrastructure, provide healthcare, improve education, etc., etc., etc. Double bulls eye.
But big profits for our best in the world war machine builders. Talk about short-term.
83
@Kitjon
I am with you 100%.
I just read that the Democratic establishment is warning (again) against pushing for Medicare for All Americans. As they (and the Republicans) like to say, how can we possibly afford it?
And yet no one ever asks how can we possibly afford to invade and occupy another country and pay for the damage we do to generations of people at home and abroad [hint: in the Bush administration they just kept it off the books - or in Trump's, just take the oil].
It's not just our use of language that is misguided -- so are our morals and our priorities.
100
@avrds Actually, anything that keeps him away from the White House should be considered an investment.
35
Creating something the world needs and wants is what drives economies around the world. Moving money around like hedge funds, money managers, Wall Street, etc., creates absolutely nothing except inequality on a massive scale. The wealthy elite are jerks.
12
The State is, or at least could be, the investor of both the first and the last resort. It could, for example, support the development of carbon-free electricity generation such as advanced nuclear and fusion (it does, but not enough). It could support an environmentally friendly replacement for palm oil, for beef, and so on. It could support development of desalination and wastewater reuse.
These are higher risk ventures that for-profit entities are reluctant to approach. But have high payoffs. It could support more efficient clean engines - they do exist, and safe high-speed rail for trips below a few hundred miles.
But also, when the economy goes south, it could jump start it with infusion of cash into the hands of real consumers, not the mega-rich. But to do all this requires practical thinking and the elimination of idiotic ideologies.
4
Since there is little about of Mariana Mazzucato’s thinking, it is fair to ask how exactly she advised AOC? Was chasing away Amazon’s jobs and willingness to develop a derelict waterlogged property part of the Green New Deal?
Governments don’t usually innovate because they rely on the status quo and usually attract people looking for security, conformity and a pension.
When they do innovate, someone usually winds up in jail or the public is outraged. Think of the last few administrations, corrupt politicians generally, ticket quotas, Robert Moses and taxpayers saving the banks without also requiring banks to save taxpayers.
Businesses succeed because they are motivated by greed and a common-sense ability to make innovations work. Government is motivated by satisfying key constituencies, and old rules - the kinds of things innovation tends to disrupt.
That’s the other thing, innovation is usually about disruption and few government welcome that…..
There is a way for the public sector to be innovative: through managed crowdsourcing. It probably involves blockchain along with alternative economies - how else to pay for the caring needs of society if you don’’t want to rely on welfare or religious agendas? Wikipedia is a good example of this and there are ways to do it in almost every field from taking on Amazon to picking up garbage and teaching students.
All this flies in the face of leftist and rightist thinking and so we read empty articles…….
1
Props for fresh—still not fundamental enough.
Econs omit fundamental infrastructure—Code.
They fail to grok code in a physics, evolution & complexity context.
eg
"The story of human intelligence starts with a universe that is capable of encoding information." Ray Kurzweil
Code is fundamental Relationship Infrastructure in bio, cultural & tech networks—genetic language religious legal monetary software, etc.
Code & Complexity — A Fundamental Consequence
Complexity increases weaken the efficacy of code—genetic legal $ software, etc.
For survival, code's gotta match the environs.
eg
“The rule of thumb is that the complexity of the organism has to match the complexity of the environment at all scales in order to increase the likelihood of survival.” Yaneer Bar-Yam
The efficacy of our bio & cultural coding? It's being gutted by exponential complexity—doesn't fit the unprecedented environs we've generated. It's non-selectable.
eg
Sky & Ocean being armed with weapons of mass extinction.
Relationship Selection & Monetary Code
As the dominant short-term drivers of evolution on Earth, humans have been creating vast global relationship structures, i.e., doing multi-scale selection in-&-across Geo Eco Bio Cultural & Tech networks for centuries—with the world's dominant information processing mechanism or app—humans deploying monetary code.
App’s information processing specs lack sufficient Reach Speed Accuracy Power & Creativity—ALL are fundaments of passing selection tests.
4
"Politicians around the world are listening."
Ah, yes. The flavor of the week. The only thing politicians listen to is the sound of their own voices.
3
Dr Mazzucato appears to echo my thinking that we need to change the language of public discussions of economics, toward making it more meaningful. The economics IQ of the general public is terrible, and the politics and ignorance of "The Great Divider" on macroeconomics lowers democratic appreciation of capitalism and socialism. Indeed, we'd do better to ditch such imprecise, dog-earred terms in favor of a term like the mixed economy.
Government has always been a viable agent in any economy, and the assumed Republican ideal of a free market as one without regulation by government has always been fraudulent. The more useful notion of a free market is one that is free for all to access, because that is a more noble social goal than following the mechanistic thinking of Adam Smith and Milton Friedman.
Changing the dialog on economics at this fundamental level is key to Democrats regaining the high intellectual and moral ground, as well as the populated center, from a Republican party that has become corrupt on these levels.
4
Capitalism is predatorial. Even mighty eagles die after all the small animals are gone.
(or is that too harsh?)
4
Deirdre McCloskey calls Mazzucato’s (and Warren’s, and Stiglitz’s, and Beckert’s) statism “a legal way of thinking, not economic.” She also often calls herself a liberal (of the Adam Smith, John Stuart Mill variety).
State capitalism appears to be what Trump is attempting, it seems, with his at least verbal efforts to shore up the coal mining industry—in short, to create jobs that shouldn’t be created, at least according to economic, rather than legal, thinking.
2
@rjon There's nothing coherent to "The Great Divider" Trump's thinking, nothing more than what seems to him to be in his own political self-interest. But yes, if the state can be used, as well as the term "capitalism", for whatever he wants, then he's for it.
7
You note that Ms. Mazzucato won a “non-Nobel” prize. Good for her, of course. It’s nice to have trophies for the trophy room.
But you do not note that all awards, including the Nobel, are primarily in the interest of the group awarding the prize.
Whenever someone suggests that the government is wasting money I answer:
"Luckily there is no waste in the private sector.
Bwahahaha (satanic laugh)"
I grew up in Europe. I have seen government work. Government, with its built-in oversight, is way more beneficial to the common good than the private sector.
9
Those at the top have fallen into the same trap all wealthy do, the fear of loosing their wealth. This fear is real and potentially dangerous to those at the bottom. It makes the 1% Elite close ranks, hold tighter to their fake power (power bought by huge amounts of money and doing favors grossly unjust to the masses) and the worst bit consuming natural resources without conscience. In fact conscience no longer exists but is replaced by a hunger for power. The nation or people who will survive climate change will be those who can change their behavior towards wasting natural resources and those who can understand the many sins of man- greed, gluttony, power, bigotry and so on. The economy will have "winners and losers" but people only react to how these trends impact their lives. Capitalism must be checked before climate change really takes hold remember a businessman's mindset is not about their employees or producing wealth among the masses but their bottom line and their personal success.
Our government didn't stifle innovated growth until recently when the Pretend King Trump started plans to interfere with scientific studies. Federal grants have enabled this country to lead in many areas. Society's educational and personal growth needs to be part of the plan or we run the risk of making the same old mistakes, meaning in the climate change world it would result in catastrophe.
5
“If we continue to depict the state as only a facilitator and administrator, and tell it to stop dreaming,” she writes, “in the end that is what we get.”
Dreams are expensive, and without the downside of potential bankruptcy and failure, public funding knows almost no limits - particularly in an era of money printing. The potential waste of resources is enormous.
1
Everyone knows we have a MIXED economy. That means we are neither a capitalist nor a socialist economy.
"Free Markets" don't really exist, as the dominant players in this advance state of development have occupied monopolistic industries that persist in control to preserve their hegemony.
Dr. Mazzucato is telling the truth to a nation who has been fed platitudes while the middle class got hollowed out to advance greater profits.
Her economics is the only way we can humanely distribute scarcer earthly resources while managing our well-being and our future as a nation and as a planet.
17
Some of Warren's ideas are good ones and Dr. Mazzucato cherry picks far less than the Cato Institute.
Roosevelt and Truman created wealth by government programs that increased the size of the government by 50% during the Great Depression, a 1000% in World War II... and followed that up with the GI Bill and the Marshall Plan. Eisenhower added the Interstate Highway System and we had more balanced budgets in the late 1940s than any of the decades with Reaganesque tax cuts.
10
You want to talk about wealth creation when the wealthy refuse to invest in their workers or this country?
Today half our populace cannot afford an extra $400 bill, much less any form of medical care and your interest is only wealth creation?
9
There is nothing wrong with capitalism.
Over the centuries it has survived much longer than other economic systems.
The problem is not to redistribute wealth it is when the bottom guy is not making a livable wage or living.
That is the issue imo. Let the top guy make all the money he wants, as long as the bottom guy is taken care of.
4
@Paul The problem you describe is inherent to capitalism, and is exactly why your last stipulation is rare and/or nonexistent, because those at the top have no desire nor any obligation to ensure those at the bottom are "taken care of."
13
@Arin Thank you for you reply. Yes it is inherent to capitalism but as the old saying goes don't throw out the baby with the bath water.
To trick is to keep the excess under control. I agree it is always a battle but the period between roughly 1935 to 1970 showed it could be done ie the low guy getting taken care of.
6
Thanks so much for introducing us to Dr. Mazzucato! "Mission Muse" and the NASA related movie of the three incredible women of color, such powerful examples of Dr. Mazzucato's "create" versus "problem-solve" mentality. Imagine if developing countries, where government is often the major source of employment, were able to effectively identify and reward creativity and success.
3
There is nothing novel about Dr. Mazzucato's prescriptions. This is identical to the Chinese model of state-directed capitalism, in practice for decades.
3
Suspicious of economist “darlings” like Mazzucato who get everyone from Warren to Bloomberg (he consulted her also) to Marco Rubio fawning. Flavor of the month and an admirable one-woman PR machine, but also a highly theoretical body of work, and a distraction from the very real problems of declining government legitimacy, economic inequality, and systems sustainability.
4
As an engineer whose career spans 65 years - seven of those in ‘military-industrial development - I witnessed first hand the way in which the government has led so many of our industrial miracles: Xerox PARC and the development of the integrated circuit, leadership in development of the internet - yes, the internet and email. Often, theses endeavors were led by DARPA. While some would argue that the government has reaped taxes from these investments, these have been minuscule compared to the subsequent industrial profits. Patents were assigned to the corporations and the U.S. was not listed as “co-inventor”. If we take the risks, we are certainly entitled to some of the profits. That’s the bedrock of Capitalism.
42
It says she dispatched an assistant to turn down the AC. Did she fill out the required forms?. Did the assistant then go out on disability. The State doesn't work. It hinders and frustrates. It is very much needed, but in small doses. There is brutal inequality in this country. The state is not going to change that. Think of Bill Gates foundation. It distributes money. Give the money to the state. They will first build a nice building, hire 500 people who could not get a job anywhere else and then give away money to other organizations that have state employees, just an non productive as they are. Then, they go out on disability. I run into it every day.
2
@one percenter
Spot on!! Our northern suburbs are growing so fast the school districts are trying to get voters to issue bonds for new construction. The construction starts with a new administration building based on the design of Buckingham Palace and then spend the rest of the money hiring 30 or 40 assistant superintendants to do nothing but attend conferences all over the country. Any money left over is spent on new Athletic facilities.
@one percenter
You’re misidentifying the problem. The state is not synonymous with bureaucracy.
But, yes, bureaucracy is a problem. A German sociologist by the name of Weber called it “rationalization.”
Presently it seems as if corporations socialize risk (think of the Wall street, airline and auto company bailouts), while privatizing profits. Dr. Mazzucato is onto something!
19
The post-second world war experience has repeatedly vindicated the view that the single most powerful driver of prosperity is profit-seeking businesses trading within a law-governed and competitive market environment.
However, in the new millennium, the recently exposed frailties of capitalism are all too evident in markets in which the government is the only customer. The problem with such markets is the endless subsidies handed out to incumbent businesses which insulates them from being usurped by agile and innovative start-ups, thereby preventing wealth being spread about.
This is further complicated by the fact that such markets are highly susceptible to cronyism – the nexus between the governing elite and the business elite that contrives to put the interests of business first, ahead of the wants, needs and expectations of ordinary citizens.
It is, as the economist Randall Holcombe puts in his book "Political Capitalism" a “system in which the economic and political elite cooperate for their mutual benefit.” The political elite tilt the economic playing field in favour of the economic elite, privileging them through subsidies, regulatory protections and targeted tax breaks. In exchange, the economic elite then help to ensure that the political elite remain in power. The rest of us pay the bill for this quid pro quo through higher taxes, higher prices, and a less efficient, less dynamic economy.
@JagPatel3
4
The old doesn't work. You can't create without increasing wages and raising taxes on the upper tax bracket.
5
The primary assumption underpinning these proposals is the possibility of infinite, unending growth. Unfortunately, the world is a finite system and growth in any one area means a contraction in another.
If politicians were competent enough to know their limits and seek advice, and then competent enough to heed it, government as a driver of wealth and innovation could work. With politicians like Trump, Morrison and Xi running the world - not a prayer!
3
@Philip Brown I think the reality of change is a bit more complex than this linear model. As parts shift and contract other parts shift and expand. For example while land lines have contracted, use of phones in general have expanded dramatically in scope of use.
2
@Cecile Betit
I am talking about the resource limits of a finite earth.
Growth in population means less land and water for crops, thus less food. The land and money used to build factories cannot build houses. Artificial islands as Chinese military bases mean that poor people from other nations cannot catch the fish they need to eat and trade. Ground water pumped for domestic use cannot support trees for shade and soil stability.
Ecology and natural systems productivity is much more complex than landline phones versus mobiles. Strahler wrote some very good texts on such topics.
3
This is essentially what the Chinese government does (and the US government is trying to force them to stop as “unfair practices”) - they invest heavily in, and subsidise, sectors they deem important to growth and to the future of the economy and national security. In this sense, they are also the “patient investors” described by Dr. Mazzucato. This is what has driven growth in the Chinese economy for the past few decades, and what is now bearing fruit as they begin to pull ahead in sectors as diverse as social media, renewable energy, high speed rail, and cell phones - what is often disparagingly termed “State capitalism”.
Of course, there is also significant waste involved from supporting the wrong sectors such as construction, or support in the wrong way .....
6
When wealth is 'created' how often is it shared with the employees that helped create that wealth? How much of the wealth created is shared with the employees?
Most of the wealth created in any enterprise depends on the efforts of many - even if the original concept belongs to one person or a few. The original employees at Microsoft may have gotten stock options but they were limited in number. Most 'employees' now are contract workers.
The same is true of most tech enterprises - so praised for their wealth creation.
Much 'wealth' is created by increasing the profits of an enterprise. More profits mean higher dividends and share prices. how is that accomplished? LOWER labor costs. Keep wages low and cut the number of employees.
6
I've seen people work hard and help others create real wealth. Yet too often they share little in the fortunes they helped to build.
I saw a company's founder structures a company to survive his death wanting it to be his 'legacy' and provide jobs for his employees for life - the employees that helped him build his fortune. He wanted to set up an ESOP but contracts he had with a company his firm represented prevented that.
The firm was sold against his wishes. His employees were all let go by new owners. His already rich children got richer.
Somehow the people with the trust funds and hundreds of millions manage to get richer while those that create the wealth they inherited lose out
You can create all the wealth you want but it does nothing to help ease the earnings gap when none of that wealth is shared with the workers that help you create that wealth.
9
This sounds just like the industrial policy used by Japan, Korea, Taiwan and most recently China. It worked for them. They were pragmatic and did not need this academic's justification to implement it. The US is late to this idea, but better late than never.
12
Google search engine created by its founders during their PhD.
1
Mazzucato says the left focuses “too much on redistribution and not enough on the creation of wealth.”
Government investment spurs growth. Redistribution spurs growth, too. It's called demand-side economics. Why can't we pursue both?
Currently, the bottom 90% of U.S. households have only 22.8% of the wealth. A little redistribution could go a long way economically.
15
One word. One concept.
"Incentive"
And human nature has never, ever changed.
4
@Hannacroix
I’m pretty sure the word has a synonym: “greed.”
1
More neoliberal thinking to cloud the rhetoric. No - the problem is inequality and it is the cruel result of 40 years of deregulation, globalization and tax cuts for the rich.
8
Mazzucato is about thirty years behind the times. Federal laboratories have been MANDATED to do technology transfer to the private sector since 1986. (https://www.federallabs.org/learning-center/what-is-t2) But beware that it is a devil’s bargain. The US military accounts for about 40% of government spending on R & D, so much of the research has a defense function. On the other hand, that can be harnessed for good by directing DOD scientists to reduce dependence on fossil fuels or come up with entirely recyclable food packaging.
6
@Anonymous I think her plan is more publicly oriented via private sector. Have a look at their work with the Labour party on pharma at https://www.ucl.ac.uk/bartlett/public-purpose/news/2019/sep/labour-party-draw-iipp-health-innovation-research-new-pharma-policy for an example of this: "To shift the pharmaceutical industry towards a more equitable model rather than a model driven by profit."
2
This article discusses an acceptable middle ground, hopefully both parties embrace growth as an abundance strategy. We all need greater tolerance of dissonance, to enable a conversation between polar opposites. Candidates will do well to avoid sweeping proposals, and instead present a choice framework as described in book Nudge. I am interested in opinions on Creative Monopolies as described in Zero to One.
1
Thing 18: What is good for General Motors is not necessarily good for the United States. There was (maybe) once a time when the interests of giant corporations were reasonably closely aligned with the interests of the national economies they reside in. That time is long gone. Multinationals will treat nations as hotels if we let them.
Thing 19: Despite the fall of communism, we are still living in planned economies. Capitalist planned economies, that is—only nobody calls it that when we get the results that happy suburban consumers like ourselves want. The very fact that people are whining to Washington to solve our economic problems reveals how important planning is in this country.
Thing 20: Equality of opportunity may be not be fair. A “get what you deserve” society sounds good, and in many ways it is, but there need to be some minimums for what even the losers get.
Thing 21: Big government makes people more open to change. Because it makes them more able to take risks. Some economies with big welfare states do very well, thank you. It all depends on what kind of big government you have. If big government is always a loser, why is America borrowing money from Sweden?
From Ha-Joon Chang’s 23 Things They Don’t Tell You About Capitalism
6
We continually seek out new economic stories to help form images of what the future can be. Many of us will read these proposals in avoidance of naiveness. I worry that this is true in appearance, but not in fact, for the future may still be hideous since individuals have a tendency of being able to remedy their problems only by aggravating them, so that each day is much more tolerable before the solution is found to the difficulties of the moment. This is why we need transparency.
1
The paradox of the economic stories we tell ourselves leads to all that is good and bad. During good moments, how we shape our narrative help us deal with economic trauma. Economic pain rewires the brain and changes the way people experience the world. Economic struggles can affect the mind and body immensely and prevents those affected from living in the present. So in essence, we are and become the stories we tell ourselves. Our economic narratives can also be dangerous if we’re narrow minded, disregard constructive criticism and ego driven. We mustn’t let our ego become a controlling factor in the way we act and make economic decisions. If this sounds like you, don’t tell yourself a story. In such instances, the stories we tell ourselves are just labels that put us at odds not just with reality, but with the real strategy that made us successful in the first place. From that place, we might think that success in the future is just the natural next part of the story-when really it’s rooted in work, creativity, persistence, and luck.
2
Our history shows that her model does work well, save for the fact that we usually require a war to obtain funding. Much of what is loudly claimed to be a result of private enterprise had its origins in government labs. That knowledge was given away with no compensation to the public who’s taxes funded it.
3
What Dr. Mazzucato's economic model may have already existed ?
Like in China, there is a mix of state owned and private owned enterprises. It has succeeded to bring 700-800 millions people out of poverty ( accounted for 80% drop in poverty around the world ) in the past 4 decades.
The question is why the West continues to meddle the internal politics so as to contain the peaceful rise of China ?
3
Dr. Mazzucato influence on some of Elizabeth Warren's policies are indeed encouraging. However, among Warren's many economic policy proposal are some I question as to their stated goals. I strongly support her proposals to increase federally supported R&D to level seen in the 1980's. Its drop to half some 4 decades later has hurt American innovation, but was largely compensated by privately supported R&D, which now exceeds the federal contributions. Warren's negative example of the iPhone as being the result of federal R&D with the profits going to Apple and none to the tax payers is misleading, as the vast number of components in the iPhone were developed by Apple and other companies based on technologies developed decades after the discovery or invention of the underlying physical principles. It was the latter that benefitted from the federal R&D. It was primarily the basic research function that produced the discoveries, with much of the support directed to the academic sector. And it is this component that needs the most help to boost innovative discoveries in all aspects of the physical, health and environmental sciences, which industry is not prone to engage in. Once a discovery, invention or process has matured and becomes a commodity, the US becomes less competitive as we have seen throughout our post WW II history. Our best strategy is continuous innovation through our world-class educational and research institutions. Eventually all of us will benefit.
3
'Dr. Mazzucato argues against the long-accepted binary of an agile private sector and a lumbering, inefficient state. Citing markets and technologies like the internet, the iPhone and clean energy — all of which were funded at crucial stages by public dollars — she says the state has been an underappreciated driver of growth and innovation'
Lady does realize that all those creations were made by private companies, I assume she knows that?
The government involvement was providing the cash, but the rest it was not a bureaucrat but an inventor tinkering until he got a product.
Based on that, the rest of her assumptions are way off.
2
@AutumnLeaf That's correct. But that's why R&D funded by the Government is essential. R&D usually has long term goals. "Investement Capital" seeks short term profits (witness WeWork, Theranos and other "startups"). Neoliberal capitalism is into short term gains. True development has long term vision. That's why Ike funded the Interstate Highway system (besides providng convenient landing strips in the case of nuclear disaster). Even higly controversial fracking has been funded in its initial stages by government R&D. Short term profits are anathema to development. They only create bubbles and economic turmoil. I was in NY last year and was astounded at how poor much of the "heartland" is. To lift it up, you need long term investment, education and public health. It's astonishing that the US has no public health system. We don't have the best in the world here in Chile, but even a person deep in our "heartland" can get his checkups, medicine (including insulin) and have basic care and then will be derived to more specialized places when he/she needs it. Even so, we're shaking off the yoke of neollibearlism, which has made huge fotrunes, but for 0,01% of our population
6
The basic technologies were created by the military and funded by taxes.
Yes, private firms added to the process. But they profited from basic research that was government-sponsored.
That’s the point. It took both.
4
@AutumnLeaf Read her book on the Entrepreneurial State to understand her concepts more fully than the journalist explains them here.
2
The flaw in the "government as first resort" thinking is that they don't have the expertise and can't compete with the private sector to attract and retain it. Think DMV competing with Sand Hill Road. Mazzucato's thinking would work well in Zimbabwe, where there is a dearth of private capital, but in the US all it would do is fund Solyndras and politically favored lines of research.
6
@Kurfco Solyndra was a great startup. I visited it in 2006. Perhaps *too* far ahead of it's time. What happened then is thar the US (and most of Europe) were looking the other way and didn't see the Chinese solar juggernaut gathering steam. China banked on conventional silicon, and they improved production, slashed prices and (literally) took the world (and China) by storm. Today they're moving very fast in the CSP sector (solar energy 24 hoours a day), thermal storage, batteries and electric cars. If the US doesn't wake up (gas prices in the US are incredibly low. Taxes don't even cover road maintenance), it will get steamrolled again. The US has some of the greatest scientific, engineering and industrial talent in the world. However all everyone seems to think is how to strike it rich, and make zillions in finance. Finance desn't creat value. It creates numbers and then the bubble bursts on a regular basis. And it's the "heartland families" that will pay the heaviest price. Greetings!
11
Thanks for restating the central neoliberal argument. The problem that Mazzucato points out is that this perspective isn’t empirically accurate. It doesn’t accurately account for the actual relationship between state and private sector, nor the history of some of our country’s greatest technological developments.
3
@Kurfco VCs have a narrow window through which to assess viable projects. Many other projects have significant social and economic value, but cannot be turned into cash within the necessary timeframe. It's a big mistake to think that most early stage investment comes form VCs.
If, by posing the question of how wealth is created, we mean how wealth ends up in the hands of a small group or even a single individual, that is undoubtedly the most significant question one can ask about the aggregation of wealth in the hands of less than one percent of the population. How does a Bill Gates or a Michael Bloomberg end up with a personal fortune equal or greater than the gdp of some whole nations? The answer to this question has little to nothing to do with their genius or even their cunning--and all to do with tax laws written to allow such an outcome, first of all, and secondly, with labor laws written to make unions powerless or defunct. It has never been more obvious that behind every great fortune is a great crime.
18
@Vincent Amato
Just curious, but haven't you lived your life under the same laws and tax regimes? I assume you, too, are part of the Gates, Bloomberg, one percent? Or are there other factors at work?
5
Government investments are very likely to further corrupt our institutions and our politicians. There are some public investment vehicles that have done well, thinking of Singapore and the Norwegian models, but there are many more that have been corrupted - Malaysia for example.
1
@Ben P Agree. That's why creating governance is essential. And corruption is not only in Malaysia, but wides swathes of Africa, Central America and (lol!) in more than one US district or state...
2
It's always been about who controls the narratives. Which the Democrats have been consistently atrocious at doing...no matter the subject, or issues. They always fail to make a case by intertwining cases and causes and the sins committed. Instead they make individual cases, trying not to "complicate things" (even now with Trump and his Circus) an then end up playing too much defense, when Repubs and Trump/Fox TV drowns them out with a Grander Narrative. Usually laden with conspiracies and outright fantasies.
When it comes to wealth, economics and the who, what and hows...and whys - Dems get tangled up in their designed for the campaign fixes first, before explaining the causes followed by some potential fixes. Where the Repubs simply say, "Look if they do X, then YZ will always happen and that will hurt you. So don let them." Then Dems play defense and trip up on their own lousy explanations. Instead of saying this is what is occurring, and here's why, because of Repub policy, A, B thru M. so we need to fix it this way.
Thats why Warren gains traction. She specifically points to examples, followed with fixes. Not patches, which is typical Dem rhetoric. Esp. when it involves wealth redistribution.
1
Her theories are not new, the NYT is 6 years late - but better late than never
Here is the link to her 2013 LSE (London School of Economics) Lecture
http://richmedia.lse.ac.uk/publiclecturesandevents/20131008_1830_growthTheoryStateBeyondMarket.mp4
But beware :What she calls "State Investments" (e.g. Jobs surfing on State Spending" is, in the US, MILITARY investment in R&D
The internet was funded and started by DARPA (Denfence Advanced Research Project Agency). As were self driving cars.
Intel was funded , while developing the Micoprocessor, by DOD
Space exploration of the US is military driven - the civilian part is part to sell it to the public, but not its core missions
Carbon fiber based high strength materials (that led to the Boeing 787) was financed for decades by the Pentagon
So before you applaud, check , Americans , where the State R&D flows to in your country.
It is, for the US , a call for more for the US to spend on military R&D
Is that what you want?
8
I have had for quite a while the same thoughts and feelings towards the benefits of government activities as has Ms. Mazzucato.
3
In general public investment in individual firms does not have a great track record, but public investment in basic research and then licensing, etc those fruits to private sector entrepreneurs is a great policy mix that produces great results.
We should accelerate investments in basic research by the US’ outstanding university system and protect the IP while encouraging US firms to pick up the innovation cycle to bring new products and services to market.
6
The technology for the web was developed through defense (DARPA) spending sponsored research. Instead of selling the results to private investors/corporations and/or granting them patents for a pre-determined time of monopoly, the technology was openly given directly to the market.
Just sayin', ya know...
3
I, as a leftist sustainability sociologist, have applied Dr. Muzzacato’s leftist think to my systemic approach to deal with the looming climate catastrophe and I have been proposing transforming the unjust, unsustainable, and therefore, unstable international monetary system by the introduction of the carbon monetary standard of a specific tonnage of CO2e per person and its associated monetary architecture.
The commercial, intellectual, ecological and strategic dimensions of such carbon-based international monetary system are seminally presented in Verhagen 2012"The Tierra Solution: Resolving the Climate Crisis through Monetary Transformation" (www.timun.net). An outstanding economics author who will be close to Dr. M’s thinking and who is a globally known climate activist opined about this Tierra global governance system: “The further into the global warming area we go, the more physics and politics narrows our possible paths of action. Here’s a very cogent and well-argued account of one of the remaining possibilities.” Bill McKibben, May 17, 2011
2
Is Dr. Mazzucato John Maynard Keynes & Ludwig Wittgenstein rolled in one?
1
Anyone who's worked in corporate America, as I have, knows that the concept of "agile private sector" is laughable. The time and effort spent on CYA activities - or "running it past legal" more than outweighs any bureaucratic inefficiencies in government work, I'd wager.
34
Economic and political systems shouldn't allow billionaires to be created, as they take too much away from the rest of us. Instead, the poor and the middle class should account for at least 80% of the wealth.
5
@Alex Bernardo No matter how thin you slice it, every story has two sides. Equality is as undesirable as it is unrealizable. Attempting to achieve equality requires that each of us forego who we are and what we can do in order to create something in which no one ultimately believes - a society everybody is the same or has the same. let us by all means seek to increase opportunities for all. We have to proceed knowing to increase opportunities for all is likely to favor those better able to take advantage of them and may often first increase inequalities.
4
Please pick a billionaire and show me what they have taken from you.
1
@randomxyz Life is what you do with what's been done to you. To learn more read Jonathan Haidt - an American social psychologist, Professor of Ethical Leadership at New York University's Stern School of Business. In his book “The Righteous Mind - Why Good People Are Divided By Politics And Religion” he describes his transformation from liberal to an intellectual. Haidt repeatedly uses The Elephant and the Rider Metaphor. Haidt says that our emotional side is the Elephant and our rational side is the rider. Perched atop the Elephant, the Rider holds the reins and seems to be the leader. But the Rider's control is precarious because the Rider is so small relative to the Elephant since it is not reason who guides life, but customs we're born into. It is these elements which those of us who avoid addressing these questions rationally & only see the world through an elephant's perspective, deep down, especially intolerant towards and upset about. Their inability to be mostly rider reflects a longing for a world without a need for hard choices and the sacrifice these necessarily entail. We may well long to ‘stick to facts,’ but we eventually have to try to lead our lives according to values, which are inherently much more contentious and complicated structures. The most unfortunate thing regarding nihilism is not the loss of the ability to believe, but the inability to see the beauty, opportunities and possibilities of things and events occurring around us daily.
2
Well, I have said as much in numerous comments on this site. Where is my Ph D.?
What we call innovation and growth seems to be increasingly more elaborate methods of waste - the narrative should be that this is destructive. More equitable distribution accomplishes democratizing the power of "investment". The crucial decision making is mission priority - so many things are perfectly agreeable to a large number of people until it is poisoned by the pursuit of market dominance - generally a way to reward the least-best solution.
The real question for me is how much longer until we realize this is a genuine moral failure on our part. Does it actually take biblical consequences? (See UN climate report)...
3
I like her ideas and she is a persuasive debater, albeit smug in that way of the London metropolitan elite. But, I'll take Prof. Duflo's pragmatic and research-tested economic advocacy any day.
1
What is taking the economics profession so long?
There should be enough signals in the economy to create some re-thinking: Extremely low interest rates on government debt which screams "Invest, Uncle Sam" together with ever increasing concentration of wealth in few hands which in a previous age would scream "Revolution! Re-distribution!". Yet today we can surely understand that our previous system was owing to the need for "decentralized" markets as a way of disseminating information whereas today we see that system being perverted by the ease with which large corporation are able to centralize management with the use of a room full of servers. In the old days, the 'locals' went on strike and we had a system of "countervailing" influences which the justice system used to construct a labor v. capital "adversarial" system which was eventually won by the more nimble, portable capital. Yet, old dino liberals still trot out their blaring pro-union message screaming "strike now!!" which in this day and age scream "stop producing" or "hands up, give us your profits we don't care about the 90% who aren't in unions".
As a start, I would hope the left would point out the grotesque inefficiencies holding back our economy like big pharma, big (health) insurance, cable monopolies, dinosaur fossil fuels, arcane revenue collection (IRS), bloated, irrelevant education system and outdated military complex.
Fixing the foregoing would "re-distribute" effectively.
8
There is a thread of thinking developing that says that what we used to know about our system and have since forgotten is being remembered. Jacob Hacker and Paul Pierson's American Amnesia details another aspect of this. So indoctrinated now in the Invisible-Hand-Ayn-Rand model of government's role (and the contempt that many show for it) that I welcome any voice that points out the benefits of what we, Americans, have worked so hard to achieve.
I lived in Mongolia, former Soviet satellite country, for three years. I came to appreciate—no, yearn for—the control our government exercises for the betterment of its people. And I witnessed how publicly recognized and accepted corruption lowers the expectation of government.
At the time, we had a serious president. Mongolia had a Harvard graduate as its head of state . Now they have a professional wrestler, and we have a reality tv star.
Seriously, whatever we were thinking to get us to where we are needs to change.
4
Read her book: The Value of Everything.
It will change the way you see the economy and it will put numbers, context and data to hunches about the way the wealthy put their fingers on the scales of modern economies and then claim that the economy "naturally" works the way it does to reward the most intelligent and the most industrious. Balderdash.
Her book should be required reading in every school.
11
We need so much more of this type of open thinking. Unless we push the theoretical bounds and recognize that the laws of economics and of politics are not static (like the laws of nature), then we will fail to adapt to an ever changing world. The problem on the right (among many things) is the sacred belief that the only economic path is the classical model. That may have been right for the 1800s through late 1900s. But the rise of software-based and knowledge-based value (rather than pure manufacturing) has changed the playing field, And societies have become more diverse, more stratified, and far more complex. We need this sort of fresh thinking to challenge us to adapt.
6
Necessity is the mother of invention. Money is the father. How do you get those two together? Sometimes the government brings public money to public need. Sometimes investors bring private money to a consumer need. Government, for the greater good, takes on higher risks or longer paybacks that investors won't. So we do need government to drive some investments. It isn't leftist. It just is.
8
Much new wealth is being created now. When more is created will it continue to gush up to the top--as it has in recent decades?
3
It is easy enough to cite examples of successful backing from the public sector. The problem is that it is way easier to cite failed examples. And when the public sector fails there is no avenue to let it ride off into the sunset, it is the gift that keeps on giving where the customer (us, the citizens) can't do anything about it. With the private sector the market quickly decides who stays and who goes, what succeeds and what does not.
3
@DC I'm sorry DC. What you say is true for "small" private failings. But do you remember the 2008 financial crisis? It had global effects and finally it was Government handouts (subsidies) to the tune of nearly 1 US$Trillion that started a (mild) recovery. Isn't that an object lesson of markets running away without proper supervision? And it was the poorest sectors of the population that paid the price. Most of Wall Street is still laughing. And what "of value" did derivates create please?
1
I very much appreciate the freshness of these ideas. Thank you! I have some concern over the government being the investor of first resort though, given the government’s power to set policy. If the government becomes an entity that can both be the first investor (Instead of steward) and also the policy setter, they would gain too much power to warp markets. I believe the result would be some pretty massive, and extremely destructive bubbles. I mean, bubbles that could take down countries.
2
@Aaron Agree this is a concern, but we're pretty good at designing government granting agencies that are insulated from politics- the NSF, NEH, NIH, etc. DOE does quite a bit of granting to private businesses, but it never gets any stake in the profits. Some kind of peer review process for a government investment agency, and a clear set of principles for what benefits are being aimed at seem like reasonable ways to start a public investment program and keep it from corruption.
9
@Daniel
I’m delighted by the alternative ideas being proposed and I have generally positive feelings about the potential of government services. However, I’m concerned about safety here.
Direct corruption:
What if a future Trump gets their hands on it? He’s even politicized the National Weather Service.
But what I really mean is well meaning corruption:
What if an agency invests financially in an outcome from which it anticipates getting returns? Government services depend on these returns. Then the investment sours. However, the agency can simply alter a policy that will brighten the investment, etc, etc. This results in an increase in the the returns perhaps not reflected in the actual quality of the investment. Furthermore, the agency’s investments become self-fulfilling so private investors recognize the reliability of any investment by the agency. This could result in a phenomenon where ANY investment by the agency does well because significant private investments follow the agency’s. Large bubbles would result until BABABOOOM!
1
One way it's created is through the "rentier" class. Rentiers have amassed enough capital to buy something and rent it out. You pay dearly and they thrive. Late stage capitalism.
8
In Against Economics, David Graeber (New York Review of Books) writes a withering appraisal of current economics and just how out-of-touch and out-of-date it is and how economic reality is sweeping aside old notions such as GDP as a realistic metric. (See https://www.nybooks.com/articles/2019/12/05/against-economics/)
It seems as if there is a rising momentum of new thinking in the discipline which can only be good, it will at least allow us to come to terms with the new realities being played out for each of us.
If Oracle, for example, had to pay royalties to the DOD for the seed of their database engines, then DARPA would be even better funded than it is and be generating even more wealth for the government.
8
My niece ran a lemonade stand this past summer. When it became obvious to her that she would not have enough cups to last the supply of lemonade, she wrote "Greatness" on one side, and "Be Best" on the other. She said her customers would learn to share.
True story.
6
@Arthur, Ah marketing! Selling a short supply of something as a feature & allowing the customers to feel good about themselves are hallmarks of a great entrepreneur.
"We only have 1 cup so as to not create more waste. Only $5/cup to save the environment!"
1
Im glad to see an academic economist who's not sitting in an ivory tower, but is looking into the world beyond in a practical pragmatic policy oriented sense. When I did my PhD in Economics (from Oxford) 15 years ago, any applied economics/policy job after it was looked down upon by many of my professors. There was ---and remains ---an emphasis in the academic profession on producing useless research papers marginally shifting the conversation, and not much use to policy makers on big policy areas.
Whether or not you agree with the value of industrial policy, those economists who are outside academia, recognize the critical role of the state in transforming (or corroding) economic well-being, innovation, job creation and so on. The state is an enabler, and its interventions happen at many levels and affect wealth creation (or destruction) in many different ways. I am fortunate to have worked at the World Bank which tries to answer precisely these questions for its member countries.
12
@terrymander I totally agree.
If only Dr. Mazzucato and Dr. Mark Blyth could get together to tell America, their adopted country, where so many of the world's largest and best industries originated. The US Navy, the US space agency and on and on...
8
The problem with many proposed government-centric approaches is that they are extremely prone to corruption and unintended consequences. As the military knows all too well, giant projects like a high-speed rail system, sports stadium or a nuclear power plant almost always have massive cost and time overruns and often fall into marginal rates of use much sooner than promised. The US military has little choice but to indulge such things or greatly scale back its role, but the rest of us have a choice with our civilian economy.
Government-sponsored research is often necessary and valuable, but implementation and long-run management of most services will be better policed by investors insisting on a profit. There are obvious exceptions, but we know what they are already.
The surest path to continued prosperity is a culture that does not tolerate corruption and that preserves some competition as much as possible.
5
Yeah. Because that’s worked so well with healthcare. It comes as no surprise to me that our nation’s most corrupt President ever is a famous businessman.
3
@Maybe so, but so is the private sector prone to corruption.
@Dave government intrusion in the healthcare industry has been increasing since the first laws mandating employers cover health insurance decades ago. Blaming the free market for the inefficiencies of a system where more than half of spending is managed by government is quite a stretch. The private sector was doing a great job with health insurance before the government got involved.
2
“the world’s greatest exponent today of public prodigality.” is George W. Bush, he having started the Iraq war on a phony premise. With a 1 trillion dollar price tag, that keeps going up
as we speak, so it perfectly fits the "today" in the quote.
5
How much would U.S. government military, medical, pharmaceutical, biotech, space and environmental research be worth if companies that benefit from it had to provide a continuing stream of profits from these developments to the U.S. government instead of paying a pittance to develop them? And how much would the U.S. government receive if businesses had to pay for transportation, communication and protection offered by U.S. roadways, railways, satellites, patent protections and a host of additional protections built into our economy. Some will say transportation companies pay for the roads through fuel taxes, but give me a break. How about the true cost of road maintenance which comes from neglected investment in infrastructure. Naysayers have nothing to offer to those who say, "You didn't build it." Freeloaders...
10
@Dave So we should do some studies and prove that these companies are freeloading. Short of that, you're just speculating about the costs and benefits. Libertarians like myself are all for getting rid of handouts to corporations- they should pay for what they use. But the idea that they're not paying taxes is a progressive myth. And "you didn't build that" has been refuted many times outside of the liberal bubble.
3
Whose Capitalism? The U.S.'s, the West's? The West Plus China and India and a few economies like South Africa and Brazil? The problem with political economy theory is that the economy part is going global while politics are heading in the opposite direction. If she is advocating more government investment in the U.S. economy we have that all the time in the form of government research that is taken over by the private sector, by military spending on new weapons and aerospace systems, and cyclical bailouts of the greedy, inept financial sector. There are neither the brains nor the will to implement her program. But she does talk a good game if both Warren and Rubio are listening to her.
4
Dr. Mazzucato's books are thought-provoking. What do we as society value? How are working towards creating value? Dr. Mazzucato advises governments to not only share risks but also rewards. Her books have specific examples of how governments have supported the early stages of development of Apple computers, Tesla etc. Looking at complementary research by Dr. Mazzucato's and Elinor Ostrom on value of strong institutions offers guidance on how we can move forward. They are inspiring.
7
@PI wrote: "Dr. Mazzucato's books are thought-provoking. What do we as society value? How are working towards creating value?"
Yes!
We have more chance having our Government represent our values than Business. That's why we create Governments.
Of course this has been distorted in our Age of Capital, where MONEY is the ultimate organizing principle of American life.
Clearly MONEY is no lodestone of all pursuits, but that's where we are.
Let our Government represent us and play its intended role in our country.
3
@PI - Reading "How Much Is Enough" by Robert Skidelski at the moment, another economic thinker who is questioning our perverse thrall to growth at any cost.
1
I took a number of economics courses in the 1970's. Recently I started taking them again to see what changed and to find out why the 2008 crash occurred, why we keep bailing out one bankrupt industry after another, and why workers in America, who are the most productive in the world, are not getting a fair share. Sorry to report, that economics is still taught pretty much the same way it was 50 years ago and not only do they not have the answers, they aren't even asking the questions.
I will be getting Dr Mazzucatu's books and reading them ASAP
39
@sjs You'd be better of reading the End of Alchemy by Mervyn King. The tendency to blow up the house to kill a rodent is prevalent among today's hard left. It answers the question of the financial crisis and the concept of a pawn broker for all seasons is a concept that needs serious consideration.
2
@sjs wrote: "Economics is still taught pretty much the same way it was 50 years ago and not only do they not have the answers, they aren't even asking the questions."
Well they do have all the answers for the Elites.
And, yes they are not asking the questions needed for the rest of us.
But that's how it is designed by the Elites.
Good luck.
7
@Dude The house, in your analogy, isn't what it used to be and the left has changed as well. The two together can help offset the damage done by austerity, growth at all costs, and environmental degradation, brought on by right/neoliberal policies.
These new thinkers need to be heard and getting their message out to "the rest of us" is important if we're going to participate in the discussion of our collective future.
8
US capitalism has required 3 bailouts in the last 5 decades. So, I agree that having the US being the lender of last resort is wrong. Also, with her example of the moonshot, and I would add the internet, roads, airports and bridges, the govt rewards everyone when long term investing is considered.
9
Since there is little about of Mariana Mazzucato’s thinking, it is fair to ask how exactly she advised AOC? Where's the value of chasing away Amazon’s jobs and willingness to develop a derelict waterlogged property?
Governments don’t usually innovate for the simple reason of incentivize, and they usually attract people looking for security, conformity and a pension.
When they do innovate, someone usually winds up in jail or the public is outraged. Think of the last few administrations, corrupt politicians generally, ticket quotas, Robert Moses and taxpayers saving the banks without also requiring them to save taxpayers.
Businesses succeed because they are motivated by greed and a common sense ability to make innovations work. Government is motivated by satisfying key constituencies, and old rules - the kinds of things innovation tends to disrupt.
That’s the other thing, innovation is usually about disruption and there is nothing government hates more…..
There is a way for the public sector to be innovative: through managed crowdsourcing and it probably involves blockchain along with alternative economies - how else to pay for the caring needs of society if you don’’t want to rely on welfare or religious agendas? Wikipedia is a good example of this and there are ways to do it in almost every field from taking on Amazon to picking up garbage and teaching students.
All this flies in the face of leftist and rightist thinking and so we read empty articles…….
4
@Alan Brody I would look at her youtube videos or read her book 'The Entrepreneurial State'. The government has basically been a primary risk in the economy and not just relegated to 'correcting market failures'. She makes the argument persuasively in my view. Her stump speech includes breaking down each individual component piece of technology in the iPhone and showing how it all came from government research. She has a number of case studies that show this. Your statement 'businesses succeed because they are motivated by greed....government is motivated by satisfying key constitutiencies' is out of sync with available evidence.
6
@Alan Brody Ah, Yes. The Gordon Gecko Philosophy of Wall Street Market Economy. The result being how a game of Monopoly ends. One privileged white male with all the cash and the rest of us waiting patiently for some "Trickle Down".
6
@Michael W. Espy wrote: " The result being how a game of Monopoly ends. One privileged white male with all the cash and the rest of us waiting patiently for some 'Trickle Down"'.
More like:
One privileged white male with all the cash and the rest of us broke, in hock, houses mortgaged.
You know...Game Over.
1
I would have liked to see Dr. Mazzucato, as a thought experiment if nothing else, tell us how her paradigm would work in addressing the world's biggest single problem of the near future: dealing with the economic effects of climate change, both with respect to its cause and solutions.
Indeed I googled on my question and found this web page where she addresses the problem:
https://marianamazzucato.com/research/green-innovation/
Reading it briefly, the central idea of hers is that we need to approach climate change as an "investment" challenge equivalent to the mission to land on the moon.
But this can only come from a central government dedicated to the mission in the first place (think JFK).
But we have in place an and administration and a political party (hint: GOP) that does not even recognize the problem, much less want to solve it.
23
@ernieh1
The mission to land a man on the moon was not prompted by an apocalyptic crisis, unlike the creation of the Manhattan Project, which is a far more apposite analogy to government's response to a clear and present danger. As you wrote, corporate owned Republicans and Democrats are resolute in their refusal to acknowledge, let alone act to address climate change with the necessary urgency. More disheartening, however is the fact that at the conference Dr. Mazzucato attended in Manhattan, those present shivered until an intermission when Dr. Mazzucato had to ask for the air conditioner to be turned off.
Most of the money floating around the world is based on belief and faith and emotion, rather than anything solid that you can hold in your hand. The value of a country's currency, of stocks and loans and real estate and jobs are all largely based on amorphous factors like market demand, fashion and politics. A dull, traditional manufacturer earning solid profits and employing hundreds of thousands of people can be worth billions less than a hi-tech, money-hemorrhaging startup employing a few hundred young people. Like virtual particles in space, billions of dollars of value pop into and out of existence every day on the world's stock markets - much of it driven by esoteric math designed to extract large profits from fractions of a penny (with the stock shares themselves often only a promise to deliver the stock shares).
The more you think about what money really is, the more your head hurts. We need new thinking, like Dr. Mazzucato's, about what value is and where it comes from and how to create it in more equitable ways.
8
Stock buybacks are so appealing to management for several reasons. 1) They are instantaneous with no time lag or lengthy payback period. 2) They are very safe, risk-free investments. 3) They have become so frequent and so large that they allow management to control, even manipulate, the price of a company's stock. As a result, they can be used to cover errors in managerial judgment that result in lower earnings, via their use as an autonomous source of EPS growth. 4) Such pricing power enables management to increase a stock's price at the end of the year, for example, when investors are most interested in stock prices as they realign their portfolios and sell their projected losers. 5) Considering former Fed chair Alan Greenspan's "wealth effect" of stock ownership as stock prices rise, during critical shopping periods such as Nov. and Dec.'s seasonal feasts, stock buybacks can be used to drive stock prices artificially higher during this critical shopping period. And, these price increases in the stock market can unleash consumers' purchasing "animal spirits."
[11/26/2019 Tues. 1:45 pm Greenville NC]
4
Re: “the world’s greatest exponent today of public prodigality.”
Maybe after Trump and all his fellow Republican spend-and-don’t-tax fellow travelers.
4
The problem is that capitalism isn't working right now. This is bait and switch. Fix the current problems first.
@James It is a PROBLEM of CAPITALISM as practiced. Tooling with today's of System Capitalism won't do it.
2
Just for the record, most all of the discoveries that fuel today's tech world came out of Bell Labs, from the transistor to lasers to terrestrial broadband to wireless. Lots of REAL Nobel prizes accrued in the process, unlike the faux Nobel's for "economic science" - which of course is an oxymoron - there is no progression in economics and therefore it's not a science...
6
Who knows if Dr. Mazzucato is right or wrong, but she has raised some interesting points that should be further examined. What is certain is the status quo leads us to an uninhabitable planet and ever widening cracks in the foundations of a stable society. At this point, we should be putting everything on the table for looking for better ways or just hand the bad actors a fiddle and let them start playing while everything burns. Even the most fervent free market proponents in their hearts know that in their midst there are people whose actions are so destructive, they need to be protected from themselves.
1
Bravo. Finally, the rebirth of appreciation for Public Utilities
Maybe, the economy, or more specifically the distribution of the rewards of the economy, would have stayed within a narrower range had we not lost appreciation for the public domain.
For one, I would question the release of public pension funds to privatization. This definitely emptied the well for public works projects.
It is exceptionally clear that the government, which handled the air waves and highways so well. never had proper control of the internet.
3
I keep wondering when Hazel Henderson's ideas are going to make it to the main stage of discussions about how to create a sustainable economy that is premised on a holistic ecological framework-- one that takes into account the fundamental systems-based reality that most economic theory refuses to acknowledge (including human behavior and the generation of meaning that defines value).
Many comments here refer to the internet. We should be thinking further back: the interstate highway system, the subways systems of NYC, Chicago, Washington, etc., and even more basic things like the relation between even-handed justice in commerce and the flourishing of commerce. The degree to which we failed to have non-corrupt, locally controlled, disorganized economies, such as in the Jim Crow South, was related to the degree of backwardness of those economies.
9
@Daniel Mozes the postal service is a very early example, it was crucial to the economy for a very long time.
Yes, wealth reduces pollution, hunger, illness and ignorance. Redistribution to individuals is theft, pure and simple, as it doesn't focus on the common good, but the good of some people over that of the vast majority of other people.
But isn't this combined system just China? A fully centrally planned economy with capitalism added at the end? Is that really our goal?
Nuclear power is a good example...when government created it murder as many people as possible, then locked in power reactors using ancient technologies with no way to improve them over time, and finally capitulated to hysteria and thus increased greenhouse emissions over the last 50 years, not to mention the wars fought over oil. Central planning simply cannot work over time because it suffers what all monopolies suffer in the end (goes stale, protects the current mediocrity over innovation, political corruption, theft of profits). Flexibility is a key trait to survival and improvement, and relying on central planning for this has never proven true yet.
4
@David
Redistribution of wealth created the super rich and you do not acknowledge it. When wealth is concentrated (extreme inequality) it transfers power from the society (elected government) to a few individuals and corporations which impose their value system on to the society. It is only natural that those who have money and power want to continue status quo. There is always redistribution of wealth in every society and that process has to ne modulated. Nobody can be so valuable to the society that he/she must be paid 1000 times the wage of a median worker. We have allowed that to happen and there has to be readjustment. In other words, the direction of redistribution of wealth has to be reversed and balanced.
8
Material happiness, does matter make us happy is another question, stands on 3 points: labor, capital, and the commonwealth.
Commonwealth without labor and capital is vacuous and abstract. Labor without capital has no capital savings to live on, and capital without labor is a pile of useless paper notes.
The common good is the inheritance that one generation of workers and capital transmits to the next generation. For example, our roads and structures have been bequeathed to us by the previous generation, dirty air and water from the past which are negative common goods, are handed over to us by the previous generation. Ideally, we must clean them to give the next generation a healthy world. At our death, the rich and poor take nothing with them. They only hope to leave behind a better world for their children.
2
@David
It all depends on who does the planning and what end it is undertaken!!!!!!!!
Her ideas are certainly interesting. Otherwise, economically we're doomed with deficit spending that results in more and more of the federal budget dedicated to debt service. There are opportunities for the government like drug manufacturing that could lower consumer prices and make money for the government. Just think of the private drug company money spent on advertising that would be saved.
3
The idea that government investment is an effective way to create wealth is not new and has been used for decades. The obvious examples are semiconductor technology, speech recognition, self driving cars and the Internet but government funding has been much more fundamental to technology advances and economic growth than the few examples people usually come up with. When someone questions that assumption I challenge them to come up with a single instance of a fundamental technology breakthrough since 1940 that created a new industry that did not start with government funding. So far no one I talked to has come up with a single example where private money created such a breakthrough.
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Dr. Mazzucato’s theories make a great deal of sense and have the added advantage of folding regulation into entrepreneurial incentive. But it’s interesting that Elizabeth Warren and AOC are the politicians cited as being influenced by Mazzucato’s ideas. In EW’s case, her stump speech’s go-to point on creating economic equality is taxing the wealthy. If you listen to Corey Booker’s ideas for making strides towards economic parity, they much more closely resemble what Mazzucato is talking about. But for reasons beyond me, Senator Booker’s strength as a presidential candidate are underplayed by mainstream media. Could they be responding to the poll numbers they help to create?
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The federal government could license and control technology and software developed by NASA and Department of Defence Research and Development, instead of doling out billion dollar contracts to Amazon and Boeing, but technocratic solutions don’t resolve wealth inequity. The extreme concentration of wealth by neoliberal capitalism is inherently hostile to democracy, and redistribution of wealth is redistribution of political power from the super-rich to the people.
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@Bruce Shigeura If redistribution worked as you suggested, wouldn't the rich be poorer and the regular people richer? No, government redistribution mostly ends up transferring wealth up, not down.
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Trickle-down economics has been the policy of not only Reagan to Trump Republicans but Clinton to Obama and Pelosi Democrats, who will only spend federal money if it’s paid for by taxes on the middle and working class. The banks, corporations, and billionaires spend their wealth enriching themselves through stock buybacks, mergers and acquisitions, predatory lending, and hiding money in tax shelters, paying little to no taxes—leeches on citizens and the domestic economy. Tax them and spend it producing goods and services for Americans, on infrastructure, greening the economy, expanding health care, education, and preschool, with decent paying, respectable jobs.and preschool, with decent paying, respectable jobs.
Our tax dollars built the internet. Now the well-connected are extracting (not creating) value.
"The Value of Everything" is an excellent book--well-argued, fun to read, and supported by her nice survey of the history of economic theory.
Thank you for this write-up, but it's a shame that there should still be an article about Mazzucato with the word "Meet" in the title. She deserves a prominent position in our current political/economic discourse.
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The far left is becoming the beached whale of politics with their endless calls for income and asset redistribution - taking from Peter to hand out to Paul.
Government exists to handle "tragedy of the commons" problems - where an individual acting alone will fail, but a collective action will succeed. Infrastructure and defense are the obvious prime cases. Public health and safety are important as well.
Where we have erred is that for the past 20 years there have been powerful blocks lobbying to deconstruct the gains made in the past rather than to build on what had been done. Cap and Trade credits should have gone further than just SO2 and NOx, but those efforts were killed by Republicans. We have had a long history of product safety, but the oversight is dwindling. The new thinking in Silicon Valley is to push whatever seems to work out the door and hope for the best. Silicon Valley still has the promise of riches, but now at a much higher moral cost. If government invests in medical developments, the public should be compensated by reduced costs.
I'm unclear as to how new tools will work when existing tools, and they are very good tools, have failed in the face of short-sighted pressure.
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@John No matter what, you'll be at the mercy of the current government in power. Government is a full monopoly, though more powerful than any corporate monopoly because it can and does use force. People think central planners will only be optimal when it's a well proven story that it just becomes corrupted.
Healthcare is expensive today, for example, because of a overly-harsh FDA, limits on medical competition through regulation, government spending on services and drugs that are not proven to be great and where customers just consume because other people are paying. Then the lawyers sue and make everything more expensive.
When you lose the information that price produces, you forfeit improvement. You lock in bad actors and promote new drugs that cost more but aren't any better. Free markets won't pay more no better quality.
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If one needs an example of successful public roles in capitalism the East Asian model is pretty compelling. Singapore, using the strong state model has over the last century become a virtual city state economic colossus, with a PPP per capita that is far above the United States.
On the other end of size, China's hybrid socialist/capitalist model generated a forty fold increase in GDP over a forty year period, beginning with the Deng reforms of the late 70s and early 80s. China may be dominated by an authoritarian state that controls most of its economy, but its robust private sector is thriving including entrepeneurship and technological innovation. With their command model, they have built the largest high speed rail system in the world in a little more than a decade. They are world leaders in solar photovoltaic technology and now produce more cars than any country in the world. The Chinese have told us they intend to achieve technological and economic parity with the United States by 2030 and then surpass in such fields as artificial intelligence. The Chinese are expanding all over the world, using its vast public finance reserves to the country's very ambitious Silk Road intiative in Central Asia and the MENA region as well as economic development in Sub-Saharan Africa, Iran, Pakistan and Latin America. All of this is being generated by a very different form of capitalism where the public sector is in fact dominant. It is not paradise but is very effective.
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Dr. Mazzucato is right on the substance of all the ideas here. The linguistics and the charisma-connection, I have mixed feelings about, but as they’re not as crucial, I’ll defer. Her most important accomplishment, and it will be a huge test for her audiences, is her questioning of conventional wisdoms. A major one is the stale, creativity-stifling duality between the alleged capabilities of government and business, and the many things that fall from that. When will audiences be ready to hear this?
Even for her and the proponents of such state-involvement in the economy, there are tests. Will they go further? It probably doesn’t include everything. What about what everyone is missing, picking up on the best of corporate social responsibility and linking business performance to the U.N.’s Sustainable Development Goals. Then there are the many other greening of economy ideas that are also mostly outside of policy consideration like green design, living buildings, etc.
Also important are day-to-day aspects, with the backwards air conditioning at the conference a good metaphor. This includes implementation; early detection of and adapting to mistakes; whether they eschew the certainties that almost never really exist; will they listen to good ideas, even from the right and from non-names not invited to conferences.
Making government entrepreneurial may not be impossible, but it definitely requires a transformational culture change. How are their organizational learning skills?
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Investment and redistribution go hand in hand. Let's say you invest in Medicare for All, for example. The money comes from wiping out the billionaire class, which is redistribution. (Interestingly, we never call it redistribution when the Justice Department confiscates the assets of a felon. In that case, we call it a just punishment.)
But if Medicare for All allows a Mom or Dad who is stuck in a mind numbing job solely for the health benefits to start their own business, that is investment, isn't it?
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@Walter Bruckner Because billionaires are convicted felons? If government can't even stop the crimes you pretend have been committed, why do you think they can centrally plan hundreds of millions of people?
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One comment. The article states: 'She has written that governments and state-backed investment entities should “socialize both the risks and rewards.” She has suggested the state obtain a return on public investments through royalties or equity stakes, or by including conditions on reinvestment."
In the U.S., public corporations effectively pay taxes twice. First at the corporate level ( when they actually pay the tax ) and second at the shareholder level when dividends are paid. One could look at the first level as the gov't obtaining a return on their investment.
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@Blaine They pay taxes, except for when they don't (see Amazon et al)
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This sounds interesting. I follow Krugman, been reading Capital in the 21st Century and I believe a great deal of current crazy GOP policy to continue to cut taxes and balloon deficits is simply idiotic ideaology that does not work, and has not worked for 30 years. I hope her ideas gain more traction because we need to change.
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@David wrote: "GOP policy to continue to cut taxes and balloon deficits is simply idiotic ideology that does not work, and has not worked for 30 years."
It DOES work. Just not for the vast majority of Americans.
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I had a very smart professor who asserted that "Does is work or not?" was almost always the wrong question for public policy proposals. The right question, he said, was "What work does it do?" or per dannyboy's comment "Who does it work for?". The problem with the 'work/not-work' frame is that puts forth a single purpose as the reason for policy, and a single effect therefore as it's consequence, with that as the only metric of judgement. All of which ideologically buries all the other possible reasons — which may be the real drivers — and all the other effects — which we might judge quite differently.
Thus, the 40 years of GOP policy to continue to cut taxes and balloon deficits has worked extraordinarily well in turning the U.S. away from democracy and justice and toward a repressive authoritarian oligarchy.
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One thing to consider.The taxpayer, via the government pays for much of the basic important research that leads to valuable properties. The history of the internet, yes the internet, most drugs, flat screen TV, almost all ,of Apples early products, and many, more important things were discovered and developed by Tax payers funded research.Then they were given free of charge to the Private guys,
The logging and mining industries given our lands and forrest's for a low price to make billions. Yes.,if we the taxpayer shared in the results of these tax paid research and collected stock value then health care, child care,,paying down of the debt would happen.
Not only do we not get our share but we then allow these same corporations to avoid sharing the profits by lowering their taxes. In 1980 Corporations paid 35% of taxes and workers 6%, Now Corps pay11% and workers12%.
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@Richard Head Please explain how development of the MacIntosh computer by Apple was funded by the tax payers.
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@Richard Head wrote: "Yes.,if we the taxpayer shared in the results of these tax paid research and collected stock value then health care, child care,,paying down of the debt would happen."
But that's the WHOLE IDEA! Of course Republicans don't want the majority of Americans affording their health care. The Republicans want oversized profits for the healthcare Businesses.
Of course the Republicans haven't yet figured out how to squeeze all of our money for childcare yet. They figure provisioning child care would just cannibalize all those excess profits from healthcare, financial services, etc. Why give the serfs any more, if there's no more to squeeze?
As to indebtedness, well that keeps the whole scam running. Serfs don't get no stinken' Freedom.
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@Richard Head wrote: "Yes.,if we the taxpayer shared in the results of these tax paid research and collected stock value then health care, child care,,paying down of the debt would happen."
But that's the WHOLE IDEA! Of course Republicans don't want the majority of Americans affording their health care. The Republicans want oversized profits for the healthcare Businesses.
Of course the Republicans haven't yet figured out how to squeeze all of our money for childcare yet. They figure provisioning child care would just cannibalize all those excess profits from healthcare, financial services, etc. Why give the serfs any more, if there's no more to squeeze?
As to indebtedness, well that keeps the whole scam running. Serfs don't get no stinken' Freedom.
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I applaud the purported focus on wealth creation instead of redistribution, which is immoral and non-productive. However, Governments are incapable of making tough decisions. When an investment is floundering, they are inclined to throw good money after bad until a final collapse. Instead of more government involvement, I much prefer a system that trains people so that they can meaningfully participate in the private sector.
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@Tim Lewis
In spite of some off the charts Right Wing assumptions, You have put your finger on a pivotal area, education. The electronic age demands some major changes in that realm. Online learning, maybe. Life-long learning certainly. Making a good education possible for everybody .
But we need to educate people in how to learn, Not train them like gerbils.
@Tim Lewis wrote: "I much prefer a system that trains people so that they can meaningfully participate in the private sector."
Kind of a giveaway.
I much prefer a system that trains people so that they can meaningfully participate in the PUBLIC sector.
But, as I said, it's a giveaway that you want uniformed and weak pubic sector.
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Dr. Mazzucato's theory points to the wisdom and benefit of our governments investing in the R&D of alternative energy technology. As progressives have argued for years, such investment would lead to job creation, the by-product of increased wealth, and technologies to combat climate change. These are all good things.
On another note, it is laughable that Marco Rubio champions Dr. Mazzucato stating that we need to focus on long-term economic solutions. I would like to ask him why he and other Republicans supported the massive Republican tax cut (which resulted in short term gains for our economy) and supports de-regulation of land use to benefit the fossil fuel industry, and clean water rules, if he truly believes this.
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Yes, government investments in basic research and in public goods -- defense, education, health care, etc. -- are often productive and meet needs not addressed by the private sector. However when governments attempt to play the role of a private sector entrepreneur they most often fails. Why? Because of politics and more fundamentally the lack of feedback by way of consequences. Perhaps the most immediate example it that of the EU and its predecessors who have been attempting to foster an IT industry since IBM mainframe days, unsuccessfully.
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Thanks very much for this Katy. I'm half-way through both of her books highlighted here.
There is something stirring inside and outside mainstream economic thinking, the whole direction of anti-statism and short run thinking, and "financialization" brought to us by Neoliberalism. She's one of the leading critical voices along with the economists who were nurtured at the University of Missouri, Kansas City: Stephanie Kelton, L. Randall Wray, Bill Black, Michael Hudson, Pavlina Tcherneva...just to mention a few. And Modern Monetary Theory, which was nurtured there and which I see as a platform for carrying out the directions of her policy.
It's a bit of a puzzle about her though, why she didn't become a member of the World Economics Association, to which I belong, the chief rival to the establishment American Economics Association, the world of Larry Summers, Paul Krugman and Olivier Blanchard.
The WEA has its own stars: Dean Baker, Edward Fullbrook, James Galbraith, Steve Keen , Richard Koo, Herman Daly, Henry C. K. Liu, Jayeti Ghosh, Yanis Varouvakis, Robert Skidelsky...Anne Mayhew, Ann Pettifor...and Randall Wray.
The state of the world in the West for the bottom 60% is fracturing the political universe - and this, in the US, is during at the peak of the longest period of Growth in GDP in modern history. It doesn't tell the whole story. When it ends, the whirlwind comes, and against it, new economic structures will emerge and "MM" will be part of the design team.
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@William Neil wrote: "The state of the world in the West for the bottom 60% is fracturing the political universe - and this, in the US, is during at the peak of the longest period of Growth in GDP in modern history. It doesn't tell the whole story. The state of the world in the West for the bottom 60% is fracturing the political universe - and this, in the US, is during at the peak of the longest period of Growth in GDP in modern history. It doesn't tell the whole story. When it ends, the whirlwind comes, and against it, new economic structures will emerge and "MM" will be part of the design team., new economic structures will emerge and "MM" will be part of the design team."
Just need to change a few words for accuracy:
It doesn't tell the whole story. When it ends, the whirlwind comes, and against it, War & Depression will follow.
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Her approach to economics might address a way to deal with the impacts of global warming. Allowing and supporting companies that continue to damage our environment and contribute to global warming has to stop. The current arrangement between government and business has been a total failure. Government SHOULD be directing innovation and investment that benefit society and certainly to deal with the effects of global warming. How this transition might take place given the corrupt system that allows business to control our government will be challenging. The cost to humanity if we continue on the current road will be unbearable and harsh.
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"...there’s been kind of a strange symbiosis between mainstream economic thinking and stupid policies."
Absolutely a clear sign that the current models and concepts are not only not functioning to the benefit of the planet and its inhabitants, but actually to our collective detriment. Dr. Mazzucato points the way to better, constructive thinking and policy creation. Brilliant.
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@WR Yes,"...there’s been kind of a strange symbiosis between mainstream economic thinking and stupid policies."
The mainstream economic thinking has been bought and paid for by Elites, who benefit from those policies.
They are only "stupid policies" for the rest of us.
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I wish this articles and articles similar to this would focus on what this person is actually doing. All I got is that she is travelling around the world (flying?) somewhat fighting climate change by advising important people.
You really should have spent more than two sentences on telling us how she is different. With the exception of you explicitly stating that she is not the same:
'Dr. Mazzucato’s platform is more complex — and for some, controversial — than simply encouraging government investment, however.'
Everything in this article implies that she pretty much is the same. Is she really the first person to come up with 'socialize both the risks and rewards'? Are the elites really that far from Earth or is this article that is not doing her justice?
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@Morgan wrote: "Are the elites really that far from Earth"
No.
The Elites have a different Agenda than the rest of us.
Their Agenda opposes our wellbeing, that's all.
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Government and it’s throw offs art the source of the majority of wealth.
The transistor, chip, solar energy, modern aircraft, arose from government needs.
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@John Don't forget the even more fundamental goods supplied by the government: a transportation network, a predictable legal system, markets and rules. No capitalist enterprise can survive without them.
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@John
If the government is to promote growth, then all future growth needs to be carbon-neutral. The government can promote R & D with a fraction of the military budget.
The neoliberal concept that shrinking government improves the economy is based on the common sense premise that those people in government employ doing activities that are not fundamentally productive, i.e., sticking their noses into other peoples' business or beavering away at whatever they do for minimal systemic economic gain, should be reduced as much as possible, and from societal point of view, redeployed more effectively. Makes fundamental sense.
But - there is also no question that the private sector does not do hugely well in sufficiently investing where there is significant societal good, but that is not recoupable by the investor, or the benefits are long term, not short, or where it's pure basic, versus applied R+D. So governmental participation or funding in those contexts make perfect sense. It is patently obvious that's what we should do.
However, government is run by politicians, whose self-aggrandizing drive for power naturally causes them to use any spending power to take care of their friends, often in a economically dysfunctional manner from a societal point of view. Examples of that abound. It's not about government recouping and profiting from investment for redeployment for the good of the whole of society; that makes perfect sense. The question is, how to prevent politicians from doing what comes naturally and digging into the honey pot, so that we continue to waste our tax dollars on the politicians' "friends"? Neutral investment committees, maybe?
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@Jack I note that you seem to think that politicians, with their "self-aggrandizing drive for power" are qualitatively different from CEOs and others in the private sector management class. And wondering why you think that.
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@Rosemary Nguyen I've spent enough time in large corporations to wonder who thinks they're efficient.
When government is inefficient, it's usually because we want it to be: it's a side effect of slow, deliberative processes, which are generally better than the opposite. Keeping governments honest is what keeps them inefficient, and it's worth living with.
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@Rosemary Nguyen - government jobs do not pay leaders the same as the private sector. So while a corporate CEO can get satisfaction from accumulating wealth, a politician gets satisfaction from accumulating power.
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Silicon Valley, where I work, is held up as the poster child for innovation and wealth creation in the private sector. The reality is quite different.
Venture capitalist squander a lot of money on "me too" products built by companies that will fail. In a "time to money" culture, products ship before they are ready, and consumers pay, unwittingly, for the R&D.
The R&D credit in Federal corporate taxes, is often the only significant funding for new product innovation in mature tech corporations.
Much of technology, especially "interoperable technology", depends on common standards, and companies spend fortunes on advocating for their "standards" to monetize their intellectually property (IP). The other side of that coin is protracted litigation over patents, royalties, and what constitutes IP. None of this is "efficient", and BTW, must be adjudicated by government.
Working in the private sector, I am not impressed.
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@OSS Architect So, so true. And also - what problems are they solving? WeWork rents [rented] office space, big deal. Uber helps you get a cab. Yelp helps you see if the tacqueria down the road is OK. I mean, some utility there, but not exactly top priority. It's as if people were shivering and naked, and our most thriving clothing sector was investing billions in coming up with new kinds of ribbon.
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@Madeleine Golden Yes, I am so much in agreement with you. I know that technology has done some actually great things, but the way that people depend on it now in their lives, as a solution to things that were rarely major problems for anyone, is a bit pathetic, particularly when it's presented as some savvy new thing. And it's become increasingly unavoidable - things I used to easily do without my phone, I now have to do with my phone because it's expected, and it hasn't made them any easier. It's not utility that is driving these investments of money and other resources, it's profitability, and often that means just convincing humans they will look more "with it" and "cutting edge" if they adopt the new technology, and people buy into it gladly. Then in retrospect people go "oh, maybe Yelp has had some negative impacts and not really added much to my life. Oh, maybe social media makes me more depressed and is an invasion of privacy? Oh, maybe I don't like being googled and having so much info on there." Well, okay.
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