Mariana Mazzucato

The Value of Everything: Distinguishing Value Creation from Value Extraction

Many of the world’s leading companies – particularly in the tech, financial and pharmaceutical industries – are at their highest “valuations” in years. But the numbers regularly trumpeted by CEOs, pundits and politicians do not reflect the real value of companies and of our economy as a whole. Mariana Mazzucato’s extensive economic research shows that while many companies believe they “create” value through rent-seeking and price hikes, they also remain dependent on public money to innovate and grow. Companies are in fact extracting (and sometimes destroying) value, while the source of real value declines due to lower wages, lower tax revenues and hostility to state investment in industry.

In this presentation based on her new book, “The Value of Everything: Making and Taking in the Global Economy” (Public Affairs, 2018), renowned economist and public policy expert Mazzucato analyzes where true value comes from in our economy, and reveals to business leaders why the amount of money generated by companies is not an accurate measurement of their long-term ability to produce, innovate and thrive. The problem, she believes, is that by accepting the conventional wisdom that delivering value for shareholders is the same as delivering value for the whole economy, we have confused value creation with value extraction. Mazzucato argues it is not just the public sector and taxpayers, but the private sector as well, that stands to lose from an economy whose real foundations are being continually eroded.

Her analysis is both empirical as well as theoretical—calling for theories of value to be debated again, as heatedly as they were in the times of Adam Smith and Karl Marx. In his excellent review of the book in the Financial Times, Martin Wolf writes that it, “forces us to ask ourselves what adds value to society and how to create an economic and social order that promotes that. The book itself adds value by forcing us to confront these points.”

Financing the Green Economy: Quantity vs. Quality

Bringing about the next generation of green technology is a perfect example of an undertaking that needs both public and private sector support. But simply pumping money into renewable energy and other environmentally friendly technologies can distort incentives, acting as a public subsidy for private industry. What was to be a public good can become yet another instance of rent-seeking at the taxpayers’ expense.

In this presentation, Mariana Mazzucato outlines how government can move from subsidization to a goal-oriented approach to investing in green technology, focusing on how particular countries specialize in certain niches of the green economy. By building legitimate public/private sector partnerships – and emphasizing the quality of investment over the quantity of funds – policymakers and entrepreneurs can ensure taxpayer money is invested wisely in a program of inclusive growth and innovation, all while helping stem the tide of environmental degradation.

The Entrepreneurial State: From Lender of Last Resort to Investor of First Resort

The role of the state in innovation should not be as corrector of market failures and “lender of last resort,” but as investor of first resort, able to identify key sectors and technologies for investment and drive the innovative process. In a political climate where the government is synonymous with lethargic bureaucracy and the private sector is the hotbed of innovation – as well as the unfortunate target of stifling regulation – this notion may seem counterintuitive and radical. But Mariana Mazzucato argues that nearly all great technological change has been the product of government initiatives, from space travel to the iPhone.

In this presentation, based on her best-selling book, “The Entrepreneurial State: Debunking Public vs. Private Sector Myths,” Mazzucato illustrates how contrary to popular belief, the private sector has generally been timid in putting up the money for groundbreaking technology, only doing so after public funds paved the way forward, and provides evidence and a practical framework for rethinking public-private partnerships. If policymakers and entrepreneurs alike do not acknowledge and embrace such a role for the state, the innovative breakthroughs of the past are unlikely to be repeated.