Mariana Mazzucato: What is economic value, and who creates it?
Which actor in the economy is most responsible for making radical innovation happen? Mariana Mazzucato comes up with a surprising answer: the state. Full bio
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you think of innovation,
that some people aren't creating value.
have to have a proper theory of value.
to break it to you
on this question.
we've stopped contesting it.
really tough questions
value creation and value extraction,
some context here.
a year and a half after
financial crises of our time,
productive in the world.
for an economist,
dynamically and efficiently.
that the world needs, wants and buys.
just one year after the crisis,
as well as many other banks --
on Goldman Sachs here --
they had actually produced
mainly but not only related to mortgages,
actually lose their homes.
through the foreclosures of that crisis.
be bailed out by the US taxpayer
that they were value creators,
is kind of ask ourselves
could almost go unnoticed,
it was said very seriously.
300 years in economic thinking,
they were right or wrong,
a value creator, a wealth creator.
within the economics profession.
we've kind of lost our way,
"wealth creation" and "value,"
I hate to break it to you --
an agricultural type of society.
that the economists of the time,
of their attention to farm labor.
does value come from?"
probably the world's first spreadsheet,
one of the leaders of this movement.
"Farming is the source of value."
what was happening to that value
a bit simpler here for you --
in society into three.
were called the "productive class."
moving some of this value around
that was simply charging the farmers a fee
if you think what it means:
are going to the landlords,
potential of the system at risk.
were their way of simulating --
these guys were really using big data --
actually happen under different scenarios
reinvested back into production
siphoned out in different ways,
were getting too much.
the Agricultural Revolution
Karl Marx, the revolutionary,
because they were actually living
with the rise of machines and factories,
to the value that was created
of the pin factory where he said
making every bit of the pin,
production and the division of labor,
"organizational innovation" --
in their human capital,
by an unspecialized worker.
into productive and unproductive ones.
most of you are on that list, aren't you?
about the lawyers.
the letters of all kind people.
the worst performance of his life
three professions up there
of saying, "Don't do these things."
some parts of the economy to get too large
how to increase the productivity
that they thought was key,
is this right or is this wrong,
to ask interesting questions.
as the focus of the Physiocrats,
conditions of production.
at the class struggle.
if you want, power relationships,
division of labor,
and what was happening to it.
that then happened --
taught in economics classes --
with the current system
objective conditions to subjective ones.
all the attention went to
make their decisions.
their choices of leisure versus work.
their so-called utility,
then we can aggregate this up,
because we also added to it
part of the organizing principle.
that equilibrium price, or prices,
from objective to subjective,
one of what is value,
potential of the economy,
as fascinating as that might be.
to produce more of some activities,
some activities more than others.
if you're a value creator or not,
if you aren't determining that?
how we think about output.
and environmental economists
about this quite a bit.
GDP will go down, so do not do it.
before being paid for is still being done
you'll help the economy.
pay someone to clean it.
is what happened to finance
I'm always surprised
was not even included in GDP.
perhaps not knowingly,
of the Physiocrats
not actually producing anything new.
that had an explicit price were included.
a mortgage, you were charged a fee.
income and product accounting.
net interest payments didn't,
what banks were earning in interest
they were paying out for a deposit.
started to look at some data,
that the size of finance
the "banking problem."
inside, actually, the United Nations
of National [Accounts], SNA.
and we're not even including it."
making that Tableau Economique
about what is actually happening,
types of activities in the economy,
net interest payments a name.
were called the "risk-taking activities,"
as a whole was growing
the blue line, industry.
and what we know today,
writing about this,
is from the Bank of England,
was actually doing
insurance and real estate.
10 and 20 percent of finance
the real economy, into industry,
into that acronym, FIRE:
is good or bad,
that was being generated,
"What is it actually doing?" --
in industry itself, what was happening?
and also share prices
the Physiocrats and the classicals had
that was being generated in the economy
an ultrafinancialized industrial sector
of the profits and the net income
back into production,
into research and development
in terms of buying back your own shares,
which is, in fact, the way
share buybacks is absolutely fine,
is completely out of whack.
466 of the S and P 500 companies
on just buying back their shares.
this up at the macroeconomic level,
of business investment.
for skills and job creation.
of attention these days
for centuries, actually, taken jobs,
reinvested back into production,
is, in fact, very dangerous.
for example, how prices are set,
at these objective conditions
is created in the economy.
lots of different actors --
third-sector organizations --
value in this sector
went up by 400 percent overnight,
"How can you do this?
what the market will bear,"
that in the US, for example,
spent over 30 billion a year
that actually leads to these drugs.
to those objective conditions
itself to reveal the value.
an academic exercise,
[for] how we measure output,
that you're productive,
proud to be part of.
could say that.
are the most productive.
is revealing their value.
how we're measuring output,
amazing experiments worldwide.
a gross national happiness indicator.
about happiness and well-being indicators.
just be adding things in.
a moment for pause,
has actually changed
we are not also confusing
not just adding more,
confusing rents with profits.
was about unearned income.
talked about in economics,
towards a competitive price
if you take away some asymmetries.
activities into what the classicals called
good, other sectors.
in some ways after the crisis.
the financial transaction tax,
long-termism over short-termism,
new types of institutions.
public financial institutions worldwide
long-term, committed finance
infrastructure and innovation happen.
the rate of output.
that this week we are celebrating
the private sector,
in all sorts of ways,
like nutrition and materials.
that were done along the way.
its full power of procurement,
those bottom-up solutions,
nurture the experimentation,
the R and D laboratory of AT and T,
where government was quite courageous.
in order to maintain its monopoly status,
back into the real economy,
the early history of Bell Labs.
in new types of value
challenges of our time,
present value calculation
to go to the Moon and back again
and I can tell you,
ABOUT THE SPEAKERMariana Mazzucato - Innovation economist
Which actor in the economy is most responsible for making radical innovation happen? Mariana Mazzucato comes up with a surprising answer: the state.
Why you should listen
States and governments are often depicted as slow, bureaucratic, risk-averse. That argument is used in support of making states smaller and the private sector bigger. In her latest book, The Entrepreneurial State: Debunking Private vs. Public Myths in Innovation and in her research, Mariana Mazzucato offers a bold contrarian view: States aren't only market regulators and fixers, but "market makers" -- actively creating a vision for innovation and investing in risky and uncertain areas where private capital may not see the ROI. Yes: Private venture capital is much less risk-taking than generally thought. As an example, the technology behind the iPhone and Google exists because the U.S. government has been very interventionist in funding innovation. Private investors jumped in only later. The same is true today of what promises to be the next big thing after the Internet: the green revolution.
Mazzucato, a professor of economics at the Science and Technology Policy Research Unit (SPRU, University of Sussex), argues that Europe needs today to rediscover that role -- that what the continent needs is not austerity but strategic investments (and new instruments such as public investments banks) towards an "innovation Union."
Mariana Mazzucato | Speaker | TED.com