From Market Fixing to Market-Creating: A New Framework for Economic Policy

Mariana Mazzucato

SPRU Working Paper Series from SPRU - Science Policy Research Unit, University of Sussex Business School

Abstract: Many countries are pursuing innovation-led ‘smart’ growth, which requires certain types of long-run strategic investments. This paper argues that such investments require public policies that aim to create markets, rather than just ‘fixing’ market failures (or system failures). Such ‘mission-oriented’ investments have led to men walking on the moon (which created spillovers across the economy) and are today catalyzing investments to tackle climate change around the world. In the two above-mentioned cases, public agencies not only ‘de-risked’ the private sector, but also led the way in terms of shaping and creating new technological opportunities and market landscapes. Only then was the private sector willing to invest. This paper considers four key questions that arise from a ‘market creating’ framework: (1) decision-making on the direction of change; (2) the nature of (public and private) organizations that can welcome the underlying uncertainty and discovery process; (3) the evaluation of mission-oriented and market-creation policies; and (4) the ways in which both risks and rewards can be shared so that ‘smart’ innovation-led growth can also result in ‘inclusive’ growth.

Keywords: innovation policy; mission-oriented; market failures; system failures; directionality; smart growth; inclusive growth (search for similar items in EconPapers)
JEL-codes: H1 L1 L2 O1 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-cse, nep-hme, nep-ino, nep-pke and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:sru:ssewps:2015-25

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