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

23 Pages Posted: 8 Mar 2016  

Mariana Mazzucato

University of York - Social Policy Research Unit (SPRU); University of Sussex

Date Written: August 29, 2015

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

JEL Classification: H1, L1, L2, O1, 03

Suggested Citation

Mazzucato, Mariana, From Market Fixing to Market-Creating: A New Framework for Economic Policy (August 29, 2015). SWPS 2015-25. Available at SSRN: https://ssrn.com/abstract=2744593 or http://dx.doi.org/10.2139/ssrn.2744593

Mariana Mazzucato (Contact Author)

University of York - Social Policy Research Unit (SPRU) ( email )

United Kingdom

HOME PAGE: http://www.sussex.ac.uk/spru/people/peoplelists/person/111262

University of Sussex ( email )

Sussex House
Falmer
Brighton, Sussex BNI 9RH
United Kingdom

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