The Entrepreneurial State by Mariana Mazzucato PDF
"Half of the money used by goverment is wasted; the bad thing is we don't know which half."
Mazzucato shows that many commercial successes have had their origins in government funding, and argues that therefore every government should have an Advanced Research Projects Agency to manage that basic research. Ignored are the observations that the commercial successes quickly traverse the planet, and that the vast majority of basic research has not yet been commercialized.
Given the uncertainty of basic research, why not let other organizations / countries do the basic research, and copy what works, like the world did with cars, vaccines, telecommunications, etc.?
The answer appears to be that Mazzucato prefers institutions of control (DARPA, MITI, the Federal Reserve), instead of institutions of support (R&D tax breaks, Lenders of last resort). The rationale for control seems obvious, however it is predicated on having a complete and perfect understanding of how innovation works.
We do not yet have that level of expertise. Witness what happens when we try to manage a country's interest rates and money supply, something the economic profession believes we know more about than innovation: the US Federal Reserve operates in a world of imperfect information and occasionally (Great Depression, Great Recession) pursues the wrong corrective action, thereby making things worse despite its good intentions.
Keynes and Minsky focused on the need for the state to intervene in order to bring stability and prevent crises, certainly a pressing issue in today's circumstances.
Furthermore, Minsky argued for maintaining low levels of debt since they have been associated with more economically stable times. We are far from historically stable levels of debt to equity, and Mazzucato would have us slow down our repairs in order to try our chances in the global innovation lottery.
the computer industry, the internet, the pharma-biotech industry, and many more including today's nanotech industry. None of these technological revolutions would have occurred without the leading role of the state.
Risky research is funded by the publicly funded labs (the National Institutes of Health or the MRC) while private pharma focuses on less innovative 'me too drugs' and private venture capitalists enter only once the real risk has been absorbed by the state. And yet make all the money.
Often, the only return that the state gets for its risky investments are the indirect benefits of higher tax receipts that result from the growth that is generated by those investments. Is that enough?