Why Mariana Mazzucato Is Wrong About The ‘Entrepreneurial State’

Mariana Mazzucato is the influential author of The Entrepreneurial State. She is an important influence on policymakers in the UK and Europe, and a major voice in reshaping attitudes towards the state and capitalism.

Despite her policy impact, most academics and economists remain highly skeptical and unpersuaded by Mazzucato's arguments. In this piece, Michael Liebreich lays out some of the reasons why.

First, while Mazzucato shows that in many cases the state played a role in helping many important innovations get started, she fails to establish that the role of the state was critical. Or that this was the best use of public resources. She focuses on the seen and ignores what the 19th-century French economist Frederic Bastiat called the "unseen". That is, she doesn't pay attention to how the resources siphoned by the state could have been otherwise employed.

Second, she doesn't focus on the difficulties involved in creating a bureaucracy capable of managing innovation.

Third, there is a no evidence that state-run companies can succeed at bringing innovations to market. There is an economic rationale for the state to fund basic research, but not for it to attempt to produce goods that are attractive to consumers in the marketplace. It will likely fail in this task.

Fourth, misguided attempts to create an entrepreneurial state will likely crowd out private investors who will be unwilling to put their own money at risk if they think they might be competing against a government-backed company.

In other words, there is no need for an entrepreneurial state. There are other important problems that governments need to concentrate on.