It is often said that the private sector should take the lead in innovation and the creation of economic growth while governments support, facilitate, and regulate. Many argue that the state should focus on creating an enabling environment.
But what if there was another option? The mission-oriented approach championed by economist Professor Mariana Mazzucato presents a paradigm shift in how we think about the role of the state and the dynamics of innovation within an economy.
Professor Mazzucato is Professor in the Economics of Innovation and Public Value at University College London (UCL), where she is Founding Director of the UCL Institute for Innovation & Public Purpose (IIPP). In her book The Entrepreneurial State, she argues for governments to take a more active and strategic role in driving economic development through targeted missions.
At the core of her thesis is the idea that governments should not merely regulate markets or fix market failures, but take risks and invest in areas that have the potential to address big societal challenges. She contends that by setting ambitious and purpose-driven missions, governments can stimulate innovation, create new markets, and drive economic growth.
Missions are specific, time-bound, and measurable goals that address significant global or national challenges such as climate change or public health crises. Instead of leaving it to the market to find innovative solutions, the state takes on a leading role in identifying and shaping these missions. Professor Mazzucato argues that, in this way, governments can foster collaboration among academia, industry, civil society, and other stakeholders to achieve transformative outcomes.
In a mission-oriented approach, the state doesn’t only provide funding; it actively participates in the innovation process. This may take the form of shaping the direction of research or taking a risk on an unproven technology. For Professor Mazzucato, this approach mitigates risk and ensures that the benefits of innovation are widely dispersed.
This approach is not completely unheard of. Professor Mazzucato often points out that state investment and initiative played an important role in the development of the Internet and the iPhone and these breakthroughs were not solely due to the work of the private sector. The Internet, GPS, and even touchscreens had their genesis in publicly funded research that was often carried out by government agencies.
While the public sector is often associated with inefficiency and bureaucracy, Professor Mazzucato argues the state can be agile and innovative. When it operates as “an entrepreneurial state,” government can address market failure that private entities may not find attractive because of a focus on short-term profits.
The mission-oriented approach also aligns with Professor Mazzucato’s call for a more sustainable and inclusive form of capitalism. If governments target missions related to environmental sustainability, social equality, or healthcare, they can direct innovation towards areas that have a large-scale societal impact.
Professor Mazzucato will deliver the Central Bank of Barbados’ 48th Sir Winston Scott Memorial Lecture on Monday, November 27, 2023 at 6:30 p.m. in the Frank Collymore Hall. If you’d like to hear her speak on the mission-oriented approach and how it can lead to sustainable and inclusive economic growth right here in Barbados, RSVP here to reserve your seat. This is a free public event.