Mission Economy

Public choice scholars are facing tectonic shifts in public policy that may render their analytical tools outdated. Since the 1960s, public choice assumed policy makers had to justify interventions by explaining how they affected individual autonomy. Self-correcting markets and limited government complemented this liberal vision of social order. Anything markets could coordinate should be done by markets. The government would only intervene in cases of market failure.

Mariana Mazzucato’s Mission Economy is a bold rejection of those assumptions, especially limits on the scale and scope of government, representing a new global policy consensus. Her thesis is straightforward: governments are leaders who are not limited only to monitoring and enforcing market institutions. To fight challenges like global inequality, climate change, and pandemics, policymakers need a mission approach like the Apollo Mission of the 1960s.  Mazzucato rejects the public interest theory of regulation where the government only responds to market failure (p. 20). 

Governments, in her approach, guide priorities and focus economies on the proper hierarchy of investments, consistent with expert preferences. She holds the RM Phillips Chair in Science and Technology at University College London, has advised governments from the EU and UK, to South Africa, and authored many influential pieces including The Entrepreneurial State (Anthem Press, 2013). Her vision reflects a growing consensus among technocratic elites around the world who publish documents like the UN’s Sustainable Development Goals. 

Mazzucato builds her own theory on a state capacity argument: a bigger, more ambitious state can accomplish things that smaller governments cannot, thanks to economies of scale and scope. This argument appears in various forms, like wartime productivity booms and, for her, the Apollo Mission, which achieved space flight in the 1960s; a goal no private market could achieve without public sector support. As she puts it, “without ambitious public investment the private sector would have proved unwilling to invest in areas where the required funding was large, long-term, and highly uncertain” (p. 30). 

Unfortunately, her narrative is incomplete. First, Mazzucato never explains why the Apollo Mission had trouble recruiting private investment. She points to the many products that were developed along the way to space flight, and claims these as “positive spillovers,” claiming that leadership provoked private investment without identifying any opportunity costs. The counterfactual is hard to measure and should be harder to assume into existence. 

Considering one proposal without comparison to the alternatives is the “nirvana approach” named by Harold Demsetz (“Information and Efficiency: Another Viewpoint,” Journal of Law and Economics 12:1 [April 1960]: 1–22). Demsetz argued that simply pointing out discrepancies between an ideal and reality doesn’t prove that the reality is inefficient. The relevant comparison is not between a real market and a perfect government, but between imperfect versions of both, accounting for the information problems, incentive structures, and capture risks that manifest in rent-seeking behavior. Mazzucato simply assumes these problems away for expert policy makers. In doing so, she ignores dispersed knowledge, coordination costs, and principal-agent issues. These realistic assumptions about government stem not from government scale, but from the incentives distinguishing political choice from entrepreneurial choice. 

Demsetz builds on an insight that is at the core of economics as a discipline. Real productivity gains come from changes in absolute or comparative advantage. Adam Smith understood that a shift in the production possibilities frontier comes from increases in dexterity, saving time, and innovation. David Ricardo explained comparative advantage as specializing where you have the least opportunity cost and then trading. To convince this economist, Mazzucato must explain why Smithian gains are more likely to come from a centralized and not a decentralized approach and why limiting trade increases specialization. 

If Mazzucato has a theory of why expert-led choice within a global hegemony is so much better than disaggregated feedback by markets, she does not make that central to her argument. Hegemony might suit a static system needing to homogenize the global economy, but experience has shown that the productive efficiency approach fails at allocative efficiency. Efficiency doesn’t matter if people don’t want what is produced. 

Mazzucato presents a genuine problem with public-private partnerships. “The real problem,” she writes, “is the practice of socializing risks and privatizing rewards” (p. 54). Her example: “Elon Musk has reportedly received $4.9 billion in public subsidies for his three companies, including SpaceX. This support is not part of the narrative of his entrepreneurial success story, and it is also not reflected in concrete contracts; there is no sharing of the rewards of the money made on the backs of taxpayers” (p. 195–96). 

That diagnosis is exactly right. The system is broken when firms receive money for R&D under terms that they can lose without risk and gain without repayment, keeping all the profits. This important critique might have led Mazzucato to Randall Holcombe’s (Political Capitalism: How Economic and Political Power Is Made and Maintained [Cambridge University Press, 2018]) conclusion: that an economic and political system of elites collaborate to maintain power and privilege through regulatory capture, rent-seeking, and what Gordon Tullock called “Transitional Gains Traps.” This reciprocal relationship between economic actors and policy makers abounds in western economies. 

Engaging with her arguments here helped me confront the uncomfortable truth that the liberal order of the status quo is already compromised by many of the examples Mazzucato gives. While I find Holcombe’s diagnosis more compelling, I want to be careful to highlight agreement on symptoms while disagreeing on diagnostics and treatment.  

Mazzucato is right that crony capitalism is a problem, but prescribing more government power is not the cure. Larger government and a solid consensus supercharges cronyism. Why would folks like Elon Musk be worse off in a mission-based economy? The logic mirrors the 2008–09 financial bailouts. If the banks were “too big to fail,” why did Dodd-Frank result in the failure of smaller banks and the increase in the average size of financial institutions, exacerbating the problem? Increasing government scale and scope produces the opposite result from that implied by Mazzucato’s theory. 

Mazzucato directly attacks financial institutions for short-run orientation. Her assumption is that financial incentives have a shorter time horizon than political ones like reelection. This is empirical, and the answer might surprise her. Elections shorten policy horizons and budgets shape the agenda setting. Public Choice researchers can continue to point out how global agendas of consensus get the time-discounting question wrong, even by Mazzucato’s standards. 

Mazzucato opens part II of the book, outlining her mission-focused approach, with an anecdote about failed leadership during the civil rights era. Confronting trade-offs between moonshots and social policy, she points to leadership’s importance without fully acknowledging the process by which the civil rights movement organized and influenced cultural change. She quotes Gil Scott-Heron’s song “Whitey on the Moon” (p. 63), presumably to recognize popular resistance by minorities to policy that prioritized the space race. Yet Mazzucato redeems the moonshot through its positive spillover in the expansion of the U.S. Cold War missile arsenal. Her defense of centralized priority-setting trusts experts to settle questions of opportunity costs, to simplify complexity, and to choose between incommensurable ends. 

Ultimately, policy priority discussions highlight a crisis in contemporary western political institutions. The problem is not that markets cannot respond by creating incentives, generating information, and encouraging innovation. Rather, it is that collusion between economic and political elites has warped society’s priorities. The belief that more centralization will undo the problem of cronyism is unconvincing. Mazzucato’s proposal increases the stakes for rent-seeking and regulatory capture, in a clever repackaging. 

The answer to the crisis is to reinforce the principles of liberal order. Protections for individual autonomy ensure policy takes seriously the local and tacit knowledge of people on the ground, aggregated organically, bottom-up. Hard problems arising from complex social systems need complex trial-and-error processes. Various scholars call this emergence, spontaneous order, and self-governance depicting coordination at the many different levels of aggregation in an economy. Limiting government scale and scope protects these other processes and is unlikely to inhibit efficiency. 

Efficiency matters. Economists should assert that efficiency comes from real productivity changes, not a shared global consensus. Approaches that do not identify where the efficiency gains originate risk being chimerical. Pointing at measured gains may do little to increase the solution for the problems of real individuals on the ground. 

In Holcombe’s Political Capitalism, hegemony sows the seeds of its own destruction. Either we actively disintegrate the concentrations of power and restore feedback through competition, or we watch until global consensus grows so top-heavy that it collapses. We can only hope that systemic failure does not take down the liberal institutions that brought us prosperity. Mazzucato’s Mission Economy represents growing global consensus. Readers of The Independent Review should be aware of this argument so they can be on guard against those who think neither autonomy nor competition make sense. The stakes are too high to sleepwalk while others concentrate power.