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

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  • Mariana Mazzucato

    () (SPRU (Science Policy Research Unit), School of Business, Management & Economics, University of Sussex, Brighton, BN1 9SL, U.K.)

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.

Suggested Citation

  • Mariana Mazzucato, 2015. "From Market Fixing to Market-Creating: A New Framework for Economic Policy," SPRU Working Paper Series 2015-25, SPRU - Science Policy Research Unit, University of Sussex Business School.
  • Handle: RePEc:sru:ssewps:2015-25
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:tefoso:v:136:y:2018:i:c:p:166-177 is not listed on IDEAS
    2. Mariana Mazzucato & Douglas K Robinson, 2016. "Lost in space? NASA and the changing publicprivate eco-system in space," SPRU Working Paper Series 2016-20, SPRU - Science Policy Research Unit, University of Sussex Business School.
    3. repec:eee:tefoso:v:127:y:2018:i:c:p:23-37 is not listed on IDEAS
    4. repec:eee:tefoso:v:138:y:2019:i:c:p:78-94 is not listed on IDEAS
    5. Matthijs Janssen, 2016. "What bangs for your bucks? Assessing the design and impact of transformative policy," Innovation Studies Utrecht (ISU) working paper series 16-05, Utrecht University, Department of Innovation Studies, revised Dec 2016.

    More about this item

    Keywords

    innovation policy; mission-oriented; market failures; system failures; directionality; smart growth; inclusive growth;

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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