Alberto Mingardi  

A very bad book

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Re-Thinking Capitalism.png On our sister website, the Online Library of Law and Liberty, I've reviewed a very bad book, "Re-thinking Capitalism" edited by Michael Jacobs and Mariana Mazzucato. Here's the key-bit:

Rethinking Capitalism is but the latest example of a notable stream of literature blaming capitalism for not accommodating the desires of its authors as quickly and comprehensively as they would like. Make no mistake, though, it is in its own way an important work. Arguments such as the ones I've explored won't convince an educated layman who comes to the book with no predisposition on the matter. But they are a formidable device to strengthen the convictions of those who already support big government. They would have us believe that the state is good in precisely those circumstances where even most interventionists have typically accepted that it is not: in prompting innovation.

The fact that markets produce innovation, and government doesn't, is often considered such a truism that it is not even worth restating the case. Thanks to Mazzucato's indefatigable proselytising for the "entrepreneurial state", some people are now starting to challenge this apparent truism, building on the supposed evidence of US military spending translating into technological breakthroughs, which are then exploited by free enterprises years later. It is a bit surprising to hear the left going for guns instead of butter, but this is a growing trend. As I argue in the review, I think this is by and large based on a view of the economy which over-emphasizes the producers' side and doesn't grasp the importance of consumers' feedback for transforming new technologies into "stuff" which is of use for a vast number of people.

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COMMENTS (6 to date)
jj writes:

I don't think Military spending innovations is an argument against capitalism/libertarianism. It might be an argument for it. The military is innovating because it has competition with foreign nations. They have to innovate or else the U.S. risks destructions. That gives the incentive to innovate. Whereas a government agency like the post office or DMV has no incentive to innovate because they have no competition. You can see the same with the Soviet Union. Their military was top notch because of the competition but their domestic goods were crap because it had no competition.

One problem with State support of innovation is when that support is cited as a reason to restrict the innovation in question.

This actually occurs in the case of nuclear energy. It's sometimes used as an argument in favor of the "Fairness Doctrine."

Alan Goldhammer writes:

There is a long history of inventions coming out of US Government research laboratories and also from US Federal support of research (NIH, NSF, USDA) that are not militarily related yet gave rise to significant commercial products. Certainly in my area of expertise (pharmaceuticals) we would not have nearly as many important drugs in the absence of such research. I'm only going by what was posted as I have not and probably will not read the book under review.

Hazel Meade writes:

Lots of things the military finances also never become commercially viable at all, because they are terribly expensive and inefficient uses of resources.

It would be interesting to see some sort of comparison on the record of private industry vs government on what percentage of private vs. public grants (one a dollar basis) actually yield commercially successful technologies.

ChrisA writes:

What is the model for these people arguing for state financed research? I can see an argument for research being funded by the state based on the idea that the societal benefits of an invention are often greater than what can be received by the inventor as compensation for their invention. But we must set against this cost possible incentives by researchers in the state sector lacking incentives to undertake research that is socially useful as opposed to interesting to their selves or perhaps which is politically useful but not practically useful. That is why I favour the prize money model for basic research. I would like to bet that if we took the money being given to NASA to fund the Mars mission and accumulated it over time as a prize for the first company to successfully land and return astronauts back to earth, then there would be plenty of investment in basic space technologies by private companies and we would have a lot more innovation and spin off benefits.

Fabrizio Ghisellini writes:

I have not read the book, and it is likely that if I read it I would agree with Mingardi, but perhaps book reviews should be less brutal (especially in the title)? Also, in order not to receive the same treatment administered to the author of the book, the reviewer should explain what is the evidence for the left (which cannot be equated to the person of Mazzucato) going for guns.

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