348. Is the Government More Entrepreneurial Than You Think?

We all know the standard story: our economy would be more dynamic if only the government would get out of the way. The economist Mariana Mazzucato says we’ve got that story backward. She argues that the government, by funding so much early-stage research, is hugely responsible for big successes in tech, pharma, energy, and more. But the government also does a terrible job in claiming credit — and, more important, getting a return on its investment.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Stephen J. Dubner?

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• 0:48Stephen J. Dubner?

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• 1:19Stephen J. Dubner?

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• 2:09Stephen J. Dubner?

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• 2:46Mariana Mazzucato?

  So I wouldn't say that my path to economics was through Marxism, but it was through reading some very inspirational economists, of which one was definitely Karl Marx.

• 2:57Stephen J. Dubner?

  That's Mariana Matzakado.

• 2:59Mariana Mazzucato?

  I'm a professor in the economics of innovation and public value at University College London.

• 3:04Stephen J. Dubner?

  You also advise, as far as I can tell, a number of governments and governmental institutions.

• 3:10Mariana Mazzucato?

  Sure, so I'm currently on the Council of Economic Advisers for the First Minister of Scotland. I'm also the special advisor for Carlos Modash, who's the Research Commissioner in the European Union. And I used to be on the Advisory Board for Jeremy Corbyn, and then I resigned because of Brexit.

• 3:29Stephen J. Dubner?

  It says here, "Special Advisor to the Secretary General of the OECD," is that right?

• 3:34Mariana Mazzucato?

  Yes, so the OECD is currently rethinking its economic narrative, and so they have a group that's literally called that, the New Economic Narrative, and I'm one of the people on that group.

• 3:45Stephen J. Dubner?

  Gotcha. And also Citra's advisory panel in Finland, is that true?

• 3:50Mariana Mazzucato?

  Oh, yeah, sorry, I didn't realize you wanted the whole list. Yes, there's actually even like 30 more.

• 3:57Stephen J. Dubner?

  How can it be that one university economist has the ear of so many governments and institutions? For a clue, let's get back to why Matzakado found such inspiration in Karl Marx.

• 4:09Mariana Mazzucato?

  One thing that's fascinating about Marx is that he's known as a critic of capitalism, but actually, when you read Capital, Volume 1, 2, and 3, you end up really admiring and appreciating the dynamic aspect of capitalism, which is technological change. We shouldn't forget that feudalism was 500 years of inertia. One of the defining features of capitalism is, in fact, the way that innovation has really broken down all sorts of walls that is constantly changing how industries operate, how production, distribution, and consumption work. And Marx really talks about that. So it's quite curious that one of the most famous critics of capitalism actually described it in the most dynamic of all ways. And that's what got me interested in the economics of technological change.

• 4:54Stephen J. Dubner?

  But it's not just technological change that interests Mazzucato. She has a relatively radical stance on the value that's created by technological change. What do I mean by a radical stance? Consider the titles of her books. The first was called The Entrepreneurial State. Those two words, entrepreneurial and state, typically are not used together. Mazzucato's latest book is called The Value of Everything: Making and Taking in the Global Economy. When it comes to the relationship between government and economic growth, Mazzucato knows how the popular narrative goes. It goes like this.

• 5:33Mariana Mazzucato?

  My god, the government, what a basket case, group of bureaucrats. They don't know what they're doing.

• 5:38Stephen J. Dubner?

  But she sees it differently.

• 5:40Mariana Mazzucato?

  You know, what would Uber be without GPS publicly financed? What would Google be without the internet publicly financed?

• 5:47Stephen J. Dubner?

  Today on Freakonomics Radio, in the modern economy, are governments the ones who are getting a raw deal?

• 5:53Mariana Mazzucato?

  Today, all the discussion is about somehow getting the state out of the way, completely ignoring the fact that these government investments were critical for innovation to happen.

• 6:03Stephen J. Dubner?

  And when you look at big, rich sectors of the economy, like finance and pharmaceuticals, how much value are they really creating?

• 6:11Mariana Mazzucato?

  We have to make it much more difficult for different actors in the economy to call themselves wealth creators without really being asked, well, are you? Are you not?

• 6:33Speaker 02

  From Stitcher and Dubner Productions, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner.

• 6:48Stephen J. Dubner?

  Mariana Mazzucato was born in Rome but grew up in Princeton, New Jersey, where her father took a job as a research physicist at the university. She studied history and international relations at Tufts and got her PhD in economics at the New School for Social Research in New York. Now she lives with her family in London. In an interview with the Financial Times, Lunch with the FT, where you go and have lunch and a glass of wine, you said-

• 7:17Mariana Mazzucato?

  Well, a very expensive glass of wine.

• 7:19Stephen J. Dubner?

  I saw that. The glass of wine you ordered cost 40 pounds.

• 7:23Mariana Mazzucato?

  I made an error.

• 7:24Stephen J. Dubner?

  They made an error.

• 7:25Mariana Mazzucato?

  Well, I didn't see the price. This is how they trick you. No, no, they trick you. They trick you. I don't know if it's because I was a woman and they didn't show me the price, you know, to be a gentleman, or if it's what the FT does. But there was no prices. I was so involved in the conversation, I just pointed to the first wine I saw, and it turned out to be the most expensive wine that got anyone who read that article to call me a Sauvignon socialist.

• 7:46Stephen J. Dubner?

  Right. So to someone who says, you know, free markets are almost always good and governments are almost always bad, to someone who says that, you say what?

• 8:00Mariana Mazzucato?

  The first is, what do you mean by the free market? And it's curious, if you read Adam Smith, you know, one of the first economists back in the late 1700s, he actually meant by the word free market, not free from the state, but free from rent-seeking, free from those activities that extract value. So what I say to those who say that, you know, we need less state- In order to be more innovative, more dynamic, I say, well, let's look at one of the most innovative parts of the US economy, which is Silicon Valley. Did that come from the free market or from an active, visible hand? The state.

• 8:42Mariana Mazzucato?

  My point is, actually, the state was involved in almost everything in Silicon Valley. Not to exclude the role of the private sector, of course. We all know the very important companies in that area. But the role that public actors played was really across the whole innovation chain.

• 9:00Stephen J. Dubner?

  So you're talking about agencies like DARPA and NASA and the National Institutes of Health and so on, yes?

• 9:06Mariana Mazzucato?

  Exactly. I'm talking about both agencies that do basic research, like the National Science Foundation, but also agencies more downstream doing applied research, like DARPA, but also its sister organization in more recent times called ARPA-E, the National Institutes of Health, which continue to spend more than $30 billion a year in the most radical, uncertain, high-risk research.

• 9:35Stephen J. Dubner?

  Here's some evidence of the government funding that Mazzucato is talking about. DARPA, or the Defense Advanced Research Projects Agency, created during the Cold War to keep American technology ahead of the Soviets, has, over the years, produced several kinds of missiles and airplanes, as well as the first computer mouse, miniature GPS receivers, HD displays, and a digital personal assistant. ARPA-E, or the Advanced Research Projects Agency for Energy, founded under George W. Bush, has funded a variety of energy projects, including battery storage tech. The Department of Energy, starting in 1978, invested more than $130 million studying the extraction techniques that have come to be known as fracking.

• 10:19Stephen J. Dubner?

  And the National Institutes of Health has helped fund the vast majority of all new drugs approved by the FDA.

• 10:27Mariana Mazzucato?

  These public institutions have absolutely co-created value. It's quite extraordinary that we've become very used to these kind of much more passive words to describe the state. You start having to change the vocabulary that one uses. So instead of saying the public sector de-risks the private sector, it's actually about sharing risks. Instead of talking about just facilitating and enabling business, it's really about, you know, taking on the lead investor role. As an investor, first resort...

• 11:01Stephen J. Dubner?

  One of the central arguments you make is that government institutions and quasi-government institutions are involved in the investment, are involved in the risk, and yet, you argue, barely share in the return. How big of a problem is that?

• 11:14Mariana Mazzucato?

  So, it's a huge problem, and it comes back to how we talk about things. I often remind people, you know, that Plato said that storytellers ruled the world. So these stories that we tell about who creates value has in fact created the stories that justify the extraction of value. So let me give you an example, which I think brings us home. The US government, after the crisis, decided to have a proper fiscal stimulus program of close to $800 billion. And part of that agenda was really also to direct that fiscal stimulus towards the green economy. So you might remember that Obama financed some companies like Solyndra through the

• 11:58Mariana Mazzucato?

  US Department of Energy, through a guaranteed loan that was for about $500 million, and that company went bust.

• 12:06Speaker 03

  There are new questions tonight about a cornerstone of stimulus one, a $535 million loan to a company called Solyndra that makes solar energy panels.

• 12:14Speaker 04

  Why does the taxpayer have to be the one footing the bill to try and see if some power, solar power, works?

• 12:20Mariana Mazzucato?

  People said, "My god, the government, what a basket case group of bureaucrats. They don't know what they're doing. They shouldn't be picking winners. They should just really do this kind of facilitating roles of, you know, construct some roads, education, infrastructure, and then get out of the way." Which, first of all, completely misses the point that actually the US government, in terms of energy, has been the lead financer of areas like solar and wind alongside other governments, but also nuclear. Fracking itself came out of a US government financing early on. But more concretely, at the same time that it was financing Solyndra, it also financed Tesla for a very similar amount of money.

• 13:03Mariana Mazzucato?

  So the Tesla-esque car got a $465 million guaranteed loan. And when I say guaranteed, I'm talking about guaranteed by the US taxpayer. So when Solyndra went bust, the taxpayers were pretty angry that they had to pick up the bill. But why did the taxpayers not know that they had also financed Tesla? Wouldn't that have changed the narrative and the perception of what these bureaucrats in Washington were doing? They actually had a portfolio, like any venture capitalist, which, you know, takes on risk. And so, speak to any venture capitalist, they will tell you that for every success, there's many failures. However, if you really want to be a venture capitalist, you have to construct your portfolio in such a way that you also get some of the upside from the wins, precisely to cover that downside.

• 13:47Mariana Mazzucato?

  And the US government didn't do that. So not only had they failed on the marketing side, they hadn't actually communicated to US citizens of all these successful US investments, which include everything in your iPhone or smartphone, from the internet, GPS, touchscreen display, Siri, all government financed. But in this particular case, people didn't know that Elon Musk himself had received, you know, financing for Tesla. And Elon Musk, by the way, has received a total of $5 billion. That's billion, that's nine zeros.

• 14:21Stephen J. Dubner?

  That $5 billion has been spread across Musk's three companies, Tesla, SpaceX, and SolarCity. Mazzucato says that taxpayers should be getting a much better return for investments like these.

• 14:33Mariana Mazzucato?

  So what the US government actually did with Tesla was the opposite of what they should do. They said, thinking they were quite wise, "If you fail to pay back the loan, we get 3 million shares in your company." And you have to ask yourself, you know, why all these Goldman Sachs guys who were in fact in Obama's government didn't actually come through when they were needed? Because they should have said the opposite. "If you do pay back the loan, we get 3 million shares." And the price per share when the loan was taken out in 2009 was $9 a share. When it was paid back in 2013, it was $90 a share. That difference multiplied by 3 million would have more than paid back the Solyndra loss and the next round. Then the question becomes, how do you share not only the risks, but also the rewards? So we don't get what we get with the banks,

• 15:18Mariana Mazzucato?

  which is that, you know, when things go bad, the state has to bail them out. And when things go well, the banks take the profits.

• 15:25Stephen J. Dubner?

  So let me ask you about two specific areas that you talk about. One is, I guess, you know, one term for it is information and communication technology, or what we all think of as roughly the digital revolution. And another is pharmaceuticals. And you argue that in both cases, there's been a massive government investment in the US and a relatively terrible return on the investment, to the government at least. Is that still a current argument? Is it still the case that agencies like DARPA and NASA, or parallel versions, are still so strongly involved in the innovation?

• 16:05Stephen J. Dubner?

  Or was that a golden era of government investment and research that now needs, in your view, to be rebooted?

• 16:14Mariana Mazzucato?

  So the first part of the answer is, business has changed. It's become increasingly financialized. This is a huge problem. The two sectors where this is the biggest problem is precisely pharmaceuticals, where companies like Pfizer and Amgen are spending over 100% of their net income on areas like share buybacks and dividend payouts. And of course, energy with the big possible green tech revolution. Now, in terms of the government investments, on the one hand, they continue to be absolutely fundamental. So in, you know, the emerging green economy was actually ARPA-E, which came out with one of the biggest innovations in battery storage. Again, fracking, which has changed the international landscape around energy, was also financed by government.

• 16:59Mariana Mazzucato?

  To what degree was fracking, for instance, funded by the government? To what degree? Well, you should remember that the main thing is when. So when it was still extremely uncertain, extremely risky, where there was no private finance, government was making those early investments. So in terms of the actual amount and percentage of the total, that's not really the issue. It's who took on the early risk. And so that's why we should stop using words like lender of last resort for government financing and use more words like investor first resort, because that's in fact the role it plays. Now, in terms of all these organizations like NSF and DARPA and the National Institutes

• 17:42Mariana Mazzucato?

  of Health, they're still spending a lot of money, especially in the high-risk, high-incertain phases, high-capital-investment phases. However, they've been under attack. But the real issue shouldn't just be the budget, it should be the ability of these organizations to continue to really lead the way, to have missions which aren't asked in the Budget Appropriations Committee, you know, what is the economic value going to be? Because had they thought about net present value and cost-benefit and, you know, economic value as economists think of it in terms of jobs today and patents, et cetera, then there's no way we would have done the Man on Moon mission. That actually required a certain level of ambition, of imagination, of willingness to dream.

• 18:22Mariana Mazzucato?

  So any country that's interested in tackling areas around climate change or rethinking 21st century healthcare systems, tackling the aging demographic crisis, these are all broad challenges, which unless we really frame them as missions, then we're not going to be able to tackle any of these grand challenges. That's what we should be learning, instead of, oh, we need more venture capital.

• 18:47Stephen J. Dubner?

  So you're making an argument that the US government is not getting enough credit for its investment in the past through agencies like DARPA, NASA, and then in the pharma area and so on. You also argue separately that they're not getting enough return on the investment, which that sounds believable. But you also argue that the high return and relatively low tax environment for entrepreneurs and investors is not a big driver. And I want to know what the evidence is for that. I mean, I look at the US as, you know, one question you ask is where are Europe's Googles? What happens differently in the States than in Europe to produce these companies like

• 19:31Stephen J. Dubner?

  Google, Facebook, et cetera? There are certainly a lot of people in private equity, in venture capital, in the startup culture who say that because of the capital gains tax environment, because of the carried interest loophole, that that helps create the very large incentive to make these companies that turn out to be super rich. And I'm not even saying these handful of companies that turn out to be super rich are necessarily so good for society. I think that's a bigger discussion for another day. But I just want to know, what's your evidence that that incentive is not really important and is perhaps a key factor in why this is happening in the US and not in Europe?

• 20:16Mariana Mazzucato?

  So my answer is, first of all, what happened in the US is that there was a system of innovation, which lacks in many European countries, where you had patient finance, but also active, mission-oriented agencies, which really thought about big problems. So going to the moon, which required many different sectors to innovate, including clothing, not just aeronautics, and then instruments, including prizes and procurement policy, which allowed startups to scale up, right? Startups in and of themselves, who cares? Just because you have a startup. What's interesting is if you have a system, an entrepreneurial ecosystem, I don't believe in entrepreneurs, I believe in entrepreneurial ecosystems, which actually allow startups to scale up.

• 20:56Mariana Mazzucato?

  And so, you know, interestingly, Europe has learned the wrong lessons from Silicon Valley. And this is partly because of how the US talks. The US talks Jefferson, but it acts Hamilton. So, you know, Jefferson talked more about getting the state out of the way and Hamilton, before getting into his duel with Burr, who was buried, by the way, in the town I grew up in, Princeton, New Jersey, was very much about an active industrial strategy. So Europe, interestingly, I think, has learned all the wrong lessons. China, on the other hand, and this is really curious, China has learned the right lessons. China is actually doing for the green economy what the US government did for the IT revolution. At the same time that Trump, Donald Trump, is dismantling what I call the entrepreneurial

• 21:41Mariana Mazzucato?

  state.

• 21:42Stephen J. Dubner?

  Coming up after the break, how you, the taxpayer, lose out when it comes to, for instance, pharmaceuticals.

• 21:51Mariana Mazzucato?

  So what we actually have is the taxpayer paying twice, both for the very, very, very high basic research spending and then for these extremely high prices.

• 21:59Stephen J. Dubner?

  And what kind of solutions does Matzakato have?

• 22:03Mariana Mazzucato?

  Yeah, so I think it would be good if I ran the world.

• 22:06Stephen J. Dubner?

  That's coming up next. In the meantime, if you want to go deep into the Freakonomics Radio archives, you can find every episode we've ever made on the Stitcher app and at Freakonomics.com. The last three months' worth of episodes are available on Apple Podcasts, Spotify, or wherever you listen to podcasts. Freakonomics Radio is sponsored by Granola. You know that moment when a meeting ends and someone says, let's circle back on this next week, and everyone nods but no one writes it down? Then next week rolls around and it's radio silence? That's why Granola exists. Granola is an AI-powered notepad built for the way real people actually meet. You take

• 22:48Stephen J. Dubner?

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• 23:33Stephen J. Dubner?

  Freakonomics Radio is sponsored by PNC Bank. Boring. Great word, bad rep. Yet, time and time again, here at Freakonomics, we find that when something culture-changing happens, boring things like calculations and careful planning are usually behind it. Which begs the question, why not apply it to other aspects of life? Like banking, for example. Well, PNC Bank did, since its inception, proving time and again that the best banking strategy isn't the exciting type, but the steady, reliable, definitely-not-yolo type. PNC Bank: brilliantly boring since 1865. Brilliantly boring since 1865 is a registered mark of the PNC Financial Services Group, Inc. PNC Bank, National Association, Member FDIC.

• 24:21Stephen J. Dubner?

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• 24:59Stephen J. Dubner?

  Mariana Matzakato is a professor in the economics of innovation at University College London, and she's the author of the books The Entrepreneurial State and The Value of Everything. She argues that the US government in particular doesn't get nearly as much credit for or return on its investments in life-changing technology and life-saving medicines. To be sure, Mazzucato has plenty of critics. They say she doesn't fully appreciate the risks that private firms take on and the groundbreaking work they can do. They also say that she overlooks the waste and corruption and incompetence that plague a lot of government programs. In any case, she is arguing for a new and improved relationship between government and

• 25:44Stephen J. Dubner?

  industry, starting with a better return on the government's investment in public-private partnerships, like the space travel partnership between NASA and SpaceX.

• 25:58Stephen J. Dubner?

  Here's something you once said in an interview. So when Justin Bieber goes into space and unfortunately comes back, part of the price he's paid to SpaceX, which is the private firm, goes to NASA's budget. So I wanted to know about the economic setup, the collaboration between SpaceX and NASA. But I first wanted to know, are you, you're hoping that Justin Bieber dies in space rather than return? What do you mean he unfortunately comes back?

• 26:24Mariana Mazzucato?

  No, no, no. That was a joke. And I have four teenagers who I'm sure would be upset if he didn't come back. So that was a joke. No, the real point was, we should not make the same mistakes in space that we've made on Earth. And on Earth, we have not gotten these contracts right. So my point is, on the International Space Station, you know, there is Novartis today working for free and patenting. That doesn't make much sense to me. You know, either you charge Novartis to have publicly funded astronauts to be doing experiments for them, or you don't allow them to patent. And patents themselves are deals between public and private, and they are bad deals.

• 27:08Mariana Mazzucato?

  They used to be downstream, which was a good thing. They could incentivize innovation. They've increasingly gone upstream. So today, we are patenting the tools for research. So the irony is that in a world of open innovation and big data, we're actually going back to the Middle Ages in terms of secrecy, because we're patenting the really basic science. But, you know, my point in terms of space is SpaceX has massively benefited from NASA investments, also from NASA personnel, by the way. But just the issue, that example of space tourism, you know, where does the profit go was my provocative question, given that it's all in the back of publicly funded infrastructure.

• 27:47Stephen J. Dubner?

  Well, where would you like to see it go? If you could be the czar of designing public-private partnerships for the next 50 years? Let's say you're going to throw out all the garbage deals that you've been describing and set it up so that when governments invest, they get a proper return and proper credit, even, let's say. What would be your choice of either equity payout, financial instrumentation, tax policy that would give the government a fair return and give us, the citizens, the people who actually pay the taxes, a fair return rather than the return continuing to flow into private and shareholder hands?

• 28:26Mariana Mazzucato?

  Right. So there's different ways. There's no one way. It would be foolish to think that this is always the same, whether it's cross sectors or cross different phases of the innovation cycle. So with pharmaceuticals, the obvious way to do this is through the prices. The prices set for the drugs, the medicines that people have to buy in order to survive when they have these terrible diseases, whether it be diabetes or hepatitis C or cancer, should reflect this public contribution. So over 75% of new molecular entities with priority rating have actually been financed by national institutes of health. So what we actually have is a taxpayer paying twice, both for the very, very, very high

• 29:07Mariana Mazzucato?

  basic research spending and then for these extremely high prices, which are actually set by the pharmaceutical industry. So the healthcare budget, actually, in the US, I often say it's not really a healthcare budget, it's a subsidization of the pharmaceutical industry budget because these prices are just way too high. And they should actually be reflecting that public contribution. And by the way, in theory, they should be able to do that because there's something called the Baydole Act in 1980s, which allowed publicly funded research to be patented because before that, the idea was that if it's publicly funded, you can't patent. And once that changed, in the act itself, it says that the government should retain marching rights, so the ability to cap those prices of those drugs that were publicly financed.

• 29:49Mariana Mazzucato?

  But what's interesting is the government has never exercised its right to do that. And that comes back down to the Plato's storytellers because if the narrative is all against you, as just an impediment, as just an intervenor, as just a regulator, and not an investor-first resort, you don't have the confidence, you don't have the security, and hence the mandate, to also affect the price. And you're scared of the public blowback. Exactly. So that's one example, prices. Another one would be conditions on profits being reinvested in those areas where there have been very large government subsidies or handouts. They shouldn't be conditionless. I mean, if companies want to go completely free market, fine, go free market, don't get a penny from the state. But if you are going to get these massive pennies, or pounds,

• 30:31Mariana Mazzucato?

  or euros from the state, then there should be conditions attached in order for public value to be achieved, because otherwise it's just private value. And I've been thinking about this, especially around the big data and the kind of new questions around, you know, privacy with Facebook, et cetera. Instead of having a situation where all the data basically gets captured, which is citizens' data, by companies, which then, you know, in some ways, we have to pay into in terms of accessing these great new services, whether they're free or not, we're still indirectly paying. We should have the data in some sort of public repository, because it's citizens' data. The technology itself was funded by the citizens. You know, what would Uber be without GPS publicly financed? What would

• 31:16Mariana Mazzucato?

  Google be without the internet publicly financed? So the tech was financed from the state, the citizens, it's their data. Why not have, you know, completely reverse the current relationship and have that data in a public repository, which companies actually have to pay into to get access to it under certain strict conditions, which could be set by an independent advisory council. And, you know, these companies call themselves tech companies, but they're not really tech companies. They're often other media or advertising companies that have used this publicly financed technology. And so even these words, tech companies, and then we say have to be regulated, completely misses the point. We should be actively co-shaping and co-creating this space.

• 32:08Stephen J. Dubner?

  As compelling as your argument is from, let's say, an economic and political perspective, do you feel that you're losing the argument? Because from what I see, most big governments and industries are pushing pretty hard in the opposite direction of where you'd like to go, yeah?

• 32:25Mariana Mazzucato?

  Yeah, so I think it would be good if I ran the world. No, I actually think these ideas are gaining ground. I think it was much harder some years ago. I mean, just take the pharmaceutical companies. They can no longer pretend that they charge these high prices because they, you know, spent so much in R and D, because myself and others have shown that actually, they don't spend so much in R and D. They spend much more in marketing, much more share buybacks than R and D. And the R and D they do do is much more downstream than that that the public sector does. So they have been forced to come up with other kind of crazy ideas of why they can charge these very high prices. And one is called value-based pricing, which actually makes even less sense. It's basically this idea that because they can no longer pretend that their prices are due to their

• 33:09Mariana Mazzucato?

  R and D expenditures, the idea is that the price is basically in the eyes of the beholder.

• 33:15Stephen J. Dubner?

  The value of a life, let's say, right? Life extension.

• 33:17Mariana Mazzucato?

  Yeah, the value of basically not getting that drug. And if you have kids, as I do, you'll pay, you know, it would be infinite, the value of a drug if you don't have access to it because you want to save your kid's life.

• 33:28Stephen J. Dubner?

  It's so striking to me. You make the argument that we, including economists, really misdefine, I guess, what value is. And you've talked a lot about the ways in which what is said to be value or wealth creation is really not. I'm just curious, what's the best example of an industry or a realm where value creation is equitable and where the parties share the rewards justly? Can you point to that?

• 34:00Mariana Mazzucato?

  So I wouldn't point to an industry. I could, you know, one could point to companies. There is obviously cooperatives around the world that are very much run in that way. You know, it's quite interesting to look at the difference between Walmart and Costco. These are two, you know, competitors in the same industry where one has always tried to achieve a high profit margin, basically, you know, through different, different strategies, but one of the key ones through exploiting the labor force. So if you get a job at Walmart, up until recently at least, you would immediately qualify for welfare benefits because your pay would be low enough to do so. Whereas Costco has, you know, tried to achieve the same profit margins, actually through innovation,

• 34:42Mariana Mazzucato?

  through investment in new ways to, you know, deliver high-quality goods and services.

• 34:49Stephen J. Dubner?

  Okay, we'll end with this one obnoxious question. So you're calling for a greater appreciation of government spending and indeed a greater investment in government spending and greater return, but you are also an advisor to many governments and government agencies, including the Scottish government, the European Commission. So when you accuse private industry of being full of rent seekers, persuade me that you and your government allies aren't the rent seekers.

• 35:18Mariana Mazzucato?

  Okay, so first of all, in none of, well, I mean, and I don't want to sound defensive because I have no reason to be, but in none of my roles do I receive a penny. So my point, let me just rephrase my point because otherwise it's very misunderstood. My point is not that government needs to invest more. My point is government needs to better understand what its role is. It is not there just to fix things on the sidelines and wait for things to go wrong, to put a bandage on something. It is to be an active co-creator and co-shaper. So my role has been to make sure that the private and the public sector, when they talk to each other, that it's an exciting conversation. So that's what my role is, and my role is to be a real thorn in the side to the political process, which unfortunately does get captured quite often.

• 36:03Mariana Mazzucato?

  To be a thorn in the side to business, to not make it so easy for them just to say things like, "Oh, yes, short-termism is due to market pressures." And I say, "What do you mean? The market's an outcome. It's an outcome also of how you behave. So what is the market?" And I get attacked all the time because I'm a thorn in the side, definitely of both, public and private. And when I am an advisor, I'm an advisor in the capacity of trying to change the comfortableness that you might have around the table. You know, the smugness in both the business community and the policy community. And I think there's real difficulties ahead, but only by tackling them together can we succeed. And that does mean changing the vocabulary, the narrative, the story to not one of de-risking,

• 36:47Mariana Mazzucato?

  but sharing risks and sharing rewards.

• 36:56Stephen J. Dubner?

  I'm Stephen Dubner, and that was the economist Mariana Mazzucato. Her most recent book is called The Value of Everything. Coming up next time on Freakonomics Radio, we launch a special series about a special industry. That's roughly the same size as the cardboard box industry. But the cardboard box industry doesn't have what this one has. This one has winning, losing, cheating, stealing, hitting, hurting, batting, betting, cheering, jeering, and balls. Lots of balls.

• 37:30Stephen J. Dubner?

  Do you love sports? Do you hate sports? Do you know nothing about sports? Perfect, then you will love our upcoming series. We've interviewed dozens of world-class athletes, coaches, owners, union reps, league officials, and of course, economists.

• 37:51Speaker 04

  Our beliefs in streaks are much stronger than the data actually supports.

• 37:55Stephen J. Dubner?

  Football is for the men.

• 37:57Speaker 05

  I hit her as hard as I could.

• 37:58Stephen J. Dubner?

  Sports has a social impact that is way, way bigger than its economic impact.

• 38:04Speaker 06

  They didn't tell Dr. King, "Well, Dr. King, you can protest on Tuesday. You protest when you feel like protesting." Colin Kaepernick's protest against racial injustice seems to be gaining traction.

• 38:15Stephen J. Dubner?

  This was the moment I realized that baseball is a business. I played in a preseason game where a guy died in a locker room afterwards.

• 38:23Speaker 07

  I have an eight-year-old son. There's no way I'd let him play tackle football.

• 38:25Speaker 08

  Things hang in the balance. Outcomes are unclear. My body took over. My mind shut off. You cannot be afraid to fail.

• 38:32Speaker 09

  That could be the reason you're telling your second-grade daughter that she's moving next week.

• 38:36Speaker 08

  The fact of the matter is, superstars do win championships.

• 38:38Speaker 10

  I had never been in an environment that was so emotionally charged, where grown men were hugging and kissing each other and crying together.

• 38:50Stephen J. Dubner?

  That's next time on Freakonomics Radio. Freakonomics Radio is produced by Stitcher and Dubner Productions. This episode was produced by Zach Lipinski with help from Alison Kraglo. Our staff also includes Greg Rosalsky, Greg Rippon, Alvin Melathe, Harry Huggins, and Andy Meisenheimer. The music you hear throughout the episode was composed by Luis Garra. You can find Freakonomics Radio wherever you get your podcasts. Our entire archive is available on the Stitcher app or at Freakonomics.com, where you'll also find transcripts, show notes, et cetera. If you subscribe to Stitcher Premium, you will get every episode of Freakonomics Radio ad-free, plus lots of extra bonus episodes. Just go to StitcherPremium.com/Freakonomics.

• 39:35Stephen J. Dubner?

  We can also be found on Twitter, Facebook, LinkedIn, or via email at [email protected]. Thanks for listening.

• 39:51Stephen J. Dubner?

  Freakonomics Radio is sponsored by Ozempic. Innovation happens through rethinking what's possible, and when it comes to GLP-1s, Ozempic pill does just that. Learn more about Ozempic semaglutide tablets, 4 in 9mg, by calling 1-833-OZEMPIC or visit Ozempic.com to view the medication guide and ask your doctor what's possible with FDA-approved Ozempic pill. Freakonomics Radio is sponsored by Southern Company. The world and its energy needs are always changing. Southern Company's commitment to meeting this demand stays the same. That's because Southern Company believes energy is more than a utility, it's what powers possibilities.

• 40:36Stephen J. Dubner?

  So they are looking ahead and investing $80 billion in infrastructure upgrades and are committed to fueling growth in ways that benefit all customers so that reliable and affordable energy is accessible for generations to come. Go to SouthernCompany.com to learn more. Southern Company: building the future of energy.

• 41:01Speaker 05

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• 42:01Speaker 11

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