In 1962 US president John F. Kennedy committed his country to put a man on the moon within a decade. The accomplishment of this ambition is often held up as the historic standard of human ingenuity, and this first “moonshot” is frequently invoked today, whether by environmentalists seeking an ‘‘Earthshot” to save the planet, or those praising the technical accomplishment of the world’s first Covid-19 vaccine.
In her book Mission Economy: A Moonshot Guide to Saving Capitalism, Mariana Mazzucato draws out lessons for policymakers. By discarding old orthodoxies and embracing a “mission-oriented” approach, governments can create a more equitable and sustainable capitalism by focusing policymakers on achieving missions related to the grand challenges of climate change, ageing populations, and health.
What is the role of governments?
The mission-oriented approach discards the view that government policies are justified by the need to fix market failures. Instead of viewing government intervention as inherently a second-best solution deployed in specific circumstances, states are viewed as co-creating markets and technologies with firms. This point has been driven home during the coronavirus pandemic by the way that public and private actors collaborated in the world’s fastest vaccine development programme, as well as the role that public agencies have historically played in creating a range of technologies – technologies that Mazzucato details in another book, The Entrepreneurial State.
How do we appraise policies?
Typically, policymakers appraise policies by summing up the potential costs and benefits at the outset using a cost-benefit-analysis approach. Mazzucato argues that reality is too complex to predict, particularly when government procurement can be used to drive unpredictable dynamics of innovation and spill-overs. The Apollo programme, for example, generated large commercial spill-overs, not least by catalysing the development of compact and powerful computers. However, to NASA planners such benefits would have been unknowable, so a CBA approach would likely have doomed the project due to its $28bn cost ($283bn in inflation adjusted terms).
Public officials should abandon the unrealistic notion that they can predict all the future costs and benefits of a policy. Instead, policies should be appraised on the basis of whether they realistically assist in achieving the chosen outcome specified by the overarching mission.
How should government approach risk?
Policymakers are generally risk-averse and often frame policies in terms of de-risking and facilitating private sector activity. This is reflected in widespread concern that governments should abjure from ‘picking-winners’, out of a concern that unrecoverable investments in specific firms or industries may be wasted. The mission-oriented approach calls on the state to embrace the spirit of
entrepreneurialism, recognising that all investments generate risk, and that failure is a necessary part of the learning process. This is reflected in the new high-risk strategy of the Advanced Research and Innovation Agency, which consciously adopts a high-risk strategy that accepts most programmes will fail, but views such failures as justified by a few profound successes.
The Mission-Oriented approach
Taken together, the mission-oriented framework suggests that we should discard the view that policymakers focus merely on correcting market failures. Instead, governments should pursue risky and ambitious missions that require the co-creation of new technologies and capabilities alongside private sector actors. While the investments required to achieve these missions will potentially be on an even larger scale than those of the Apollo programme, the outcomes and the unpredictable spill-overs will more than justify the expense.
Theo Curtis is an economist at the Department for Business, Energy and Industrial Strategy