Excellent points, as usual, Marco. And I broadly agree with your arguments and am very worried that the 'small yard' we plan to protect with a 'high fence' is going to grow quickly over time. Having said that, most of what the Biden Administration is doing is offering incentives to private actors to deliver electric vehicles. It is not setting up a Climate NASA to do the job itself. Also, I would point out that SpaceX is an amazing story, but still depends heavily on a big client called NASA. And last, I think it's unfair to suggest our budget deficits are expanding because of industrial policy. As you know, our biggest expenses are social transfers. Another problem altogether ... Nice piece.
On the deficits, I am not arguing that budget deficits are expanding because of industrial policy, but rather that having large deficits already limits the scope for more spending on further government interventions.
I would argue that incentives for electric vehicles are a great example of "government doing it wrong": it boosts demand for electricity when the limitations we face in the green transition are on generation and storage. Moreover, current calls for ambitious industrial policy (on both the left and the right of the political spectrum) go far beyond energy and climate.
On Space X -- fully agreed, though I think it is the growing perception of the economic potential of the space economy that has helped getting not just Musk but other players into the game, with impressive results.
Having said all this, if we as a society really wanted to consider another true moonshot, say a climate moonshot, it would be a discussion worth having. But that's not what advocates of industrial policy are pushing for. They want government to shape an economic growth model that is sustainable, equitable, and conforming to a long detailed list of political priorities -- and that to me seems even more misguided than good old communism
OK, so much to digest here. Let me share a couple of immediate comments:
1) Your long list of innovations is indeed impressive, and if governments were in charge, Moore's Law would sadly and quickly mutate into Murphy's Law. However, and this is a relevant point I feel, innovation is 'good'—economically, and I suspect also socially—only inasmuch as it sustains productivity, meaning that with them, we can do more (or the same) with less. Now, I think we agree the productivity bump we’ve seen so far is quite underwhelming. So, the question here is: are we investing in the right things, or are we just distracting people? (i.e., does Alexa have a secret mission?). Not that I think governments have the slightest clue about it.
2) On your point about the quality of government: I couldn't agree more. I look at our generation of politicians and want to ask, how did we get here? I listened to a radio show last week where the host lamented the disappearance of 'diplomats' (unless we’re ready to admit that the new Kissinger is Blinken). The accumulation of debt is just one of many signs that the government is as irresponsible as the roughest private entrepreneur.
3) Mazzucato is a hopeless romantic. She seems to think the government has the long-term destiny of its citizens in mind. May I dare to say: they don't give a damn. Look at the German government: only agreeing to DSV buying DB Schenker after the Danish company promised not to lay off German staff; or Chancellor Scholz stating that UniCredit’s attempt to snatch Commerzbank is 'inappropriate' (an odd choice of adjective and timing, given Draghi’s recommendation for EU financial integration). Look at Emmanuel Macron's mercurial call for a general election in France, supposedly to prevent the far right from coming to power, only to form a government that excludes the left (who won the election) and fundamentally depends on the far right's mercy. Look at Joe Biden, who will provide Ukraine with long-range weaponry as long as Zelenski doesn't use them against Russia (perhaps implying Ukraine should attack the Moon instead)... I could go on. Everyone just wants to be re-elected. Yes, even Biden, before... well, you know.
4) Mazzucato is a hopeless romantic (2.0). What is the left interested in nowadays? Industrial policy? Boring! Adding unnecessary 'neo-pronouns' (latest notable additions: ze/hir, xe/xem, fae/faer): GREAT VALUE TO SOCIETY! Green? OH YES, FOSSIL FUELS: KILL THEM ALL. Merit as a value in schooling: BOOOOOOO. This comes from someone (me) who is theoretically very interested in what the left could offer society, but who feels kind of betrayed.
5) The irony is that the absence of quality, long-term government is making the private sector more 'dangerous.' Isn’t the unbridled development of social media having much more severe consequences than merit in schools? If you want to have a (bitter) laugh, look at this: https://www.bbc.com/news/technology-53476117
Luca, all excellent points and I think we agree on all 5, but let me react to 1 and 5. I'll start with the easiest: 5) You are absolutely right, it is not the first time that private sector innovation has harmful consequences, and this is exactly where a good government should intervene: once the negative effects become clear, draft targeted regulation to keep them in check.
2) is more subtle. You are right, the productivity boost has been imperceptible, which raises the question of whether these innovations were worthwhile. I would say (a) some are clearly worthwhile even if they don't raise productivity, like telesurgery expanding potential access to health care; (b) these are clearly the kind of innovations we want -- companies focus on these applications because that's where the money is. I am also disappointed and depressed by the fact that digital innovation seems to go overwhelmingly in advertising and entertainment. But, these are the preferences of the same society that elects the leaders you have so effectively described. Having innovation and growth guided by politicians chosen by the same people who only desire better special effects for their selfies to post on social media is unlikely to improve the situation. (c) The best way to get out of this situation would be to improve the education sector and the quality of information, but here government has been pushing in the opposite direction on both, sponsoring censorship and getting schools to obsess on pronouns rather than imparting knowledge.
I don't know what the solution is, but it is certainly not government, for all the reasons we agree on.
To be fair, the climate change issue can be said to justify a moonshot effort – probably much more than the moonshot itself: it’s existential for the human race, and it requires a great deal of new technologies – and hence massive R&D expenditure which we now the market underprovides (as it cannot internalize the benefits) –; old-fashioned infrastructure investment such as grids (again, can’t happen from the private sector alone); deployment of renewables; new markets (which, like it or not, governments are good at establishing – joining up disparate carbon pricing schemes would be a modern example) and many other things.
But, and this is a very big but indeed, this should not and cannot be a pretext for an ever-increasing role of the government in the economy. Government intervention for climate change mitigation and adaptation should remain targeted – much like the moonshot.
I strongly agree on your last point Spyros. I also think there are smart ways in which government can help accelerate progress on renewable energy. And if we believe it's an existential imperative (achieve it or we all die), then the last thing you'd want to do is load it with extraneous requirements on DEI, workforce development, community relations and what have you. Whether climate change justifies a moonshot is a separate discussion. But assuming that it does, it should not be used to justify a vast range of government interventions that are at best tenuously related to the main goal.
Excellent points, as usual, Marco. And I broadly agree with your arguments and am very worried that the 'small yard' we plan to protect with a 'high fence' is going to grow quickly over time. Having said that, most of what the Biden Administration is doing is offering incentives to private actors to deliver electric vehicles. It is not setting up a Climate NASA to do the job itself. Also, I would point out that SpaceX is an amazing story, but still depends heavily on a big client called NASA. And last, I think it's unfair to suggest our budget deficits are expanding because of industrial policy. As you know, our biggest expenses are social transfers. Another problem altogether ... Nice piece.
Good points Christopher.
On the deficits, I am not arguing that budget deficits are expanding because of industrial policy, but rather that having large deficits already limits the scope for more spending on further government interventions.
I would argue that incentives for electric vehicles are a great example of "government doing it wrong": it boosts demand for electricity when the limitations we face in the green transition are on generation and storage. Moreover, current calls for ambitious industrial policy (on both the left and the right of the political spectrum) go far beyond energy and climate.
On Space X -- fully agreed, though I think it is the growing perception of the economic potential of the space economy that has helped getting not just Musk but other players into the game, with impressive results.
Having said all this, if we as a society really wanted to consider another true moonshot, say a climate moonshot, it would be a discussion worth having. But that's not what advocates of industrial policy are pushing for. They want government to shape an economic growth model that is sustainable, equitable, and conforming to a long detailed list of political priorities -- and that to me seems even more misguided than good old communism
OK, so much to digest here. Let me share a couple of immediate comments:
1) Your long list of innovations is indeed impressive, and if governments were in charge, Moore's Law would sadly and quickly mutate into Murphy's Law. However, and this is a relevant point I feel, innovation is 'good'—economically, and I suspect also socially—only inasmuch as it sustains productivity, meaning that with them, we can do more (or the same) with less. Now, I think we agree the productivity bump we’ve seen so far is quite underwhelming. So, the question here is: are we investing in the right things, or are we just distracting people? (i.e., does Alexa have a secret mission?). Not that I think governments have the slightest clue about it.
2) On your point about the quality of government: I couldn't agree more. I look at our generation of politicians and want to ask, how did we get here? I listened to a radio show last week where the host lamented the disappearance of 'diplomats' (unless we’re ready to admit that the new Kissinger is Blinken). The accumulation of debt is just one of many signs that the government is as irresponsible as the roughest private entrepreneur.
3) Mazzucato is a hopeless romantic. She seems to think the government has the long-term destiny of its citizens in mind. May I dare to say: they don't give a damn. Look at the German government: only agreeing to DSV buying DB Schenker after the Danish company promised not to lay off German staff; or Chancellor Scholz stating that UniCredit’s attempt to snatch Commerzbank is 'inappropriate' (an odd choice of adjective and timing, given Draghi’s recommendation for EU financial integration). Look at Emmanuel Macron's mercurial call for a general election in France, supposedly to prevent the far right from coming to power, only to form a government that excludes the left (who won the election) and fundamentally depends on the far right's mercy. Look at Joe Biden, who will provide Ukraine with long-range weaponry as long as Zelenski doesn't use them against Russia (perhaps implying Ukraine should attack the Moon instead)... I could go on. Everyone just wants to be re-elected. Yes, even Biden, before... well, you know.
4) Mazzucato is a hopeless romantic (2.0). What is the left interested in nowadays? Industrial policy? Boring! Adding unnecessary 'neo-pronouns' (latest notable additions: ze/hir, xe/xem, fae/faer): GREAT VALUE TO SOCIETY! Green? OH YES, FOSSIL FUELS: KILL THEM ALL. Merit as a value in schooling: BOOOOOOO. This comes from someone (me) who is theoretically very interested in what the left could offer society, but who feels kind of betrayed.
5) The irony is that the absence of quality, long-term government is making the private sector more 'dangerous.' Isn’t the unbridled development of social media having much more severe consequences than merit in schools? If you want to have a (bitter) laugh, look at this: https://www.bbc.com/news/technology-53476117
Luca, all excellent points and I think we agree on all 5, but let me react to 1 and 5. I'll start with the easiest: 5) You are absolutely right, it is not the first time that private sector innovation has harmful consequences, and this is exactly where a good government should intervene: once the negative effects become clear, draft targeted regulation to keep them in check.
2) is more subtle. You are right, the productivity boost has been imperceptible, which raises the question of whether these innovations were worthwhile. I would say (a) some are clearly worthwhile even if they don't raise productivity, like telesurgery expanding potential access to health care; (b) these are clearly the kind of innovations we want -- companies focus on these applications because that's where the money is. I am also disappointed and depressed by the fact that digital innovation seems to go overwhelmingly in advertising and entertainment. But, these are the preferences of the same society that elects the leaders you have so effectively described. Having innovation and growth guided by politicians chosen by the same people who only desire better special effects for their selfies to post on social media is unlikely to improve the situation. (c) The best way to get out of this situation would be to improve the education sector and the quality of information, but here government has been pushing in the opposite direction on both, sponsoring censorship and getting schools to obsess on pronouns rather than imparting knowledge.
I don't know what the solution is, but it is certainly not government, for all the reasons we agree on.
To be fair, the climate change issue can be said to justify a moonshot effort – probably much more than the moonshot itself: it’s existential for the human race, and it requires a great deal of new technologies – and hence massive R&D expenditure which we now the market underprovides (as it cannot internalize the benefits) –; old-fashioned infrastructure investment such as grids (again, can’t happen from the private sector alone); deployment of renewables; new markets (which, like it or not, governments are good at establishing – joining up disparate carbon pricing schemes would be a modern example) and many other things.
But, and this is a very big but indeed, this should not and cannot be a pretext for an ever-increasing role of the government in the economy. Government intervention for climate change mitigation and adaptation should remain targeted – much like the moonshot.
I strongly agree on your last point Spyros. I also think there are smart ways in which government can help accelerate progress on renewable energy. And if we believe it's an existential imperative (achieve it or we all die), then the last thing you'd want to do is load it with extraneous requirements on DEI, workforce development, community relations and what have you. Whether climate change justifies a moonshot is a separate discussion. But assuming that it does, it should not be used to justify a vast range of government interventions that are at best tenuously related to the main goal.
“governments do it better” ??? The British economist should cjheck out Russia, China, even UK, and EU whether they are doing "bertter" than USA.
I suspect she did check them out, and clearly liked what she saw...