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Historically, the driving forces behind the United States’s economic growth have been fourfold: natural resources, scientific and technological creativity, labor immigration, and the immigration of ideas with entrepreneurs. Up until 1950 the U.S. had a unique combination of all four of these as a powerful wind at its back. Since 1945 the resources of the U.S. have no longer been anything special, but the others have been a powerful wind at its back. -- Brad Delong
This is a good overview of several problems facing America. Can people agree on these things?
Tim Oreilley
Shaping the stories that rule our economy
The economy we want to build must recognize increasing the value to and for humans as the goal. that government by definition is outside "the production boundary" (that is, does not create any value but simply redistributes it or consumes it);
"Until the mid-19th century," Mazzucato writes, "almost all economists assumed that in order to understand the prices of goods and services, it was first necessary to have an objective theory of value, a theory tied to the conditions in which those goods and services were produced, including the time needed to produce them and the quality of the labor employed; Part and parcel of this modern theory of value is the idea that value creators are entitled to whatever they can extract from the rest of society. The wizards of Wall Street who brought us the 2008 financial crisis were, by this new definition, creating value even when knowingly selling defective mortgage securities, as long as they were able to find willing buyers for their goods. It was only in 1993 that the System of National Accounts, which controls how countries calculate their GDP, began to count financial activity as value added, rather than simply as a cost to businesses. Mazzucato notes, "This turned what had previously been viewed as a deadweight cost into a source of value added overnight." Yet, because of our distorted theory of value, government gets no credit, and companies that have brought relatively little to the table reap outsized returns. She makes the case that mission-driven government investment has created many of the marvels of the modern world, and it is only the oddity of our beliefs about value that keeps government from reaping the benefit on behalf of the public that footed the bill. While there are those who argue the government gets its return via future tax receipts and downstream economic spillovers, I agree with Mazzucato that any story in which losses belong to the government, but any gains belong to the private sector "value creators" is one of those self-serving stories Plato advised those in power to tell.
Mazzucato's point, though, is not to "try to argue for one correct theory of value," but "to bring back value theory as a hotly debated area." The modern idea that rents are simply an "imperfection", a barrier that can be competed away, has replaced the classical economic idea of rent as unearned income—that is, income received from unproductive activities is treated as equivalent to that derived from the production of real value.
In each of the past debates about value, more and more human activity came to be understood as value creating not just because economists persuaded us of the new idea, but because of changes in society itself. Of course, as she notes in the book, government is currently doing a poor job of maintaining a market free of rents, precisely because our current definition of "value" allows rent-seekers free rein.