when the state doesn't understand its role in terms of really being purpose driven and having proper metrics around the public interest than that possibility and risk of corruption is much, much greater and surprise surprise. We get a lot of corruption.

Hello and welcome to Ezra Klein Show on the Box Media Podcast Network. My guests today is one of our most requested guess somebody I've been wanting to have on the show for a long time. Economist Mariana Mazzucato She is a professor in the economics of innovation and public value at the University of College London and founder and director there of the Institute for Innovation and Public Purpose. She's the author of a number of super important economics books in past couple of years, including the entrepreneurial State and the value of Everything. And and both of these, I think bear in a very profound way on our current moment, in particularly value of everything, which is trying to restart a discussion in economics and, more broadly about how do we assign value to what do we assign value right now? I think one thing that Corona viruses forcing us to confront is that the very things were calling essential the things we have clearly when they were at risk of being taken, assigned the most value to are not the things that our economy treats as most valuable. The same workers we call essential are the workers we treat as disposable the workers. We give no pay leave to pay like shit. And this should not just be a call Air Force a call for, like a temporary boost in pay or hazard pay or praise that should actually make us rethink some very fundamental things about our economic systems. Mazzucato is somebody who's been working hard for years to try to get economists to rethink some of their models of the world.

The New York Times called her, I think, the most dangerous economist in the world and why I don't know if she is that dangerous. She is somebody who offer some challenges are worth taking very seriously. As always, my email is as recline joe inbox dot com Here is Mariana Mazzucato Mariana Mazzucato. Welcome to the

podcast. Thank you. Very happy to be here.

So we're seeing in this crisis that the workers who are truly essential are the workers. The market treats as least valuable.

What

does that say about how our economic system assigns value toe work?

Well, it's quite interesting that we're using these words, but I don't think we're taking them seriously. So in the UK, the word is key workers in the U. S. Essential workers. But what does that actually mean for the essential economy? And I think there's a real opportunity right now. Teoh, test the talk and see if we can actually walk that talk after the immediate crisis fall. So what that would actually mean is, Do we not only value the workers who were all clapping on the Thursdays, but at least on Thursdays, when we do it here in the UK, But are we actually valuing the functions that they provide in the economy? The services,

a social infrastructure around it, which in so many different countries for the last almost half century have been underfinanced, underfunded but especially under imagined? So it's a real moment, I think, to almost rethink the welfare state itself. So health services, public education, you know, the whole digital divide right now is a huge problem with these kids who are not going to school, so we're not actually all in it together while accessing the Internet in different ways and hence being educated in different ways. But I think what it actually says about value is we've gotten it completely wrong. But what to do about it really requires a very different approach to not just the value question, but how we build the economy around it.

But so I want to go backwards into how some of these values got set in the first place because in your book, the value of everything you talk to some of the theories that were in competition for a long time, and then how we got to the one right now. So

how did it

become the case in our economy that the way we pay and treat a child care worker, the grocery worker, a nurse and the way we pay entry ah, High frequency Trader, a management consultant, are so dramatically different? But then, when you actually get into the crunch and you see what would be a disaster if we truly lost it, you see that the people we've been treating quite badly were the ones who are essential to us all along. How did he become the case? That what are just by any measure, less essential operations are paid so much better, are valued so much higher? What theory of value predominate it and what were some of its potential

competitors? So the big change that occurred, I would say over the last 200 years, and how we think about value, is that we used Teoh, and I'm thinking about the physio crafts in the 17 hundreds and the classical economists in the 18 hundreds, and I'll say something more about them in a second. But they had a objective theory of value that was really tied to production, to the division of Labor, to the actual work that different members in society were doing and that then actually lead to also a theory of prices. What we have today is the opposite. We have a theory of price that leads to a theory of value, but let me just walk you through that of it. What I mean by objective is in the 17 hundreds, the physio Kratz, who were really living through the kind of agricultural revolution they really believed in their lens on the economy that value came basically from farmers, and they developed a whole kind of what I would call the most you know,

the first excel she ever called the tableau economic, where they looked at how the value that was produced by what they called the productive class. The farm workers was then circulated through the economy, and they talked about the merchants and the landlords who together basically formed what they called the sterile class, how it circulate in the economy, and their main worry was reproduction in the system. So if they thought that value was created by farming, if then how it got circulated, if if there was too much going, for example to the landlords who they really thought were basically these inertial sterile of forces in the economy, they worried that the system itself wouldn't reproduce. So the kind of policies they worried about was, how can we make sure that the value is actually reinvested back into making land more productive? And that was very much in some ways what Adam Smith started to do in the wealth of nations. He, too,

looked objectively at production. He had his whole pin factory example where he looked at how a rise in the division of labor, which is again, a very objective kind of lens on what's happening on the factory floor that managers the workers, how they're set up, the increased specialization of production itself, how that would lead to an increase in productivity, increase in growth and then increase in the wealth of nations. So the rise of technological change, but especially organizational change in this time and by focusing on work itself and kind of who is doing what they started to really worry about what they called rent. So rent basically is being unearned income. So some actors in the economy and it wasn't just the ones that we would point to two today in the financial sector. But some actors in the economy just kind of playing this inter mediating role, not doing much and potentially siphoning value out of the economy, which then puts the system itself at risk because it's not able to reproduce itself. What then happened in the kind of current way of thinking about the economy,

which we call neoclassical economics, which basically started in the early 19 hundreds, is that detention went away from production and looking at the different actors in the system, whether they be industrial workers or farm workers to subjective conditions. So all the attention focused on the individual, the individual worker, the individual capitalist, the individual consumer. And we built models all about the maximization of individual preferences. So they dia was that firms were maximizing their profits. Workers were maximizing their choices between these your versus work and consumers were maximizing their utility using this word that came from Bentham philosophy. And then when you aggregated up all these individual decisions, you basically get thes supply and demand curves, which I won't bore your listeners with. But anyway, where they meet,

we all know where supply and demand meet forms That unequal Librium price and basically what happened was that that equilibrium price itself was assumed to reveal value. So you can already see here that the logic went away from actually focusing on who's creating value. How do these different value creators into relate? Is there possibility of value getting siphoned out to one of just looking at a lot of individuals, maximizing their decision making and then forming a system which determines these equilibrium prices, which then reveals value to the point that we Onley include, for example, and are measures of economic growth like GDP, those outcomes that actually have a price. We don't make kind of a judgment of whether they are actually producing or extracting value in the economy. What that means is it basically creates a tautology. So, uh, I'll just give you an example after the financial crisis, it was in 2009 just one year after the whole crisis exploded. Blankfein,

the CEO of Goldman Sachs, actually said that Goldman Sachs workers were the most productive in the world, and one could, you know, kind of be shocked by that cause. This is just one year after the crisis exploded, Goldman Sachs, along with other banks, were revealed to have actually in many ways caused the crisis because of how financial products had were basically hiding the underlying risk. And yet he was right. If we are measuring our value in the economy through the price system than those workers who are earning the most, and we all know investment bankers do earn a lot or of course the most valuable, and if we're measuring productivity by output per input and we don't actually have a measure of output. For example, for those services that are free, think of public education.

But do you have a measure of that output for these activities which are priced very highly? Then, of course, the output per input is gonna look much higher for those kinds of services. And so the real question is, how could we have become so confused? And actually, you know, basically created this tautology that just because something has a very high price, it's assumed to be valuable, and hence then we also treat it as more valuable. So

on this idea that we've moved to a measure of value which ends up being basically the value of anything is whatever price somebody will pay for it. One reason, I think if that is a confusion we got confused, actually goes to the way you build your scheme in the first place. I found it sort of surprising that you called the prior ideas of value objective and this view as subjective because I think the reason that a lot of economists in particular find it appealing is it It feels more objective than value simply being defined by what society argues it is or whoever is in power. More to the point argues it is or whoever is making the argument argues, It is when you're going through Some of the early conceptions of value show how some of these early economists they would put the same. One of them would say, Well, priests are very valuable. They create a lot of alley in the economy, and the next one say, No, no, no there. Way outside the production boundary, they don't create any value at all.

And so what? I think it's seductive about pricing to people, is it? It feels like it is objective. At least it may be in perfect. But at least it isn't some bureaucrat somewhere or s'more their point. Maybe some pundits somewhere telling the rest of society what it is they're supposed to value and building all of economic policy around those very subjective preferences.

Right? So when I say objective, I mean, actually think of it as an objective lens on what's out there. So actually looking at the division of labor production systems, the factory floor, how things get produced goods and services in different sectors, so it's almost like a mapping exercise, subjective, meaning that it all comes down to individuals preferences. So So you know that how we actually derive the prices themselves that then reveal value were actually based on lots of individual decision making driven by their personal preferences. So there's this move from almost the lens on a collective set of social structures to one of just aggregating up a lot of individual decision making in these different spears, from firms to consumers to workers. So it's subjective in the sense that it goes away from looking at social structures, class warfare, the division of labor production, Teoh individual preferences.

So that's a different use. I can see how that could be confusing. It's not objective and subjective in the kind of sense of that one might use, You know, like the concepts of normative ity around.

What I like about that when I find useful about the way you frame it here, is it? I think people feel I mean it, given at times I have felt that, well, the market is setting prices, so at least someone impersonal, not someone write something impersonal and disinterested is making these judgments for us and even if they're in perfect, there's ah kind of impartiality to them, and at the same time, that's very much not true. When you talk about what I value, what what is revealed by my consumer preferences, I would pay quite a lot of money toe, have access to the road that leads away from my house. I just don't have to pay that much because it is provided to me for a very reasonable cost through taxes. I would pay a lot of money to have access to all kinds of things that the state does for me or that other people came up with before me.

And so when you look at how much I'm paying for them, it's quite little. But that's not how much I value them. And in true, some of things I pay a lot for. I don't value all that much there. You know, that speaks toe, how value the marginal dollar, whatever it might be. There's a lot, it turns out, For instance, in this moment I can live without that I was going to do before, like going out to restaurants and so there's a weird way in which the prices we pay for things I think often reflects their availability to us, not our actual value for them. And then we somehow as individual consumers, just trying to make everything fit within our budget.

Yeah, but I I think how you described it in the beginning. There is exactly the point, which is that there's this myth in some ways, that prices are arising from these kind of objective conditions, and that makes it less normative. But actually, markets themselves are deeply embedded in institutions and laws in norms and in that sense markets themselves. Air outcomes of how we govern these different, for example, very important economic actors in the private sector in the public sector and how they relate one to another. And one of the rial in some ways failures. That economics has been to understand how value is co created, not just fixed when a big crisis occurs, whether it's a financial crisis or health prices by public institutions themselves, which we again don't really know how to value, because often the kinds of outputs that they produce actually don't have prices,

and even when they do have prices, we often miss price them and so in that sense, how you know these kind of social structures around you, whether they are the, you know, the motor raise, the highways, the public education system, the public health system, but also all the technology. I would argue. I wrote a whole book about this called entrepreneurial state in our iPhones I products and smart products that were actually invested in initially by the public sector. We don't have a way in economics because we don't actually have that objective lens of kind of who's doing what and why and what are they learning from that of these public investments? And that means we also undervalue under appreciate the public sector itself and think it's just there to fix markets. Economists call it market failure theory. You have policy to come in and fix a market failure,

and all these really boring words like regulating intervening, enabling, facilitating or the word I hate the most is de risking as though there's a great risk taker out there and the role of government is just to de risk that, you know, funky creative actor. These are all words which are loaded, absolutely loaded with assumptions of how the economy works. They're not objective in any way in the way that you were using the word objectively kind of scientific. They are full of assumptions about where value itself comes from. One of the things I've been very interested in is if you look at kind of the rise of inequality from the 19 seventies, and this is the kind of work that Thomas Piketty has revealed in his work almost every decade, where we saw different types of inequality increase in the kind of tax policies that he shows tohave. Then underneath those rises in inequality came about through a narrative and a story about value and where value creation was actually occurring in the economy and also confusing. Sometimes these two words value creation of wealth creation. But in both cases there's narratives about who we think the value creators are, where we think,

well, wealth creation comes from. And so the capital gains tax, for example, in the US fell by close to 50% in just four years at the end of the 19 seventies. There a narrative about the knowledge economy and the need for venture capital to increase the incentives. Teoh ah, form that kind of wealth and the reason why then private equity equity required this massive fall in capital gains in order to nurture that type of value creation. And that was just, you know, basically a story that was told that was believed. Lots of these massive changes that we've had in our system, which have had an effect on inequality, have been accompanied by narratives about who creates value and where and how those forces come about. Now more than ever, and especially when it comes to today's economy,

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there's a bunch of things to go into here, and I really want to come back to some of the points about the entrepreneurial state to, but something I want to make sure we do is this can all get very heady and very theoretical. And I want to try to ground this so people have a sense of how the world around them works now. But almost in a scifi way. I'd like you to paint the picture of how the economy might work if we believed and built around a very different story of value, not in the sense of like the big theory policy, but just like How would it look if we had a theory of value? That's a valued teachers Maurin relationship to the good they do for society valued, you know, food production workers more in relationship to the role they play in society, valued state in some ways more in relationship to not just roll place in society, but the way in which it is an ordering function for our preferences about society and our values of that society.

What might that look like?

Because I think the hardest thing in here is not imagine what's wrong with the current theory, but imagining what a world based on another theory would feel like day to day.

Sure. I mean, just take health for a minute because we're, you know, living through a massive health crisis and pandemic. I mean, for me, it's about not just picking out parts of that kind of chain, you know, so sort of health workers. But if you really take the word health and start talking about a more caring economy and care, by the way, is one of the typical examples we give of what goes wrong with the modern theory of value. Because so much care that we give, for example, at home to Children or to the elderly, which is often for free.

It's what you know. Mothers and grandmothers do and doesn't have a price. And that doesn't go into GDP. So to the point that if you marry your baby sitter, GDP will actually go down because a job that was actually being done for a price perhaps is still being done without being paid for and GDP would fall theon office. That, of course, if we pollute GDP will go up because we actually have to pay for someone to clean up that pollution. Right? So this is just the typical example one might give of how weird we think about value and effects that has on how we measure output. But if you take health more broadly again and start work, you know, thinking about the caring economy, but also how we govern our health systems if we really valued health workers not only what they would be earning, but how would we would really be investing in public health systems because we know that that way people would be able to access good health equally and universally. That's kind of the basis of why we have in the UK and National Health Service.

But that health service would again not only be well funded, but it would be constantly re imagined. It would be modernized in the same way that we think about AI and big data and digital platforms, and we don't think of it as a static entity, but how it can adapt constantly driven by technological change, We should also be thinking about our welfare state in that way, but that assumes that we would value it. We tend to Onley apply these interesting words that creativity, imagination and again, wealth creation, dynamic capabilities, thinking out of the box when we think of the kind of high tech part of the world, we don't use those same kinds of words when we talk about again basic welfare and social services. So if we valued health, if we valued people's well being, if we constructed systems which people would be equally able to access in order to nurture their mental health or physical health than we would be constructing different types of institutions and social infrastructure around them, that would also be constantly evolving and being driven themselves by organization null and technological change. So that would be one big example of ah, of a change in people's lives.

Let me dig into that example for a minute cause it's still for me a little, a little hard to live in in my in my head. So let's take nurses in this world, right? I think everybody agrees that nurses are incredibly important. All of us have had remarkable experiences with the care they've delivered.

And

I think that a traditional economist right now would say if you went to them and said It sure seems to me that nurses aren't paid enough, given the work they dio, they would say that might be bright in some kind of conceptual way, But they're paid that much because that's what the market will bear, given the skills needed given the demand. Given the money that goes into it, you know they're paid that way. The market sets at wage and that wages sort of like you may not like it, and I guess you could do a tax and transfer scheme, but that's that's what the market pays them. That's why they're paid that way. In a world where we were trying toe order things more around what we value, How would that work? How would nurses be paid? Would they be paid differently? Would that be that at some point we voted toe have some sort of like tax credit for nurses like what is that different vision like

So I mean, that's what I mean by you would have to, I think, do this thought experiment in terms of the system, not just the nurses, right? So if you really valued, as I was saying, the health system that would become a massive objective in society to be not only nurturing but to be thinking about, you know, just think of where managers ago, when they learn, you know, when they want to get a very good job and create value in the economy, they do a masters in public. Sorry. In business administration,

right? And there's all these interesting discussions there about Strategic management, decision sciences, organizational behavior. There's a whole section of our economy that we under value and that we don't actually apply that kind of dynamic thinking, too. That sort of my first point that these areas are not sterile. There is a feedback. There's, um, a vicious cycle that areas that we undervalue also actually can potentially become mawr inertial and less valuable. So it's not just about saying why are we not paying nurses more? We know they're so important. We know public school teachers are not so important, but have we also along the way because we think that way made them less valuable. That's just an important point to make,

I think, because that feedback effect between how we value something and how that area actually evolves. What sociologists I found out called this performative ity another. Is that how you measure the performance of something affects how that something that acts, which then feeds back into how you think about it? I think that's an important piece of this puzzle now, how we pay football players, how we pay bankers, how we pay nurses don't happen in a vacuum. That's what I was saying before, which is there's actually this myth of the free market that somehow is defining on its own the price of of things. They're all actually being heavily influenced not only by regulation in some sectors, but by norms, by laws which then affect the actual price, right. So just take the price of drugs,

medicines in the health care market that is affected by what we allow. So, you know, just take the price of most blockbuster drugs, even though they get a lot of their funding from the public sector. In the US, 40 year $40 billion a year comes from the National Institutes of Health. The prices of those drugs actually don't reflect that public contribution. So there's no way you could argue that there is a free market price to drugs when the public sector itself has financed, Ah, large part of that drug development. And then we have allowed through lobbying efforts. That's what I mean by you know, it's not a free market. There's loving lobbying efforts of big pharmaceutical companies to allow a certain pricing if you want model toe to determine the prices of those drugs, which doesn't actually reflect supply and demand.

And so, in terms of the salaries of nurses, I mean, if you start saying this isn't just about nurses but building really strong, resilient health systems that are high quality health systems available to everybody, right, you would start asking yourselves, How do we get that? What is the role of private investment of public investment? What is the type of regulation that we require in order to get there? The way that the medical profession itself would be removed? Aerated also depends on how it's structured. So the U. S. Health system is structured very differently, for example,

from the Scandinavian health system, right? So how much people are paid within those health systems is not unrelated to the underlying almost model of capitalism that underlies a so the big inequities that you have in pay between bankers and managers. Nurses as executives, top doctors, middle ranking doctors, lawyers. Actually, those levels of inequality differ in different countries, even within, you know, capitalist countries, depending on lots of these rules, regulations, institutions and norms.

I like your point a lot there about a vicious cycle. I want to come back to it. But But I did stay on this point for a minute. What strikes me is a really important story for people have in their heads here and in many ways a very important model for what needs to come in the next. You know, 10 15 20 years of policy is what at least America did with manufacturing in the 20th century. So you go back to the early 20th century. You have the right. You have a huge number of manufacturing jobs rising in the economy and their terrible jobs. I mean, they're dangerous, they're paid very poorly, and there's a huge amount of struggle class struggle, labor struggle. Eventually, policy struggle to that makes him into good jobs. They build a lot of the American middle class.

You really are able to raise a family and send kids to college on them. But not only that. They become very embedded in our national mythos, right that the manufacturing worker builds America. And even today, if you listen to all the many boomer politicians who remained dominant in our political structure, a Donald Trump, a Joe Biden embedded in the rhetoric is still this idea that, like a nostalgic idea of the American manufacturing economy and the American manufacturing worker of the 19 fifties, and now we have this transition for all kinds of technological reasons and demographic reasons to an economy is gonna be very built around care oriented work right, caring for Children, caring for elderly people, teaching service sector jobs, all these different things. And we pay these jobs quite badly. And it seems to me that we need to look for some inspiration and try to better understand that story of how did we come from valuing manufacturing workers in manufacturing jobs lowly in the early 20th century to making them the cornerstone of our economy in the middle of the century. And what lessons does that have for us in this project now? And I'm curious how you read that example,

so I first I would have presented a bit differently. One is that manufacturing itself hasn't Onley decreased in many countries and given way to different types of services, but that how that's happened has occurred in different ways. And in some countries it's caused really toxic levels of inequality, and others has been managed much better. Let me just give you a quick example in Denmark, even though they have an increase in their service sector, that service sector is service seeing actually a national vision. So Denmark today, how is supplying China basically their high tech green services? And China is spending 1.7 trillion in greening its economy, and Denmark is basically through. Also, basically, it's thriving start up scene. Which two largest son has also produced those services. But it's not kind of start ups for the sake of startups or services for the sake of services like in the UK,

we have lots of financial services but its service seeing a green transformation of the country. So you still have, say, green production you have companies like Vest does, which is a very important renewable energy company in Denmark, which is co existing with the whole rise of the services that are related to what that particular type of manufacturing is trying to dio and similarly so. I mean, that's just the first point that the whole kind of manufacturing versus services it kind of depends also what that those services air doing and again in the UK, we have basically filled ourselves with all sorts of financial services which have basically serviced the financial sector itself. So finance is financing finance Onley something like 20% of finance in this country and the UK actually ends up back in the real economy. Most of it ends up back into finance, insurance and real estate. So in that sense, not all services are the same. Now, coming back to manufacturing what's really interesting is the underlying model.

The kind of business model that we have within manufacturing has changed immensely in the U. S. And I would argue that we haven't increasingly financial ized Ah, system of production in the US, where you really see this with the levels, for example, of share buybacks, where over the last 10 years something like $3 trillion have been used by Fortune 500 companies, American companies to just buy back their own shares to boost stock prices, stock options and surprise surprise executive pay. So when you have this level of profits in that income not being reinvested back into productive capacity, and I'm talking about within manufacturing companies, that creates a real crisis also for workers working in those sectors because they are not part of kind of a reinvestment machine. As the physio crafts that I was talking about early on, we're worried about right. They were very worried about this,

this problem of value getting siphoned out. And so the real question I think that sometimes gets confused when people just talk about manufacturing and services is really this of corporate governance. So it's really a crisis of corporate governance within manufacturing, which has led to lots of value getting extracted out and then it also being unlinked to any sort of vision, the transformation of what kind of economy we want to live in, a more sustainable, a more inclusive economy. So the kind of services that have anyway been rising because of how economies air changing are potentially not linked with again that vision itself. So it's sort of two different problems. One is what kind of services are increasing versus manufacturing and within manufacturing. When you haven't ultra financial eyes corporate governance model, then That's also where workers suffer. Also, because their skills were not being reinvested in. We often worry about robots, for example,

taking over jobs, taking over, you know, affecting wages and employment. The real question is not really the robots, but if the value that is being produced, for example by technological change is not being reinvested back in production. That will, in fact hurt jobs and skills and affect David Ricardo back in 18 21. He's one of the classical economists I was referring to in the beginning. He already back then was worried about this problem of machines taking over jobs, and he wrote A in his principles of political economy. There is Chapter 31 was called on machinery, and he basically was saying machines are taking over labour. This is going to create a problem of unemployment. But what actually happened for than 200 years was that those profits were reinvested. And when you don't have that, when you have this massive siphoning of value out, we also get lost of the problems we're seeing today. So I agree

with a lot of what you're saying. They're on the manufacturing sector. But I do want to hold on the service side a bit in a different way, which is to say it seems to me there's and there's an analogy for us in the work we did as a country, as a political economy in the early 20th century to take manufacturing jobs that were treated basically like shit, right, Like we there was no safety in them. There is very low wages, and unions and others fought to make those good jobs and in making those good jobs, they made them also jobs. We told a good story about and in a similar way. There are a lot of jobs in the economy right now that are really important, taking care of an aging population but also taking care of a young population. You know, we could have a need to have a system of universal pre K in this country, but right now, child care workers who deal with preschool aged Children are paid terribly and that is a for people who think the market decides is I feel like the story of manufacturing shows that it doesn't we decided it and that there is a capacity here to decide the same thing with some of the jobs into the fastest growing now in this carrot carrying economy and that we need to learn something not from the mistakes you made with manufacturing policy in the late 20 century,

but the successes we had with it in the first half of it and like learn something about how in, among other things, class conflict actually does decide what jobs we value to try to make these jobs that I think we currently see as not good jobs now low skill jobs, etcetera, to make them the good jobs of the future. And to recognize that is that that is a social choice. It isn't a choice the markets just makes for us.

Yeah, and that's what I meant also about the vicious cycle which can also become a virtuous cycle. Right? So if we and you know, hopefully we will post Covic realized My God, we really mess stuff. We are, you know, we absolutely need strong global health systems were on Lee as healthy as our neighbor. That means we don't just need it nationally but internationally really make this also global agenda. Then you can imagine that those kinds of jobs would also become much sexier, much more interesting. People would be really proud and even start calling themselves wealth creators, value creators, something I've never heard anyone in the health profession or the education professions say, probably cause they're also less arrogant than the, you know,

many working the financial sector. But it literally hasn't been the type of narrative and discourse and storytelling that we use when we talk about these really important public services. So in that sense for sure, you know the kind of way that we think about the importance of a sector and the terminology that we use around it and, you know, again, I come back to this notion of storytelling around. It will effect who wants to enter the profession and how much we think those professions are worth paying for. I see this again. I was come back to issues around the state cause that's what I study a lot. But I see this in the differences between how you know Singapore pays a civil servants compared to some others. They really believe that in order to develop and to rise to the level that they have in recent decades, they needed to invest inside the civil service and decided to actually pay very well the leaders within the public sector and, you know, up to a 1,000,000 for directing their important a $1,000,000 to directing their ministries. Now that's not necessarily the point,

right. It's not about filling the pockets of particular parts of the economy and allowing others to remain Ah, empty simply because we haven't changed the story telling her on those. But it does mean that when you really think an area is important, in order for your economy to be healthy, resilient and to grow, you will offer, you know, better payment for those services, but also the effects. Who wants to enter those services in the first place in the U. S. I was quite interested after the crisis when Obama decided to ah direct the fiscal stimulus 800 billion, at least. Initially, he was talking about directing it towards a green economy.

This is, you know, predated the concept of the Green Deal. It's not surprising he was able to attract a Nobel Prize winning physicist to run the Department of Energy, Steve To It was an honor to be the head of a Department of energy, which was seen not important to simply sort of facilitate and the risk that Elon Musk's of this world, but to really direct a green transformation of the country. Now forget whether it happened or not weaken. Go into that for all the political hang ups that happened along the way. But one would have to ask, Why would a Nobel Prize winning physicist want to become a civil servant, given what they're paid? Well, it often depends on what your remit is, what you're told. You know what is the story around,

what you're going to dio, and in this sense, there really is that feedback process. I think that if you think you're there just to facilitate someone else who's a real player in the system, you can bet that we'll see that that player, that that that engine in the system is being paid much more than those actors that are deemed to be just facilitating, enabling their their rise.

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They're just such a great merger of smart journalism and fun and beautiful writing and great editorial ambition. And, you know, if you've been listening to this podcast that I'm not a fan of New York, the place so for me to love a magazine called New York this much, it's a It's a riel. It come from a place deep within. So if you're if you've not checked out New York magazine yet, you should start your free trial today at N y bag dot com. Such easy are a again and why mag dot com Such easy are A When you were talking initially about the vicious cycle get into government was the first thing that popped into my head, and I think particularly congressional staffers here, who do incredibly incredibly important work are often incredibly good, but they're treated quite poorly there laughed at their attacked in political ads. It has become toxic to vote for pay increases for them. They're tossed around during shutdowns and everything else. And so eventually Ah,

lot of the good ones when they have two kids leave because it could make so much more money in the private sector. And it's not like anybody is like clapping for them or throwing them a parade for the work they're doing now. Chu is a great example here, where at the very top of the bureaucracies, it's a great honor to run the Department of Energy. You can almost always attract great people to Cabinet level positions, but down deeper into the bureaucracies. There are a lot of good people, but they get dismissed, his bureaucrats and we don't pay them well. We make advancement often quite tough, and it's understood is something you do for ah kind of job safety as opposed because it is a calling. So I wanted to see if you could go into the Singapore example for a bit because I agree that the way they treat the civil servants is it is something that we should think more about. And I think a lot of people in America, it would be hard. It would be hard to conceptualize how different that pathway is there than here. So it is much details you're able. Can you just talk about what it is like to be a civil servant in Singapore and what role they play in this story telling of their own society?

What the Singaporean model, I think is about is giving an equal amount of importance to civil servants as to private sector managers. As I was saying before, it's not a coincidence that because we think the business sector is creating value, that we then have these concepts of value chains, shareholder value classes in business schools that talk about creating value, strategic management, decision sciences, organizational behaviour we actually really sink through big questions like what happens when a company becomes too big and it might become inertial, so you might need to have a multi divisional company that's you know, the whole history of General Electric occurred through the multi divisional company. Now, when the public sector becomes too big and bureaucratic. We just say, Oh, it's big and bureaucratic is there's something in the d n A of the public sector which is gonna make it bureaucratic. Now you're bureaucracy shouldn't be a bad word.

We need bureaucracies. You could have really dynamic and creative and even sexy bureaucracies or really large inertial, slow, non adaptive, non flexible bureaucracies. So I think with the Singaporean model is about. But it's not just Singapore, and I've set up a whole institute in London called the City for Innovation in Public Purpose. To really theorize about this and create a whole new curriculum for global civil servants around the concept. As soon as you start thinking that, no, this public sector is just a Zim porton in co creating markets, co creating value and shaping value along the way. Then, of course, you need to have very creative civil servants,

and you need to worry about concepts like they've got dynamic capabilities and capacity of the state. And I think if you look at how public administration thinking has evolved in Singapore, but also the levels of risk that civil servants are allowed to take, that gives you a sense of how they think about the state. And let me just say something about risk. We all know that you can't learn how to ride a bicycle without falling down, learning by doing trial and air when the business sector or a venture capitalist or a financial actor makes a mistake. Sometimes they even brag about it. Yeah, muscle of money. But then, bang. I made it later, You know, just like with any venture capital financing, you often have six or seven failures before you have a big success.

When the civil certain when a civil servant or public servant messes up, they will either get fired or especially if it becomes known what they've done. You know it will go in the papers as, um, you know, having been stupid, clumsy, the whole concept of picking winners. And so by not allowing civil servants themselves to see making mistakes. And, I'll argue, risk taking actually kind of welcoming uncertainty, which, you know Steve Jobs is whole kind of efforts was about. Be hungry, be foolish in order to create value.

Then we have a very problematic state because there's no learning, there's no trial and error there's fear. There's fear of us taking. And when you fear risk taking, you not only get inertia because you you are worried again that you'll get fired or get slammed on the front page of a paper. But even worse, I would argue you start asking others to take risks for you. So the rise in some ways of the Big Four consulting companies, to a large extent, has also been fueled by that. I've worked with many governments where, even though the underlying work that we were doing, for example, building a public bank was really inspirational and loss of learning occurring that as soon as it was set up they were worried about the risks and allowed the project management of it to be done by PricewaterhouseCoopers or Deloitte. And when I went back to the policy maker I was working with and said, Why did you do that?

Why did you not invest in house in your own capabilities and capacity to manage that new, interesting public entity? You know, they might say, Oh, but that's just the project management side. But management is fundamental, right? It's about doing and learning, getting your hands dirty and when governments no longer know how to do and get their hands dirty and fear the risk taking along the way, we end up getting much, much weaker public structures and I think, you know, in Singapore, but also many ways in China, but also in some countries in the West again.

Denmark had a very interesting organization within its government called Mind Lab, which was all about risk taking and learning and innovation within the public service. Finland had similarly, through their what was initially a public fund, Citra and I was more kind of like a think tank for the government, really nurturing that public Chris taking within the government, countries that don't have that culture. You can bet they're gonna have weak states because they don't learn.

This, I think, is really important tricky territory. So I want to spend a minute in it to me. The great infuriating example. This is the Department of Energy Loan guarantee program that people know of because it funded Solyndra which went bust. But they don't tend to know, is it that program overall number one returned a profit to taxpayers, but it also funded and made possible, among other things Tesla, which would have died without that loan. And if anything, that loan program in making a profit was probably being a little too cautious and in part because it was worried about exactly what happened. A Solyndra like collapsed, and then they get tagged for and defined by, whereas in venture capital, the fact that you would fund a bunch of things don't work out.

You could fund the one thing that does. It works out totally fine, and you're honored for it and failure something you're supposed to learn from and, you know, move fast and break things. On the other hand, there is this idea that governments are number one playing with taxpayer money. Um, and did the taxpayers really want toe to make those dangerous loans? And number two, this issue of what are the taxpayers really get back from? It may be to get the innovations, but then Elon Musk is getting rich off of the innovation. Which is not to say he shouldn't get rich off of the work he's done. I think you should, but nevertheless,

it's not like every taxpayer help fund that got got some money off of the test And so there's something tricky here in which the government does and should play a role in not just funding innovation but funding dangerous innovation, right innovation that really may fail. But we have created a story where the success is really, really get hung on the government's reputation. And I'm sorry the failures really get hung on the government's reputation and the successes Number one don't rebound to the reputation they often rebound to whichever private company ended up building off of that either basic researcher, that loan and the taxpayers don't see that much of it, except for in a diffuse bettering of society that is hard to track back to any individual political leader. Political decision?

Yes, so I think there's three huge issues in that example, and it's actually one of the examples I raising the entrepreneurial state that they, you know. Both Tesla and Solyndra both got 500 million in a guaranteed loan, and when one went bust, taxpayers a Rasta bail out the failure and with the success that somehow all gets again narrated, the story telling is, Is Elon Musk's great success as an entrepreneur? So the first thing is just that amazing that the that you know, citizens don't realize what they're you know. Governments are doing on how bad governments are telling that story also in health on. But I can give you another example on health later. And you know, the whole picking winners problem comes from that two people don't realize, as I mentioned before, that everything that makes our smart products smart and not idiotic were actually funded by public institutions.

So the Internet, GPS touch screen. Siri, you know, without any of those technologies in our smart products, they wouldn't be smart. Very few people realize that that was public funding, and it didn't come from just pouring money into the system from helicopters. It required picking, but it picked through missions. This kind of comes to my missions concept. There was particular problems that needed to be solved in government. In the times it has been mission oriented, I would argue it's become much, much less mission oriented was problems oriented, So the Internet solved a problem that government had,

which was to get the satellites to communicate GPS, solve the problem, which was to know how to aim missiles and other things very clearly So one question is we need to reveal in some ways how important these mission oriented investments have been. And it's not about picking one technology one sector, but really picking ambitious problems and then using things like procurement, policy grants and loans to fuel that bottom up experimentation to solve that particular problem. Second point is along the way, and doing that, you will fail and fail again. You know, for every Internet, there were hundreds of of other things tried that that failed. Same thing with GPS. Same thing with the test. So Solyndra, the actual statistic would probably be for every test,

so you'll have nine or tensile interest. So the second point again comes to not only being able to narrate the successes, but how do you structure that investment? In the case of Tesla's Solyndra, we're talking about downstream investments. Upstream would mean kind of upstream in the innovation chain like basic research. So, you know, even Google got a grant to fund Well, what later became Google Surge? A brand got that grant from the National Science Foundation, which finance basic research which amounted to that algorithm, right? That's kind of an upstream investment which eventually becomes something important for a company. But tests on Solyndra, which for downstream what should have happened,

I think, is that government should have admitted it was acting as a venture capitalist, used that word, and hence it would never have thought about just socializing the risks and privatizing the rewards. And what's interesting is that Obama actually said to Tesla A If you don't pay back your loan, we're going to get three million shares in your company. And Tesla did pay back the loan, which was given out in 2009. It paid it back in 2013. The price per share went from 9 to 90. So had the agreement been? If you do pay back the loan any really successful, we got three million shares, three million multiplied by 90 minus nine would have more than paid back the Solyndra loss and as a venture capitalist would think the next round of investment kind of a portfolio reinvestment cycle. And it's just striking that they didn't think that way, given that they were thinking about those three million shares,

but exactly the opposite. Why would you want three million shares in a bad company that isn't able to pay back the loan. But we shouldn't just think about it in terms of equity stakes, which that example that I just gave would reveal it could also be all sorts of different things that could make sure that the public sector is getting a public return for that risk taking. It should be, you know, governing the patent system in such a way that actually works. Eso not allowing patents to be too strong, which means hard to license too wide. It should mean that the prices of the actual products, like drugs, actually reflect that public contribution. It could be in conditions of reinvestment. So companies that receive these massive amounts of money also re investor profits and don't engage in these massive share buyback schemes, and it could in some cases also be around equity. So that's that second point,

which is structure yourself like a venture capitalist if you're going to be one. But the third thing is, what do you even investing in in the first place, you know? Yes, the government has invested in great things, but it also invest sometimes in pretty problematic areas. In fact, shale and fracking was also basically started off with government investments. And so I think because we're talking about the public sector in the state and because you know we live in democracies, ideally, you'd have much more engagement the citizens in a debate about what should we be investing in? It was interesting that with shale gas and fracking, the debate with citizens was just afterwards when people started to worry about the kind of environmental and geological effects of shale. But there was never a conversation about. Is this the right way to go?

And that's where I think the Green New Deal conversation is interesting because it's very much an explicit discussion about how should public investment be used. And now, with the health crisis, hopefully will have a huge discussion about, you know, not just a green deal, but a healthy deal and making sure that we're investing in all these different structures we know are absolutely crucial for our or health in our in our livelihood and our well being. But that is about the direction of the investments themselves and making sure again that that be a very dynamic discussion. So the first point is about narratives. The second is about investment structures themselves making sure we share rewards. Not just risk. Then the third is this explicit debate a nice, contested, healthy debate between our citizenry about what are the right ways to be kind of redirecting our economies.

So let me, AH, try to make the counter argument will probably occurring to people here and the one that is, I think, embedded in our national debate, which is, if the government began doing this number one, you would have given the government's. The level of resource is a tremendous amount of public control, the private sector and we say it like that, and then to wouldn't this just devolved into corruption and cronyism and capture, which also feels like a particularly conserving possibility when you look at who is in the White House right now and they're tendencies towards corruption, cronyism and capture. So I think even people who for whom this sounds good, worry that in practice it would mean ah kind of socialized economy that ends up working for the friends of the people, controlling the public purse strings.

So I would argue the opposite. I would argue that what we have now is a pretty crony economy because we don't think this way. In other words, I'm not actually asking, necessarily necessarily for government to do more investment. Government is massively investing in tech. All the examples I gave you before investing in health products, you know, something like 75% of new molecular entities with priority rating tracer research back to the public sector and massively in the green economy globally, most really high risk, capital intensive public Sorry. Investments in the green economy occurred through public entities, including public banks, less so in the U. S. In the U. S.

It tends to be more through innovation agencies, kind of like art, but even DARPA So it's not about the lack of public investment. So I'm not saying warm or and that's gonna lead to some sort of corrupt state that's doing too much and picking winners. What I'm arguing is because it hasn't thought through its role and to make sure that it's done in the public interest and not in the private interest, which then opens it up to massive potential corruption. Then citizens don't benefit. So by having this this idea and I talked about his market shaping market co creating alongside. By the way, the private sector is not about the state doing everything then that also requires new criteria of what it is you're doing. So instead of saying which market failure are you going to fix and just thinking you're gonna put in a bit of money somewhere and hope for the best? The money going to where the private sector is not investing in particular areas like public goods. You really see your role is making sure that that whole system is governed in a way that it serves the public interest. So again, making sure patents are not abused, making sure the pricing system is not abused,

Making sure we actually get the kind of green, sustainable cities that we all want to be living in. That should be the role of the public sector. So in some ways I'm saying the opposite, which is that by having all this public money go into the system, including with the bailouts now with Cove it but also the bailouts other after the financial crisis and the public sector not really thinking through what its role is in terms of serving citizens and really governing the system in such a way that it doesn't get captured along the way by all these individual interests not only private, but mainly private. Then we get, you know, failed economies. We get overly financial ized economies because there's no conditions attached to, you know, the public investments in health. So you get Fizer massively investing in the share buybacks, which you could have made conditions that you know you cannot access. And I h ah,

funds. If you're not going to yourself be part of the solution and not part of the problem, you get bailouts now for the airlines not being linked to their reduction in carbon emissions, you get huge amounts of money going into digital platforms by governments. That's not, Forget again, the Internet itself invested in by the government and then allowing algorithms to be abused in such a way that really kind of nurtures that value extraction instead of value creation potential of the economy. So none of this is easy. But I would just argue that when the state doesn't understand its role in terms of really being purpose driven and having proper metrics around the public interest than that possibility and risk of corruption is much, much greater and surprise surprise. We get a lot of corruption precisely because these conversations they're not had. So I

want to draw something you say there that strikes me is so important and so mind bending, given our conversation, which is that the greatest trick the devil ever pulled was convincing us the way out of cronyism. Corruption and capture was toe. Have the government do all this investment and privatized rewards of it? When in reality, the thing that reflects the level of cronyism, corruption and capture is that the government is doing all this investment and privatizing the rewards of it?

Absolutely, and especially when it's around areas that are as important as health. So the fact that taxpayers are financing drugs and then cant afford them is it's not just an example of cronyism. It's tragic. It's a human rights problem data as well. We know, you know, different people have written about ethics around data and just how important the access Teoh, You know, if you just looking out with the digital divide in general, but just that your ability to actually govern how your data is used is in some ways should be a human right and governments should, because of the massive investments they've put into artificial intelligence and big data related research, should be worried about those issues as also conditions of them getting bold in those areas. And when you don't have that, you know it can very quickly become not only a scam but a tragedy for for citizens. And I think you know, this is a moment,

I think, with cove it with the need now for vaccines, the need for personal protective equipment, the need for strong public health systems being available to all also because all it takes is some of the population, you know, still having the virus that everyone is unsafe hopefully will realize out of this emergency that we need to again govern and shake our way to think about the economy in a way that's much more proactive. Which doesn't mean just saying Oh, the state is great. The state must do everything. Of course not. We need public private third sector partnerships. But how we define whether a partnership is symbiotic in mutual ist ic versus parasitic and predator prey becomes very, very important, and by the way I said this in Davos this year was that I was in double Scott. It feels like years ago, given what's happened since then.

But in January I've often resisted going, but because some of the ideas have been putting forth have now somehow resonated. And they asked me to talk about this notion of stakeholder capitalism and purpose, which is, you know, the Business Roundtable has been talking about since last September. I went today and I said, You know, we need to put purpose at the center of the system. It's not about a more purposeful corporate governance. It's not about, you know, the CEO saying me a cool bomb. Yakub, a shareholder maximization, has screwed over too many people.

That's now do stakeholder. It's how do we actually organize our system in a stakeholder governance kind of way? What does it really mean to bring workers, you know, academics, politicians, businesses, the green activists, the Friday's for the future, students to the table for real to discuss how we want to steer our economies in a different way within the corporate governance structure? What does it need to really give state workers a voice, but especially, you know, in these public private partnerships that you and I have just been talking about. What does it mean to strike? You know,

a deal that's fair. So instead of just talking about the green New Deal and giving a lot of the attention to the green part, that's really unpick the deal. What is a healthier deal when you have all this public money going into the green economy and the digital economy, the healthy economy? And then we don't structure the system in such a way that really benefits society and allows, you know, a few players to recoups. You know what basically was fueled by a collective creation of value coming back to our early discussion on objective ways to look at how values created by different actors and just kind of pretending that it's all about a small group of value creators and then others get some sort of hand out through, you know, a redistribution. This, by the way, is one of the reasons I think that the U. B. I,

the universal basic income model, is flawed. It's the underlying story around it. It's not so much the policy which I think is actually good policy to make sure that everyone has the underlying level of income. That means precisely in a crisis like this they have money to put food on the table. But the narrative of universal basic income I don't necessarily like I think we need to talk about things like the citizens dividend or citizens share, which brings much more agency and recognition. That value is created in this much wider way than how we've been told and a citizen's sharing a citizens dividend, even if it was structured like you be I proponents are proposing, still is a more explicit recognition of the fact that we need to all be also invested in our capabilities inside our mental and physical beings in order to create that value in the first place.

And we have models like that in America. Even right now, I agree that the U. B I narrative is quite bad that the brokers, they're gonna come take all of our jobs, but here you can you get a $10,000 a year check so you can chill is not a great way to talk about on economy. But if you look at, say, Alaska, where we have the permanent reserve fund, where in in order for there to be all these drilling rights in Alaska, the oil companies and others paying to this fund. And that fund distributes a checked every Alaskan every year. It's an incredibly popular program. It's probably close thing we have to you be I in America, and it is understood there not as a government handout, but as something the citizens air getting for granting access to a resource that they control to the private sector. And it's super popular and Republican and Democratic governors like Keep it,

yes, but so that. Okay, so that's really interesting because that's, of course, a similar thing as the Norway right with the Sovereign Wealth Fund, which is basically a massive wealth fund which dwarfs what the actual government investment is in the economy. So they're not allowed to use that sovereign wealth fund to actually invest in the economy. Otherwise, it would kind of through the whole budget off, so they mainly use it to invest internationally, and it also fuels the pension system in the country. So they have, ah, very good pension system. But the discussion about what to be investing in right that wealth fund, which is seen as a public fund because it's using the natural resources which are of the country.

That question of Is it right for the wealth fund, then to be investing so much in global real estate and kind of fueling the global financial bubble? Or should that fund actually be invested in, You know, all the great areas which will increase our well being in the future, and especially in Norway, the discussion is you know, why doesn't this fund really kind of lay the pathway for moving away from oil towards a green economy? And that was that third point I was mentioning before, right, which is, you know, first, the narrative Second, the structures third, the debate about what should we be investing in?

And I think you know, similarly, when I said that public investment in the U. S. Has also going towards shale. It's interesting that in the US, the states, not the federal government, but the states have also been making money, obviously from the fracking and shale revolution. But then how those states are using those funds hasn't necessarily been part of, ah, wider, more ambitious discussion of what's the right role for a public investment fund in order to really be driven by public interest goals, whether it's about a healthier system, a greener system or whatever that may be.

So I think there's a real opportunity right now to bring all those three levels of the question to the fore, given the challenges that this current kind of pandemic is throwing at us. And as you say, though, there are experiments around the world, whether it's in Alaska or California, by the way I know is thinking about a public wealth fund. There's also, as I was mentioning, really ambitious public banks across the world, including the European Investment Bank, which has moved increasingly towards innovation and kind of a venture capital model, less about just basic infrastructure. And I think what we need to do is take some of these examples and learn what works and what doesn't. So instead of just kind of romanticizing them as a kind of comeback of the state or a great state institution, sometimes they don't work well on from Italy,

and our public bank doesn't work well, has just been a handout machine and what we really need to do it is rethink or systems. You know, a capitalist system is public, it's private. It's third sector, its citizens, its trade unions. How all these different actors relate to one another is important. And in Italy, the public sector, they put in a lot of money in the system. But it kind of rains down in subsidies and guarantees with no conditions attached. It was interesting when Savage go on ahead of Ah, Fiat came to the US back. He's now passed away.

But when he came to buy Chrysler, Obama and sort of a rare moment of confidence, said, OK, fine. But in this country, in the U. S. You have to invest in hybrid engines, hybrid technology. And that's part of the deal was Chrysler at the time was in public hands. It was bailed out like the banks, and Sandra McDonough said, Fine, no problem. Whereas back in Italy,

zero investments and hybrid engines because no one asked him to. Fiat in Italy, like many large companies in Italy, benefit from a pretty again parasitic relationship with the state and its it's neither the private sector's fault nor the public sector spot. They both are part of a very problematic system that has to change. But I want to

sit in the discomfort of the problematic systems for a minute because I do think this is something that doesn't get dealt with directly enough by the left, there could be a tendency and left discussions of things to say. Well, you know, if what we did was you put X under public control whether X is an oil company or sector of the economy or sovereign wealth fund. Then clearly the public would make the decisions with X. If they had a voice that we want them to make, clearly they would want, you know, universal pre K or green New deal or whatever it might be. And as you say, oftentimes, I mean, look around at the countries of the world. You were talking about the Norway Sovereign Wealth Fund. Norway is a very social, democratic country.

It has a high level social solidarity, social trust, dining. Most people believe that it's a small D democratic system, works very well, and even that sovereign wealth fund is not making the kinds of decisions people wish it would make at all. Or at least when I say people. I mean people, like, sort of you in May, and that's to say nothing of looking at what is happening in elections in America right now. You know, Mitch McConnell gets returned to the Senate year after year by the people of Kentucky Donald Trump toe trick your situation given the Electoral College. But nevertheless he is the president of the United States. And so I think one thing that is a little scary in these conversations and and and I'm curious how you think about it is that if you did have this more aggressive public sector, if you did have a public sector that was trying to set more direction in the form of the markets that creates and had the money and the investment structures to do that,

what if it wasn't making anything like the decisions people wish it would make? What if it was investing because people wanted to return in more oil? What if that what if that fell under the control of the name? Your very conservative politician who gets elected as a businessman is gonna come to bailout government, and now it's like going into all of these businesses that you know can make a lot of money for the taxpayer but are going to do so at the cost of terrible environmental degradation. Etcetera like, How do you think about that decision making structure and the possibility for it to go really wrong?

Yep, so that's exactly the question to ask. And that brings us to the earlier point, which is? It's not enough to say the state is important. It needs a more proactive approach. It can create value. It's precisely because of those reasons. We need the right structures within the state that make sure that lots of what we're not talking about our decisions that are transparent. So, you know, my first point in entrepreneurial state Point was, the state can be really transformational is not there just fixing markets it has in history actually created in shape markets again. Internet wouldn't have happened. The whole Internet economy wouldn't have happened without the state. But then the question is, what is it creating and how is it creating so even to create that it needs dynamism?

It needs that level of kind of risk taking that we had also with the moon landing the whole story of the moon landings. Amazing in terms of also the, you know, the youth that were basically inside the mission control room, the level of risk, the ambition that they had. You know, one question is, can we actually transfer that also tell us over social kind of areas like like health. Why don't we have as dynamic of, ah, of a civil service around health and also energy in some ways, that we've had around kind of defense related areas? So that means, you know, do we actually have the training to create value in some of these sectors?

And that comes down to this notion that we haven't actually giving them enough importance. So we don't even have, ah, a curriculum that says ambitious for the public service that we have it for the private actors. So in thinking about what are these capabilities that are required? What does it mean to create public value? We actually need new concepts. You'd be surprised if you read literally the textbooks. I encourage you to look at what's taught in masters of public administration. There's a whole theory that's basically ramification. Even I don't like to use the word neoliberal economics, but let me just use it for now for simplicity, cause I don't know what I'm talking about. That's cut. That's then been fed down to the state. That's public choice theory and new public management,

which is basically tried to bring in kind of efficiency metrics into the state, which ends up kind of acting just like a private company. But in the name of, you know, public interest. So if we don't actually have intra organizational metrics, for example, this concept of public value that I keep talking about, you know, I learned about public value by by looking at what happens inside the BBC, the BBC has this concept of public value that then justifies why they should be allowed to invest not only in documentaries and high quality news, like PBS does in the US but also in soap operas and talk shows. And they, in the process, ended up making EastEnders one of the most successful soap operas, which is very different from Dallas and Dynasty in the U.

S. Is basically a soap opera about, you know, disadvantage low income people. And so that was seen as important for their public value remit to, you know, open up high quality drama, television and news to as big of a population as they could percent, just the population in the U. K. In fact, they have a very large share. So by having these discussions inside the state about what it is you're producing, what does it need to be? Purpose driven, mission oriented?

What does it need to have public value metrics that mean independent of the format? You're really trying to push the frontier and to create new spaces that you think and again, it's a democracy. So it depends how you how these conversations come about but that are in the public interest. Those kinds of metrics currently are quite weak, and it's interesting that the concept of public value doesn't even exist in economics. We have the concept of the public good, which is just a correction for something that the private sector is not doing. It's not really about being kind of ambitious about re steering and economy, for example, in a green direction. So, of course, there's a you know, the you know, the possibility that governments will make mistakes just like there's possibilities that the private sector makes mistakes,

but the kind of changes that are required within our government machinery to allow it to be not just modern, not just quick, not just efficient but really ambitious to be able to think of. You know, new structures like the welfare state was when it first came about from your beverage in the UK fought for, ah, welfare state. Those kinds of ambitious kind of Moonshots require very different types of debates and structures and metrics within the kind of public sector administration. And it's not about what happens if someone makes a mistake. It's your previous question of how can we structure this in such a way that it doesn't just end up getting done in order to allow profits to be increased in a particular sector? So the risk of capture corruption. But what are the metrics that we need today to both develop the capabilities inside the public sector, but also make sure that it's really being done in the, you know, for the public good and the public interest?

One thing that is striking to me is that there is something much closer to the conversation you're talking about and the conception of the government as directing growth and directing activity towards certain valleys or ends in emergency scenarios. So when there's a war, it becomes very explicit. Even in Corona virus, this conversation is much closer than it normally is, right in America. We're talking about using the Defense Production Act, and it is clear that a lot of people certainly wish the federal government were playing more of a shaping role to mobilize the country's resources around building testing and swabs and and the other things we need and that when times are quote unquote normal, this falls away and this conversation feels alien and it strikes me that one of the questions just why that is what you would wanna have for this conversation is for some of that same understanding that setting value and directionality the public sector has a real role in that, just as it does when there's an emergency external threat. That's just true to when the question is opportunities or slower moving threats like climate change or just the question of what kind of society we want in 10 or 15 years

exactly. I'm actually writing a book just on that, which is how could we make the kind of Moonshot mentality which unfortunately only come to during wars or crisis like the current one, that we're living through a much more normal way to think about what the role of sort of policy making is. You know, what does it mean to have a really and outcomes focused on policy making that is focused on the biggest challenges of our time, which I do think are basically the 17 sustainable development goals and Broadway and then each one of those could be broken down into really concrete missions, you know, like getting a plastic out of the ocean, which is, of course, would be a global goal. Now any of those really ambitious goals really require redesigning our public instruments. You know, just think of the power of procurement, procurement, which is government as purchaser,

not just government as investor, which we were talking about before. The budgets are massive in the UK, where I live or innovation. Budget is only about 10 billion, but just the procurement budget of the Ministry of Transport is close to 40 billion. So if we started doing the every day, like what the Transport Ministry does to be much more goal oriented again, coming back to the kind of green New Deal kind of goals you would be leveraging and so much more not only public money, but by doing it an ambitious way crowding in that private sector investment. And I We haven't used that word yet, but crowding. And it's such an important word I don't like it because it still sounds negative. Is crowding so crowding instead of counting out but crowding in so catalyzing inspiring, doing something really ambitious, for example,

in the health area of the Green Area or issues around inequality. London, where I live, has a huge knife crime problem. So having, you know, really kind of focus on not only outcomes, but along the way, kind of creating new types of collaborations and spaces can make business a C opportunities where they didn't see them before. And that is really what drives growth. You know, Warren Buffett is not a communist. He often says, Can you please stop producing my tax? I don't even look at things like capital gains tax. I invest where I see an opportunity,

and if we take. If we break down that sentence, I invest as a business versus person where I see an opportunity. Really, the goal of policy should be creating those opportunities which then catalyze business investment. Leverage new types of funds in areas. And those areas, of course, should be areas that have strong kind of social importance. Eso again, I do think globally we should be focused on these 17 sustainable development goals and turning them into all sorts of new opportunities for investment for both public, private and third sector.

I got a good place to come to a close. Let me ask you the question be used and the podcast, which is what three books you've read that have influenced you that you would recommend to others.

So I'll tell you about three books that have influenced how I think one is Marguerite your scenarios book memories of Hey Adrian, a Roman emperor who was governing at a time in the Roman Empire, kind of in between the period in which you know the gods didn't exist and when we started, you know, to have Christianity and the loneliness of the Emperor, the today's policymaker, that we've been talking about it. Really. Operating in that space is the gorgeous book that even just opening up at any page, it zvehr e inspiring in terms of what it means toe against govern in the public interest. Recently, a good friend of mine, Stephanie Kelton, has written a book called The Deficit Myth, which I think is very important in terms of kind of realizing where the real constraints are in our economy, not around cash, but actually in terms of you know where to invest and how actually to really use the power of our democracies to focus on the what should be invested in instead of worrying about where the money comes from,

very much in the ways that we've been talking about recently and I've got four teenagers and I realized that they read great modern books. But I've now started toe, forced them to at least read some of the classics of and we're currently all reading war and peace together, which is, I think, just one of the great books of all time, and it's fantastic to read it with teenagers.

Mariana Mazzucato, thank you very much. Thank you. Thank you to Dr Mazzucato for being here. Thank you to all of you for being here. Thank you.