The Importance of Market Failures

What happens when we confuse price with value? We end up undervaluing care. We pollute more. And the financial sector is allowed to brag about how productive it is—while often just moving around existing value, created by others. Most importantly we end up with a form of capitalism that rewards value extraction activities over value creation, increasing inequality in the process. Economist Mariana Mazzucato: “I will argue that the way the word ‘value’ is used in modern economics has made it easier for value-extracting activities to masquerade as value-creating activities. And in the process rents (unearned income) gets confused with profits (earned income); inequality rises, and investment in the real economy falls.” Markets have always been shaped, Mazzucato notes. They can be reshaped now to better reflect and foster real value—creating a more sustainable and inclusive economy. A professor in the Economics of Innovation and Public Value at University College London (UCL), where she founded and directs the Institute for Innovation and Public Purpose, Mariana Mazzucato is the author of The Value of Everything: making and taking in the global economy (2018) and of The Entrepreneurial State: Debunking Public vs. Private Sector Myths (2013).