Economics - Innovation - Inclusive Growth - Public Purpose

MISSION-ORIENTED INNOVATION POLICY

Mission-Oriented Innovation Policy

The 2008 global financial crisis shook the foundation of economies around the world. Nine years later, the aftershocks are still being felt. As governments worry about secular stagnation, instability and inequality the old approaches to economic policy-making seem inadequate to the task.

How can governments get economies growing again, and in ways that serve society? What can they do to get firms investing again? What can they do about big societal problems, from managing chronic health conditions to tackling climate change? With renewed interest in the role of government in stimulating private sector growth, what should modern industrial strategy look like in this this context?

Professor Mazzucato’s work on mission-oriented innovation offers a fresh approach to questions like these. It focuses on the potential of mission-oriented, strategic public sector investment to catalyse economic activity, spark innovation, solve public problems, and lay the foundations for future economic growth.

Professor Mazzucato has now joined UCL where she is establishing a new Institute for Innovation and Public Purpose, building on her work on the Entrepreneurial State and on Mission-Oriented Innovation. It will explore how public policy can be used to give direction to economic growth and innovation in order to tackle societal and technological challenges. From battling climate change to health innovation, IIPP will help develop an understanding of how the interaction between different socio-economic actors affect both the rate and the ‘direction’ of innovation and economic growth. IIPP will also establish a new partnership with the Royal Society for the Arts, Manufactures and Commerce (RSA) (see below).

Rather than focusing on particular sectors – as in traditional industrial policy – mission-oriented policy focuses on problem-specific societal challenges, which many different sectors interact to solve. The focus on problems, and new types of collaborations between public and private actors to solve them, creates the potential for greater spillovers than a sectoral approach. It was this approach that put a man on the moon, and lay behind the creation of the Internet and entire new sectors like biotechnology, nanotechnology, and the emerging green technology revolution. It is not enough to fix market and system failures: policy-makers need to be more future focused, creating and shaping new markets.

The new framework seeks to better envision, justify, measure and assess public investments, working within an eco-system of public, private and third sector actors across the innovation chain. It focuses on the role of the state as shaping and creating markets, not only fixing them – and enables the development of economic policy to be informed by a broader theoretical underpinning. It addresses four key questions which we define as the essential pillars.

  • First, how to overcome the fear of ‘picking winners’, focusing the question not on whether to ‘pick’ but on how to make strategic choices around societal and technological missions, which can ‘tilt’ the playing field around transformative change across many sectors. This pillar is about 'directionality'.
  • Second, how to build the type of public sector institutions that welcome the fundamental uncertainty—and hence risk-taking—inherent in the innovation process—becoming learning institutions. This pillar is about viewing ‘policy as process’ and building learning organizations to engage in that process.
  • Third, how to develop new tools to measure and assess the dynamic impact of different types of public policies that aim to create markets not only fix them. This pillar is about building a dynamic approach to the assessment of policies to replace, or at times complement, the more static cost-benefit approaches.
  • Fourth, how to develop mechanisms so that the public and private sectors share the risks and also the rewards. This pillar is about thinking of ways to allow smart, innovation-led growth to also be inclusive growth.

BACKGROUND

Professor Mazzucato’s 2013 book, The Entrepreneurial State: debunking public vs. private sector myths and subsequent work on Mission-Oriented Finance for Innovation brought new attention to the historic successes of mission-oriented policy and its future potential. It was such an approach that put a man on the moon, and lay behind the creation of the Internet and entire new sectors like biotechnology, nanotechnology, and the emerging green technology revolution. Done at significant scale, it offers a means to address some of the most pressing problems societies face, and give direction to private investment as a basis for more sustainable growth.

In 2014, Mazzucato organized a three-day conference, Mission-Oriented Finance for Innovation, opened in the UK Houses of Parliament by then Business Secretary Vince Cable. It brought together leaders of mission-oriented public organizations from around the world with business leaders and academics. All outputs from the conference can be found on a dedicated website. Many of the key speakers, including Vince Cable (then UK Business Secretary) Andy Haldane (Chief Economist at the Bank of England) and Adair Turner (Senior Fellow at INET) contributed to a subsequent pamphlet published with Policy Network, Mission-Oriented Finance for Innovation: New ideas for investment-led growth. A recent article by Mazzucato called "From Market Fixing to Market-Creating: A new framework for innovation policyhighlights the differences between a mission oriented, market making, framework compared to a market fixing one.

key questions

The mission-oriented research programme examines a number of questions, of both theory and practice, with the aim of developing a systematic framework, to guide development, implementation and evaluation of mission-oriented innovation policies. These include:

  • How to develop new capabilities required of public organisations – enabling them to become learning organisations, welcoming the explorative risk-taking and underlying uncertainty of the discovery process;
  • How to develop new indicators and assessment tools to aid decision-making and evaluate impact, beyond the static cost/benefit framework;
  • How to select missions that have enduring and democratic legitimacy;
  • How to define missions concretely with sufficient breadth to motivate action across multiple sectors of the economy, by public and private actors, and over different time horizons;
  • How to monitor, manage and evaluate progress, learning and adaptation;
  • How to manage inevitable failure as well as success by taking a portfolio approach; and
  • How to ensure rewards as well as risks are shared so that the growth generated is inclusive as well as smart.

policy making in practice

Over the last two years, Professor Mazzucato has worked closely with various agencies on the practical application of her ideas in different contexts:

  • NASA: a recent study on new forms of public private partnerships in space, and the changing role that NASA has been playing in directing vs. facilitating innovation. The study is now being extended with the European Space Agency.
  • Brazilian Ministry of Science and Technology: a report of the Brazilian system of innovation and the various ‘missions’ that might guide its systemic policies in the future.
  • Innovate UK: a report on the difference between a market failure framework for policy and a market creating one.
  • Public banks: work with various public banks on the role of patient long-term finance in crowding in private investment, including BNDES in Brazil and the European Investment Bank.

Highlights of 2014 Mission-Oriented Finance for Innovation conference

Mission-oriented Innovation Policy Project – A new partnership with the RSA

Mazzucato’s Institute for Innovation and Public Purpose at UCL will shortly launch a new project with the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) to develop mission-oriented innovation policy in practice.

WATCH THIS SPACE

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FT Alphaville Mission Finance

FT Alphaville Mission Finance

FT Alphaville ran a series of blogs on the Mission-Oriented Finance for Innovation conference under the banner Mission Finance, by Mazzucato and other speakers.

RETHINKING THE STATE

The Rethinking the State video project, coordinated by Mazzucato and Caetano Penna, carried out a series of interviews in 2013 in which leading economists discussed the orthodox view that the State’s role in the economy is to ‘fix market failures’. They offered a number of alternative views of what governments could and should do in order to stimulate economic development. See Mazzucato’s interview below and watch the rest of the series here.