The Value of Everything: Making and Taking in the Global Economy

by Mariana Mazzucato

Overview

Modern economies reward activities that extract value rather than create it. This must change to ensure a capitalism that works for us all.

Shortlisted for the FT & McKinsey Business Book of the Year Award

A scathing indictment of our current global financial system, The Value of Everything rigorously scrutinizes the way in which economic value has been accounted and reveals how economic theory has failed to clearly delineate the difference between value creation and value extraction. Mariana Mazzucato argues that the increasingly blurry distinction between the two categories has allowed certain actors in the economy to portray themselves as value creators, while in reality they are just moving around existing value or, even worse, destroying it.

The book uses case studies-from Silicon Valley to the financial sector to big pharma-to show how the foggy notions of value create confusion between rents and profits, reward extractors and creators, and distort the measurements of growth and GDP. In the process, innovation suffers and inequality rises.

The lesson here is urgent and sobering: to rescue our economy from the next inevitable crisis and to foster long-term economic growth, we will need to rethink capitalism, rethink the role of public policy and the importance of the public sector, and redefine how we measure value in our society.

Product Details

ISBN-13:	9781610396745
Publisher:	PublicAffairs
Publication date:	09/11/2018
Pages:	384
Sales rank:	334,314
Product dimensions:	6.00(w) x 9.30(h) x 1.50(d)

About the Author

Mariana Mazzucato is professor in the Economics of Innovation and Public Value at University College London (UCL), where she directs the Institute for Innovation and Public Purpose. She is the winner of the 2014 New Statesman SPERI Prize for Political Economy, the 2015 Hans-Matthöfer-Preis, and the 2018 Leontief Prize for Advancing the Frontiers of Economic Thought. She was named as one of the "three most important thinkers about innovation" by the New Republic.

She advises global policy makers on innovation-driven inclusive growth and is Special Advisor to the EU commissioner for research, science and innovation. She is a coeditor of Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth and the author of the award-winning The Entrepreneurial State: Debunking Public vs. Private Sector Myths.

Table of Contents

Acknowledgements xi

Preface: Stories About Wealth Creation xiii

Introduction: Making versus Taking 1

Common Critiques of Value Extraction 4

What is Value? 6

Meet the Production Boundary 8

Why Value Theory Matters 11

The Structure of the Book 15

1 A Brief History of Value 21

The Mercantilists: Trade and Treasure 22

The Physiocrats: The Answer Lies in the Soil 28

Classical Economics: Value in Labour 33

2 Value in the Eye of the Beholder: The Rise of the Marginalises 57

New Times, New Theory 58

The Eclipse of the Classicals 59

From Objective to Subjective: A New Theory of Value Based on Preferences 60

The Rise of the 'Neoclassical' 62

The Disappearance of Rent and Why it Matters 71

3 Measuring the Wealth of Nations 75

GDP: A Social Convention 76

The System of National Accounts Comes into Being 83

Measuring Government Value Added in GDP 85

Something Odd About the National Accounts: GDP Facit Saltus! 90

Patching Up the National Accounts isn't Enough 98

4 Finance: A Colossus is Born 101

Banks and Financial Markets Become Allies 103

The Banking Problem 104

Deregulation and the Seeds of the Crash 110

The Lords of (Money) Creation 115

Finance and the 'Real' Economy 117

From Claims on Profit to Claims on Claims 122

A Debt in the Family 127

5 The Rise of Casino Capitalism 135

Prometheus (with a Pilot's Licence) Unbound 137

New Actors in the Economy 142

How Finance Extracts Value 146

6 Financialization of the Real Economy 161

The Buy-back Blowback 162

Maximizing Shareholder Value 165

The Retreat of 'Patient' Capital 171

Short-Termism and Unproductive Investment 174

Financialization and Inequality 177

From Maximizing Shareholder Value to Stakeholder Value 183

7 Extracting Value through the Innovation Economy 189

Stories about Value Creation 189

Where Does Innovation Come From? 191

Financing Innovation 195

Patented Value Extraction 202

Unproductive Entrepreneurship 206

Pricing Pharmaceuticals 207

Network Effects and First-mover Advantages 213

Creating and Extracting Digital Value 219

Sharing Risks and Rewards 222

8 Undervaluing the Public Sector 229

The Myths of Austerity 233

Government Value in the History of Economic Thought 239

Keynes and Counter-cyclical Government 241

Government in the National Accounts 245

Public Choice Theory: Rationalizing Privatization and Outsourcing 249

Regaining Confidence and Setting Missions 259

Public and Private Just Deserts 263

From Public Goods to Public Value 264

9 The Economics of Hope 270

Markets as Outcomes 274

Take the Economy on a Mission 277

A Better Future for All 279

Bibliography 281

Notes 297

Index 331

Editorial Reviews

"A stimulating analysis of the underlying causes of inequality and growth which forces us to confront long-held beliefs about how economies work and who benefits"
——Martin Wolf, Financial Times

"Mazzucato's mission is to overturn the now dominant neoclassical theory of value."
——George Eaton for New Statesman

"Mariana Mazzucato offers an exposé of how value extractors and rent-seekers have been masquerading as value creators in the global economy. And, furthermore, how the conventional wisdom has indulged them in this."
——Fran Boait for Prospect

Praise for The Entrepreneurial State

"Mazzucato's ideas are fuel for a growing political debate about what portion of the country's wealth pie should be taken by the private sector." —Rana Foroohar, TIME

"Read her book. It will challenge your thinking."-Bruce Upbin, Forbes

"It is one of the most incisive economic books in years." —Jeff Madrick, New York Review of Books

"Mariana Mazzucato makes a very convincing argument . . . . from the iPhone to solar power to nanotechnology to pharmaceuticals, government did much of the basic research before venture capitalists stepped in and took the profit." —Los Angeles Review of Books, Tom Streithorst

"Increasingly, however, economists and social thinkers are challenging the conventional wisdom on innovation... Mariana Mazzucato described the most notable technology innovations as coming from the government, not the private sector." —Quentin Hardy, New York Times

"This book has a controversial thesis. But it is basically right. The failure to recognise the role of the government in driving innovation may well be the greatest threat to rising prosperity." —Martin Wolf, Financial Times


"Mariana Mazzucato ... has built up an ever bigger following for The Entrepreneurial State,
which argues that government has played a big role in creating innovation . . . . It's a serious book, and its subject is an important one. Where innovation comes from is one of the most important, and perhaps least understood, topics in economics." —Matthew Lynn, The Telegraph

"[M]ost major technological advances of the last decades have been publicly financed. As Mariana Mazzucato shows in The Entrepreneurial State, all the major advances that made the iPhone possible were publicly funded, from the touch screen to GPS." —Doug Henwood, The Nation

"The iPhone exists—as Mariana Mazzucato demonstrated in her book—because various branches of the US government provided research assistance that resulted in several key technological developments . . . . " —Jill
Lepore, The New Yorker

From the Publisher

2018-05-28
A British economics professor is debunking again; this time, her target is the conventional wisdom that so-called wealth creators deserve to accumulate massive riches.In the consequential battle of perception between the makers and the takers, Mazzucato (Economics of Innovation and Public Value/Univ. Coll. London; The Entrepreneurial State: Debunking Public vs. Private Sector Myths, 2015) sides with the actual makers, those who struggle in an economy tilted in favor of the ultrawealthy. The author mixes easily accessible lay language with technical jargon as she constructs her case that investment bankers, multinational pharmaceutical companies, and other billion-dollar enterprises—as well as small tech startups—actually create little of societal value but reap outsized benefits. Meanwhile, laborers continue to be shortchanged. The result is widespread income inequality. As Mazzucato builds her argument, she expresses specific incredulity about the banking sector's self-serving statements about wealth creation. As recently as the 1970s, the author maintains, economists viewed financial institutions as merely transferring existing wealth rather than creating new wealth. The shift in emphasis caught on quickly, and suddenly, bankers were perceived as wealth creators. "If we cannot differentiate value creation from value extraction," writes the author, "it becomes nearly impossible to reward the former over the latter." She wants to convince those in power that so-called value-creating entities should be viewed as value-extracting entities and thus regulated accordingly. When Mazzucato cites specific corporations and individuals feeding at the trough of income inequality, readers will be able to see through the abstractions and grasp the theories dividing economists. She is especially eloquent when commenting on arrogant tech-giant billionaires such as Peter Thiel, who claims that his wealth accumulation occurred in spite of, rather than because of, government presence. Mazzucato characterizes the statements of Thiel and his ilk as "entrepreneurs good, government bad." Actually, the author argues, national, state, and local government agencies offer countless incentives to corporate employers.An accessible academic treatise worth understanding.

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