Putting value creation back into 'public value': from market-fixing to market-shaping
3 June 2019
UCL Institute for Innovation and Public Purpose (IIPP) Working Paper Series: IIPP WP 2019-05
- Mariana Mazzucato | Director, Professor in the Economics of Innovation and Public Value, UCL Institute for Innovation and Public Purpose
- Josh Ryan-Collins | Head of Finance and Macroeconomics, Senior Research Fellow, UCL Institute for Innovation and Public Purpose
Mazzucato, M. and Ryan-Collins, J. (2019). Putting value creation back into ‘public value’: From market fixing to market shaping. UCL Institute for Innovation and Public Purpose, Working Paper Series (IIPP WP 2019-05). https://www.ucl.ac.uk/bartlett/public-purpose/wp2019-05
In conventional economics, the concept of value creation by the public sector is largely absent. Value is created in business with the state playing a reactive role in correcting ‘market failures’ to enhance economic efficiency. The term ‘public value’ has been adopted by scholars in public management and administration to attempt to go beyond this reactive role, focusing on how public-sector managers play an important democratic role in managing a trade-off between efficiency and the engagement of citizens in shaping policy. In this paper, we argue for a more ambitious and positive concept of public value which rejects the ‘market failure’ framework and puts public value at the centre of the economy, not in the periphery. Public value, we argue, is created by public sector actors creating and co-shaping markets in line with public purpose. This direction-setting role enables public, private and civil society sectors to collaborate effectively to solve societal problems.