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Putting value creation back into 'public value': from market-fixing to market-shaping

Public value, we argue, is created by public sector actors creating and co-shaping markets in line with public purpose.

Putting value creation back to public value

3 June 2019

UCL Institute for Innovation and Public Purpose (IIPP)
Working Paper

Ref: IIPP WP 2019-05
Putting value creation back into 'public value': From market-fixing to market-shaping (PDF)

Mariana Mazzucato
Professor in the Economics of Innovation and Public Value
Director, UCL Institute for Innovation and Public Purpose

Josh Ryan-Collins
Head of Research
UCL Institute for Innovation and Public Purpose

Abstract

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.


View the full IIPP Working Paper series