This working paper is part of the UCL Institute for Innovation and Public Purpose’s (UCL IIPP) publication series.

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UCL Institute for Innovation and Public Purpose (IIPP) Working Paper Series: IIPP WP 2020-20

Authors

  • Mariana Mazzucato | Professor in the Economics of Innovation and Public Value, Director, UCL Institute for Innovation and Public Purpose
  • Henry Lishi Li | Research Fellow in Health Innovation and Policy Engagement, UCL Institute of Innovation and Public Purpose

Reference

Mazzucato, M and Li, H. L. (2020). The Entrepreneurial State and public options: Socialising risks and rewards. UCL Institute for Innovation and Public Purpose, Working Paper Series (IIPP WP 2020-20). Available at: https://www.ucl.ac.uk/bartlett/public-purpose/wp2020-20

Abstract

This paper reflects on recent policy thinking on public options by looking at the role of the state – and economic policy – in modern capitalism. In traditional economic theory, the state is limited to ‘fixing markets’ and ‘enabling’ or de-risking the private sector. These assumptions are based on a limited understanding of value creation as something that only happens within the private sector. Value is understood as being enabled or redistributed by the state, but not co-created by it. And yet the state has often actively co-shaped markets, investing, innovating and taking high risks before the private sector is willing or able to. Understanding the market shaping and co-creating role of the state – beyond the fixing role – requires looking at how both risks and rewards can be shared between public and private actors. Public options, among other approaches such as equity stakes and conditionalities on reinvestment, are a powerful way to enable the state to govern public-private relationships to make sure that public investment delivers for the public interest.

This working paper is part of the UCL Institute for Innovation and Public Purpose’s (UCL IIPP) publication series.

Explore more working papers and policy reports here.