Mariana Mazzucato - The Value of Everything - Making and Taking in the Global Economy

In the case of prices of drugs, instead of focusing on the debatable and arbitrary quantification of ‘what it would cost society not to treat’, we should try to understand the production side of the pharmaceutical industry and its interdependencies with related industries such as the biochemical industry and the medical devices industry. We could engineer prices to ensure continuous production of drugs that are actually needed (reducing the amount of ‘me too’ drugs which have little extra benefit); supply the drugs to whomever needs them; and maintain a steady and well-targeted flow of R&D to develop new drugs. A system of this kind does not necessarily need drug prices to be above manufacturing costs. We could, for example, abolish patents on pharmaceutical products and at the same time establish a competitive prize system to reward and incentivize public and private entities to come up with well-targeted pharmaceutical innovation. If we make more use of generic drugs – drugs which are the same medically as branded ones – we can make then widely available and push pharmaceutical companies to concentrate on breakthrough innovations rather than on producing ‘me too’ drugs or running share repurchasing programmes to boost their stock prices.

Policymakers should have a clear understanding of who the different actors in the process are in order to prevent free-riding on publicly funded innovation and a ‘winner-takes-all’ outcome. Rather than creating myths about actors in the innovation economy such as venture capitalists, it is important to recognize the stages at which each of these actors is important. Tax policy could be changed to encourage truly dynamic links between the different participants in innovation, for example by bringing the rewards and tax breaks that venture capitalists enjoy more into line with the risks they actually take compared with other stakeholders. Understanding that the state’s role is to do what the business sector is not willing to do – engage in high-risk early-stage development and fundamental research – also means that particular policies such as R&D tax credits must be devised so that the subsidy encourages investment in needed innovations over and above random potentially profitable ones.

Treatment of employees is also very important here. When, typically in the name of maximizing shareholder value, a successful company fires experienced employees, it is quite probable that the unlucky victims committed their time to the enterprise in the expectation of sharing in the returns if and when it succeeded. They are now cut off from the rewards that they deserve, while others such as venture capitalists who came in at a later stage receive a disproportionately large share of the rewards. Employees’ contribution to the enterprise deserves to be better protected.

Deals are being developed in European capitals, such as Berlin and Paris, to place limits or conditions on the operations of companies like Airbnb, Uber and Netflix. 79Patent pools can be set up that guarantee the use of patents for common goals. Government can earn equity stakes or royalties when investing in high-risk areas, whether in products or technologies. Prices of products that have received public support can be negotiated to reflect the public contribution. Big data can be governed so that it reflects the public data and publicly funded infrastructure upon which it rests. This means that we must not hype up technological advances, but recognize the collective contribution that created them, and govern them so that they produce a public good.

CONCLUSION

Economic growth without innovation is hard to imagine. But innovation must be properly governed to make sure that what is produced and how it is produced leads to value creation and not gimmicks for value appropriation. This means paying attention both to the rate and direction of innovation (what is produced), and to the deals that are struck between the different creators of that new value.

First, it is crucial to understand that innovation is not a neutral concept. It can be used for different purposes – in the same way a hammer can be used to build a house or as a weapon. The big data revolution itself can go either way. It can become a way for public data (on health, on energy use, on shopping preferences) to serve private profits, or it can be used to improve the services that consumers and citizens receive. Citizenship should in the process not be confused with being a client. As citizens, we have rights to enjoy the opportunities that innovation presents us with, to make use of public space, to be able to contest authority, and to share experiences and tastes without our stories and preferences ending up on a website or a database. In this sense movements for ‘inclusive’ innovation are important in how they focus on who is involved in envisioning change and benefiting from it.

Second, innovation has both a rate and a direction. A democratic debate about the direction is just as important as those that occur about the rate of growth – and key to understanding the multiple pathways that innovation may take, and how policy affects this. The assumption is that policy should be about ‘levelling the playing field’. But achieving innovation-led growth and innovation of a particular type (e.g. green innovation) will require not levelling but tilting the playing field. And furthermore, this requires not only a different policy mindset but also a different organizational structure: the ability to explore, experiment and strategically deliberate inside the public sector. It was this capacity that was central to the organizations that fostered some of the most radical innovations of our age, from the Internet to GPS to fracking. More discussion is needed on how to use mission-oriented innovation to battle societal and technological grand challenges – like climate change or social care. 80Just as the IT revolution was chosen and directed, we can choose and direct green and care as the new paths for innovation. This does not mean top-down dictation of what should be produced, and which actors are ‘productive’ and how each must behave. Rather, it requires new types of contracts between public and private actors (as well as the third sector and civil society) in order to foster symbiotic relationships, sharing the kinds of investments that will be needed to redirect economies away from high material content and energy based on fossil fuels. There are lessons from ‘mission-oriented’ investments such as going to the moon. Making sure our earth remains habitable demands the same ambition, organization, planning, bottom-up experimentation, public-private risk-sharing and sense of purpose and urgency as the Apollo project. 81But it is also true that because these investments are transformational, more debate should also be had on why it is that some technologies are pursued, and what is done with them. It is curious, for example, that there was so little debate about fracking – which was government-financed – until after its arrival.

Third, as argued in the previous section, innovation is produced collectively, and hence the benefits should be shared collectively. The deeply flawed reasoning behind pharma prices, patents and the dynamics of big data is a good example of how a confused and misleading approach to the concept of value can be costly, allowing large monopolies to get away with huge rents at the expense of society. But it need not be this way if we think radically.

Patents themselves should not be seen as ‘rights’ (IPR), but rather as a tool with which to incentivize innovation in the sectors where they are relevant – but in such a way that the public sector also gets its return; drug prices could become ‘fairer’, reflecting the collective contribution of different actors and making a healthcare system sustainable. The sharing economy would not be based on the ability of a few companies to use public infrastructure for free and the dynamics of network economies to monopolize a market. A true sharing economy must by definition respect the hard-won gains of all workers, irrespective of race, gender or ability. The eight-hour day, the weekend and holiday and sick pay fought for by workers’ movements and trade unions were no less important economic innovations than antibiotics, the microchip and the Internet.