Uncle Sam Plays Market

Due to the efforts of people like Marianna Mazzucato, it’s trendy to suggest not merely that government can play a role in innovation, but that it ought to take center stage.

Over at The Institute for Faith and Freedom, I question this increasingly conventional wisdom. Here’s a snippet:

It’s therefore unsurprising that the actual track record of Uncle Sam playing market is a dismal one. While it’s easy to fixate on the handful of success stories, the litany of government innovation failures should be enough to sober up even the most enthusiastic proponent of state-backed entrepreneurship. Harvard economist Josh Lerner documents these failures in his book, Boulevard of Broken Dreams, while my co-authors and I point to others in a recent paper. A meta-analysis of the literature reveals that private venture capital almost always outperforms public subsidies in generating innovation of lasting impact.

The title is a nod to Mises’ quote that, under market socialism, the mangers “play market as children play war, railroad, or school.” (See pgs. 702-703 of this edition of Human Action). Being subject to the market discipline of profit and loss is quite another matter, however.

For more on the “entrepreneurial state” hypothesis, see the recent, excellent book by Mingardi and McCloskey.

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