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We have socialised the risk of innovation but privatised the rewards

blogs.lse.ac.uk

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Re: We have socialised the risk of innovation but privatised the rewards

#31

Post by nl »

adevine wrote: post #21
nl wrote: post #10

The title of this piece is terrible, and detracts from what is actually a thoughtful discussion. Mazzucato points out how the government is actually good at funding very high risk work, with a low chance of pay off (think DARPA research in the US). She does say the sentence used in the title, but the context is very important: What this means is that we have socialized the risk of innovation but privatised the reward…

I think Fareed Zakaria makes a good argument from this article in 2011: http://www.washingtonpost.com/wp-dyn/content/article/2011/03... . Basically, the share of taxes that go to productive investment (like the Interstate Highway System, GPS, ARPANet, basic research, etc.) is shrinking compared to entitled consumption spending (Social Security, medicare). The current political system in the US makes it exceedingly di…

Precisely, and I think that is the point the author should have concentrated on. New approaches there are needed.

Re: We have socialised the risk of innovation but privatised the rewards

#32

Post by robotresearcher »

anaolykarpov wrote: post #25

I so very much hate socialism. The state, with the money it took from all of us through taxes is presented as a benefactor because it gives small amounts of those money back to research. And she wants the state to have more share from successful research. The state, any state, is a very bad administrator of funds, because the so called state are basically a bunch of people spending other peoples money on things that…

I'd feel less comfortable without NASA, NIH, and DARPA, since I have benefitted a great deal from the work they sponsored. I doubt very much I would have had those benefits so soon without these grossly inefficient agencies that have no idea what they are doing carelessly spending other people's money on creating the space age, the Internet age, and the age of genomics respectively.

I don't believe for a second that private investment would have done these earlier or better if the greedy government had stolen less tax money from you.

edit: downvotes yay! Please enjoy using the Internet to show your distain for giving credit for revolutionary federally-funded technology projects.

Re: We have socialised the risk of innovation but privatised the rewards

#33

Post by spikels »

nl wrote: post #10

The title of this piece is terrible, and detracts from what is actually a thoughtful discussion. Mazzucato points out how the government is actually good at funding very high risk work, with a low chance of pay off (think DARPA research in the US). She does say the sentence used in the title, but the context is very important: What this means is that we have socialized the risk of innovation but privatised the reward…

Mazzucato provides no real evidence the government is good at funding commercially viable innovation. If you look into the details the two examples she offers were more blind luck than thoughtful investment.

While it's easier to make the case for basic research the governments attempts to sponsor commercial innovation have almost always ended in failure or turned into subsidies for politically connected companies and industries. A good case study was the $600 Flat Panel Display Initative in the 1990s. It's a good bet something similar is currently happening in the various green initiatives.

She is actually correct about these programs socializing risk and privatizing reward. Stanford got the Google shares from research funded by NSF and Continental Illinois got the Apple shares from the SBIC investment guaranteed by SBA.*

However this is the one role government has a unique advantage. And this is a good thing - think NIH, NASA, NSF, etc but also pretty much every social safety net program. Of course she (being quite left) is actually making the case for increase government ownership of public companies or at least greater taxation and license fees.

*-You could argue the U.S. got some this back when that bank failed a few year later in the largest bank failure in US history - until WaMu surpassed it in 2008. Although the $44 million from Apple shares was insignificant compared to the billions in bankruptcy costs. BTW-The Continental Illinois failure is where "too big to fail" was coined.

Re: We have socialised the risk of innovation but privatised the rewards

#34

Post by nostromo »

anaolykarpov wrote: post #25

I so very much hate socialism. The state, with the money it took from all of us through taxes is presented as a benefactor because it gives small amounts of those money back to research. And she wants the state to have more share from successful research. The state, any state, is a very bad administrator of funds, because the so called state are basically a bunch of people spending other peoples money on things that…

Have you ever read Thus Spoke Zarathustra? You might like this short chapter:

http://4umi.com/nietzsche/zarathustra/11

Re: We have socialised the risk of innovation but privatised the rewards

#35

Post by Icombine »

dmfdmf wrote: post #20
nl wrote: post #10

The title of this piece is terrible, and detracts from what is actually a thoughtful discussion. Mazzucato points out how the government is actually good at funding very high risk work, with a low chance of pay off (think DARPA research in the US). She does say the sentence used in the title, but the context is very important: What this means is that we have socialized the risk of innovation but privatised the reward…

> The title of this piece is terrible... I agree but not for the same reasons I am sure. This title is an old saw from the socialists and has been around for decades. The implicit conclusion is that to make things "fair" we should socialize risk AND reward. How convenient for the socialists. No. The discussion we should be having is; What is the proper function of government? What is your standard? > Her argument app…

I do not see where rewards are socialized. See how much Google, Facebook and Apple pay for taxes in relation to their revenue.

The problem today is not socializing the risk of innovations but socializing the risk of investments.

The EZB is currently pumping more than 1.000.000.000.000 Euros into the market for essentially failed risk assessments of high volume lenders. Which in turn sank money into projects of people who are everything but innovative, like building another much needed shopping mall.

You say 'road to communism' but do you see North Korea socializing rewards?

Beside the headline that invokes ideological impulses in some readers Mazzucato makes some considerable points.

Re: We have socialised the risk of innovation but privatised the rewards

#36

Post by spikels »

nl wrote: post #31
adevine wrote: post #21

Earlier quoted context omitted.

I think Fareed Zakaria makes a good argument from this article in 2011: http://www.washingtonpost.com/wp-dyn/content/article/2011/03... . Basically, the share of taxes that go to productive investment (like the Interstate Highway System, GPS, ARPANet, basic research, etc.) is shrinking compared to entitled consumption spending (Social Security, medicare). The current political system in the US makes it exceedingly di…

Precisely, and I think that is the point the author should have concentrated on. New approaches there are needed.

That's the real issue. What are these new approaches that will actually work? Many things have been tried before and the track record is very poor.

And stepping back is a shortage of funds really the problem holding back innovation? Seems like there is plenty of seed and VC money for good business ideas.

I think more and better managed basic research is what the government should focus on. One area that seems obvious is basic energy research which seems grossly underfunded.

http://dotearth.blogs.nytimes.com/?s=koizumi+research+energy...

Re: We have socialised the risk of innovation but privatised the rewards

#37

Post by tsotha »

robotresearcher wrote: post #32
anaolykarpov wrote: post #25

I so very much hate socialism. The state, with the money it took from all of us through taxes is presented as a benefactor because it gives small amounts of those money back to research. And she wants the state to have more share from successful research. The state, any state, is a very bad administrator of funds, because the so called state are basically a bunch of people spending other peoples money on things that…

I'd feel less comfortable without NASA, NIH, and DARPA, since I have benefitted a great deal from the work they sponsored. I doubt very much I would have had those benefits so soon without these grossly inefficient agencies that have no idea what they are doing carelessly spending other people's money on creating the space age, the Internet age, and the age of genomics respectively. I don't believe for a second that…

Of the three, I think private investment would have done better than the first two. Even DARPA is notable for a handful of home runs that may have been just luck.

Re: We have socialised the risk of innovation but privatised the rewards

#38

Post by anaolykarpov »

robotresearcher wrote: post #32
anaolykarpov wrote: post #25

I so very much hate socialism. The state, with the money it took from all of us through taxes is presented as a benefactor because it gives small amounts of those money back to research. And she wants the state to have more share from successful research. The state, any state, is a very bad administrator of funds, because the so called state are basically a bunch of people spending other peoples money on things that…

I'd feel less comfortable without NASA, NIH, and DARPA, since I have benefitted a great deal from the work they sponsored. I doubt very much I would have had those benefits so soon without these grossly inefficient agencies that have no idea what they are doing carelessly spending other people's money on creating the space age, the Internet age, and the age of genomics respectively. I don't believe for a second that…

If it wasnt for the cold war and the space race, I really doubt that NASA would have ever been created. Should we seek for another cold war because its a medium in which some kind of innovation occur? So are regular wars? Should we demand our states to start wars because technology advances during those times?

Re: We have socialised the risk of innovation but privatised the rewards

#39

Post by kristopolous »

Another political theorist, Albena Azmanova calls this aggregative capitalism. An interview here: http://www.againstthegrain.org/program/1099/tues-22415-post-... and an essay here : http://www.academia.edu/11034347/The_Crisis_of_the_Crisis_of...

A summary from http://events.newschool.edu/event/politics_talk_albena_azman...

> A key feature of the new modality is the renewal of the state's redistributive function, with an altered logic of distribution, and a simultaneous increase in the state's administrative power and a decrease in its authority - a process that has failed to trigger a legitimacy crisis of the socio-political system, despite the recent confluence of financial, economic, and social crises. And no wonder society accepts the pain with equanimity, Professor Azmanova will argue, as the very social contract in Western democracies has been recast, thus breathing new life into capitalism.

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