We have socialised the risk of innovation but privatised the rewards

i use that exact same phrase every time anyone tries to include me on a discussion about tipping. (and then promptly leave said discussion)

The NSF grant played a minor role but the OP is exagerating it's importance to support her political viewpoint of how the world should be run. More background here:

http://www.politifact.com/georgia/statements/2012/jul/09/bar...

Also the $504,000 SBIC investment in Apple actually returned $44 million apparently to it's sponsoring bank. In fact the program is exactly what the author is against as the frequent losses end up being covered by the government. More here:

http://articles.latimes.com/1990-09-25/business/fi-1303_1_sm...

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 rewards. This dynamic is one of the key drivers of increasing inequality. Because innovation today builds on innovation tomorrow, the ‘capture’ can be very large. This would not be the case if innovation were just a random walk. Policy makers must think very hard how to make value creation activities (done by all the collective actors in the innovation game) rewarded above value extraction activities (in this sense capital gains taxes are way too low). And since the booty from the latter can be very large, redirecting incentives and rewards towards the value creators is essential. The problem is that some of the ‘extractors’ like to sell themselves as the creators.

Her argument appears to be that public funds need to be directed into areas that have a chance of "industry transformation", which may create job or new (tax paying) industries in the country that funded them.

Here argument about public funding of Google and Apple is this:

For every Internet there are many Concordes or Solyndras. Yet this is also true for private venture capital (VC). But while private VC is then able to use the profits from the 1 out of 10 successes to fund the 9 losses, the state has not been allowed to reap a return. Economists think this will happen via tax (from the jobs created, and from the profits of the companies), yet so many of the companies that receive such benefits from state funding, bring their jobs elsewhere, and of course we know they also pay very little tax.

There is possibly a valid point here. Corporate tax minimisation by offshoring profits is a real challenge to the tax system.

I don't think she makes any real suggestion for how to solve the problem, though (Retaining a share of IP rights won't work, because companies can easily disassociate profits from the IP that generated them, meaning that any return-on-profits-generated scheme will fail. See Hollywood Accounting,[1] which does a similar thing in the film world)

[1] http://en.wikipedia.org/wiki/Hollywood_accounting