Analyzing the Effectiveness of State-Guided Innovation

A crucial debate exists over the effectiveness of government-guided innovation efforts, which recently through economist Mariana Mazzucato’s arguments for an entrepreneurial state that encourages the public sector’s active role in technological change and value creation, is considerably shaping global policy. This essay addresses a key assertion by Mazzucato that the government is the boldest innovator accountable for the greatest value in society. Through use case analysis, I argue that Mazzucato’s claims of the state providing mission-oriented directionality that drives technology development do not survive the scrutiny of the Supply-Chain Fallacy, the belief that every item in a line of production or chain of events is necessary and causal. I do find occasions of public sector innovation success in the development of military technologies, particularly during times of war, which can have beneficial spillover effects. However, I show that the potentiality of such successes in a persistent peacetime environment is limited by the viability of the public sector entrepreneur.