Mazzucato has written a timely book in an age in which economists and the public alike seem too often to confuse wealth with value. We once understood price as a reasonable gauge for value, but not anymore. In modern capitalism and globalisation, value can be faked. As a result, we often do not see the difference between people and things that create value and those that extract value. What do financial people do when they move assets from one place to another? Are they creating value or just extracting value? In classical economics, ‘value’ is the result of productive activities. In earlier versions of economic thought, we have Adam Smith’s theory of value based on the productivity of labour. In modern times, there are sectors that do not produce anything except moving existing assets around instead of creating new assets. It is now assumed that anything that has a price has value. How do we verify the claims by large financial institutions that their employees are the most productive in the world? How do we value their productivity when no new assets had been created by them? The conflation between productivity and value is the illusion Mazzucato seeks to dispel in this book.
Mazzucato is in no doubt that the financial sector extracts value, and she discusses how it does this. In the chapter, ‘The Rise of Casino Capitalism’, she explains how extraction is done by the insertion of a wedge, namely, a ‘transaction cost’ between the providers and the receivers of finance. They also achieved through monopoly power, and lastly, through high charges relative to risks run, especially in fund management.
In the case of economic downturns, what should be done? Should the government intervene, and if so, in small parts or in major moves? Or should the government keep out and leave it entirely to market forces? The author seems to support the Keynesian method of controlled intervention. Some economists argue otherwise, but Mazzucato’s arguments in the chapter, ‘Undervaluing the Public Sector’ is persuasive. Mazzucato examines the current history of economic activities and the impact of technology. In understanding the idea of value, we can better understand the distribution of income among different sectors of society. It is a fascinating book that is a joy to read because it covers economics, including its technical and historical aspects, lucidly for the layman. It takes us through the history of economics and the way ‘value’ had been defined and used, to the rise of the financial colossuses, and how they changed the idea of value and the impact that has made. She discusses the difference between creating value and extracting value, and the role of the government in stabilising the economy when takers (those who extract value) disrupt the economy create false value against the real value of the makers (people who produce value).
Mazzucato invites us to determine what sort of economy do we want? In so doing, she explains what markets are and how they can shape the economy – so that we can shape the markets. Technology propels us so rapidly that in the end, we may have reached the end – unless we take control and create an economy that is sustainable not just for markets, not just for takers, not just for ourselves, but for the planet.
- Paperback: 384 pages
- Publisher: Penguin Books Ltd (4 April 2019)
- Language: English
- ISBN-10: 0141980761
- ISBN-13: 978-0141980768
- Product Dimensions:: 12.9 x 2.2 x 19.8 cm
- Shipping Weight: 281 g
- Customer reviews: 21 customer ratings
- Amazon Best Sellers Rank: 21,113 in Books (See Top 100 in Books)