Chapter 6: – Mariana Mazzucato: Who really creates the values?
Introduction
Among contemporary economists, few have contributed more to reviving the fundamental discussion about value creation than Mariana Mazzucato. Through books such as The Entrepreneurial State, The Value of Everything, and Mission Economy, she challenges established notions about how economic value arises, who creates it, and how modern societies should understand the relationship between the public and private sectors.
While much of the economic debate in recent decades has been concerned with how markets work and how economic growth can be stimulated, Mazzucato asks a more fundamental question:
What really is value?
And perhaps even more importantly:
Who creates the values on which society is built?
These questions form the basis for her research and make her a key researcher in any academic discussion about value creation.
Who is Mariana Mazzucato?
Mariana Mazzucato is Professor of Economics and Innovation at University College London (UCL), where she founded the Institute for Innovation and Public Purpose (IIPP).
She is internationally recognized for her research on innovation policy, economic development and public value creation, and has been an advisor to, among others, the European Commission, the OECD, the UN, the World Health Organization and a number of national governments.
What distinguishes Mazzucato from many other economists is that she does not primarily attempt to explain how markets work.
She tries to understand how values are created.
Throughout her writing, she returns to this question and examines which actors, investments, and institutions actually lay the foundation for economic development.
Historical and academic context
Mazzucato's research emerged in the wake of several major changes in the world economy.
Globalization, technological development, and financialization had changed both business and the public sector.
At the same time, the financial crisis in 2008 led to an extensive discussion about how economic value is actually created, and whether the modern economy sufficiently rewards activities that develop new knowledge and new productive capacity.
Mazzucato believed that the discipline of economics had gradually lost some of its original focus.
The classical economists – Adam Smith, David Ricardo and Karl Marx – all discussed what value was and where it came from.
Gradually, the economics profession shifted its attention to market prices, supply and demand.
According to Mazzucato, this made economics better at analyzing markets, but worse at discussing which activities actually create new value.
She therefore wanted to bring the concept of value back to the center of the economics profession.
Key books and publications
Mariana Mazzucato's research is based on an extensive body of writing, but three books form the core of her work on value creation.
The Entrepreneurial State
This book challenges the notion of the state as a passive actor that primarily corrects market failures.
Through historical analysis, Mazzucato shows how public investments have played a crucial role in the development of many technologies that have later become commercial successes.
The book thus shifts the discussion from how big the state should be to what role it can play in innovation and technological development.
The Value of Everything
This is Mazzucato's most central work on value creation.
Here she analyzes how economics' understanding of value has developed from classical economists to modern economic theory.
She argues that the economics profession has too largely stopped distinguishing between activities that create new values, and activities that primarily move or extract existing values.
This analysis forms the foundation for her understanding of value creation.
Mission Economy
In this book, Mazzucato further develops his previous theories.
She argues that major societal challenges – such as climate, health and technology – require long-term societal missions where the public and private sectors work together towards common goals.
Innovation is thus not only the result of individual companies, but of interaction between research, authorities, business and society.
Mariana Mazzucato's understanding of value creation
For Mazzucato, value creation begins with one fundamental question:
What is value?
She believes this issue has received far too little attention in modern economics.
Instead, economic value has often been identified with market price.
What can be sold, priced and traded is automatically perceived as value creation.
Mazzucato challenges this understanding.
She argues that the economics profession must again distinguish between activities that develop new knowledge, new products, new technology and higher productivity, and activities that primarily redistribute or extract values that have already been created.
She describes this through the distinction between value creation and value extraction.
In her view, this distinction is crucial if the concept of value creation is to have a clear professional content.
Value creation is therefore not just about financial results.
It is about the processes that make the results possible.
Research.
Knowledge.
Innovation.
Technological development.
Entrepreneurship.
Competence.
Institutions.
Long-term investments.
All of these factors are part of what Mazzucato describes as society's overall value creation process.
She thus shifts attention from the question of who gets the benefits to the question of how the values are created.
Academic background and further reading
This series also builds on my own professional journey through the Web Design study , the eMarketing study , Innovation and Commercialization and professional seminars in San Francisco and Oxford . Here you will find the background, professional environments and experiences that have followed the development from the early years of the web to today's digitalization.
Recommended literature
Value creation is about much more than economic growth and money. It is about people, knowledge, innovation, productivity, institutions, trust and the interaction between the public and private sectors.
Here we have collected books from some of the world's leading economists and thinkers who explain in various ways how value is created, who contributes to creating it, and what prerequisites make long-term value creation possible.
The books complement each other and provide different perspectives on the same fundamental question:
What really makes people, businesses and societies create greater value over time?
Recommended books from our library
Creating a Learning Society: A New Approach to Growth, Development, and Social Progress
Author: Joseph E. Stiglitz and Bruce C. Greenwald
Short review:
Creating a Learning Society examines how knowledge, learning, and technological development contribute to economic growth and long-term value creation. Joseph E. Stiglitz and Bruce C. Greenwald challenge the notion that economic development is primarily about accumulating more physical capital. They argue that society’s ability to create, disseminate, and apply knowledge is crucial to productivity growth and improved living standards. A key point is that learning does not only occur in schools and universities. It also occurs in businesses, through work, production, innovation, and the interaction between people and organizations. Knowledge can also spread from one business and one part of the economy to others.
The book thus provides an important perspective on why human capital, competence, innovation and learning must be understood as central parts of a society's ability to create value over time.
Why we recommend the book
We recommend Creating a Learning Society because it expands the understanding of what lies behind economic value creation.
Machines, technology and financial capital are important, but they do not create productivity growth alone. Behind the development are people who learn, develop knowledge, improve work processes, share experiences and find new solutions.
This makes the book particularly relevant to Invisible Capital and our perspective on value creation: A significant part of society's value-creating capacity is found in the knowledge, competence, and learning ability of the people who participate in the economy.
Stiglitz and Greenwald thus provide an academic foundation for one of the most important relationships in modern value creation:
The Value of Everything: Making and Taking in the Global Economy
Author: Mariana Mazzucato
Short review
In The Value of Everything, Mariana Mazzucato asks a fundamental question: What exactly is value – and who creates it? Mazzucato returns to the historical discussions of value in economics and shows how the understanding of value creation has changed. She challenges the notion that high income, high prices or large profits necessarily mean that correspondingly large values have been created. One of the book's most important contributions is the distinction between value creation and value extraction . Mazzucato examines the financial sector, the pharmaceutical industry, innovation and the public sector, among others, and argues that we must become better at distinguishing between activities that actually create new values, and activities that primarily extract values that have already been created.
The book also challenges the traditional notion that the private sector creates value while the public sector mainly consumes or redistributes it. Innovation and economic development often arise through a complex interaction between public investment, research, businesses, capital and people.
The Power of Creative Destruction: Economic Upheaval and the Wealth of Nations
Author: Philippe Aghion, Céline Antonin and Simon Bunel
Short review
The Power of Creative Destruction is about one of the most important drivers of long-term economic growth: innovation.
Philippe Aghion, Céline Antonin and Simon Bunel build on Joseph Schumpeter's classic idea of "creative destruction" – the process by which new technologies, businesses, products and ideas challenge and replace existing solutions.
But the book is not just about the disappearance of the old. The authors examine why some economies manage to create continuous innovation and productivity growth, while others stagnate. Competition, entrepreneurship, research, education, institutions and public policy thus become important parts of the explanation.
Creative destruction also comes at a cost. New technologies and businesses create opportunities and jobs, but can also make existing skills, tasks and business models less relevant. The challenge is therefore to create societies that both promote innovation and enable people to participate in the transition.
Why we recommend the book
We recommend The Power of Creative Destruction because it shows why innovation is a fundamental driver of value creation .
Value creation is not just about producing more of what we already produce. It also occurs when people develop new ideas, technology, and ways of working that enable us to solve tasks better than before.
This makes the book particularly relevant to The Invisible Capital. Behind innovation are people with knowledge, expertise, creativity and experience. But Aghion's perspective also shows that human capital must be part of a larger system where competition, institutions, research, investment and policy create the conditions for new ideas to actually turn into economic and social development.
The book thus provides an important context in our understanding of value creation:
Knowledge → new ideas → innovation → productivity growth → long-term value creation.
Competitive Advantage: Creating and Sustaining Superior Performance
Author: Michael E. Porter
Short review
Competitive Advantage is one of Michael E. Porter's most influential works on how businesses create value and develop lasting competitive advantages.
One of the book's most important contributions is the value chain . Porter shows that a business should not be viewed as a single, unified activity, but as a series of interconnected activities – from development and production to logistics, marketing, sales and service. It is through these activities, and the interaction between them, that the business creates value for customers.
Porter also shows how competitive advantage can arise through, among other things, lower costs or differentiation. But behind these results lies the organization of the company's activities, expertise, technology, work processes and the way in which resources are used.
The value chain thus makes it possible to examine where in the business the values are actually created – and how different activities together contribute to the end result.
Why we recommend the book
We recommend Competitive Advantage because Porter gives us a perspective that fits very well into our broader understanding of value creation.
When we talk about a business “creating value,” it may sound as if the business does this as a single entity. Porter opens up the business and shows that value creation occurs through many activities that are interrelated .
And this is where people become particularly interesting.
Behind research, product development, purchasing, production, logistics, marketing, sales, customer service, technology and management are people with knowledge, experience, expertise and the ability to collaborate . The value chain is therefore also a useful way to highlight the human effort behind the company's financial results.
For Invisible Capital, Porter thus gives us another important part of the value creation picture:
People and resources → activities → interaction → customer value → competitiveness → value creation
Institutions, Institutional Change and Economic Performance
Author: Philippe Aghion, Céline Antonin and Simon Bunel
Short review
Institutions, Institutional Change and Economic Performance is one of Douglass C. North's most important works on why some societies are more successful than others in creating economic development over time.
North shifts attention from traditional factors of production such as capital and labor to the institutions that shape how people, businesses, and governments act and cooperate. Institutions are society's formal and informal rules of the game – including laws, regulations, norms, traditions, and established ways of organizing interaction.
These rules of the game affect the incentives that people and organizations face. They also affect investments, knowledge development, cooperation, transaction costs, and which economic activities emerge.
North also shows that institutions develop over time. History therefore matters: Today's economic opportunities are influenced by institutional choices and development paths that can stretch far back in time.
Why we recommend the book
We recommend Institutions, Institutional Change and Economic Performance because it explains a crucial aspect of value creation that easily becomes invisible:
Value creation needs good rules of the game.
People may have knowledge. Businesses may have capital. Entrepreneurs may have great ideas. A society may have natural resources and advanced technology. But outcomes are also influenced by the institutions that determine how people can collaborate, invest, compete, make deals, and develop businesses.
This makes North particularly interesting for our understanding of trust as part of invisible capital. Trust is not the same as institutions, but stable rules of the game, credible agreements, and well-functioning institutions can reduce uncertainty and make economic interaction easier.
North thus gives us another important part of the value creation picture:
Institutions → predictability and incentives → cooperation and investment → productive activity → long-term value creation.
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