Innovation: The Government Was Crucial After All

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Andrew Innerarity/Reuters
The LS3, a four-legged rough-terrain robot designed by Boston Dynamics with funding from DARPA and the US Marine Corps to accompany soldiers anywhere they go on foot, and to help respond to natural and man-made disasters, at the DARPA Robotics ­Challenge Trials, Homestead-Miami Speedway, Florida, December 2013. That month, Boston Dynamics was acquired by Google, which says it will honor existing contracts with DARPA but is rejecting other DARPA funding.

“The great advances of civilization,” wrote Milton Friedman in Capitalism and Freedom, his influential best seller published in 1962, “whether in architecture or painting, in science or literature, in industry or agriculture, have never come from centralized government.” He did not say what he made of the state-sponsored art of Athens’s Periclean Age or the Medici family, who, as Europe’s dominant bankers but then as Florentine rulers, commissioned and financed so much Renaissance art. Or the Spanish court that gave us Velázquez. Or the many public universities that produced great scientists in our times. Or, even just before Friedman was writing, what could he have made of the Manhattan Project of the US government, which produced the atomic bomb? Or the National Institutes of Health, whose government-supported grants led to many of the most important pharmaceutical breakthroughs?

We could perhaps forgive Friedman’s ill-informed remarks as a burst of ideological enthusiasm if so many economists and business executives didn’t accept this myth as largely true. We hear time and again from those who should know better that government is a hindrance to the innovation that produces economic growth. Above all, the government should not try to pick “winners” by investing in what may be the next great companies. Many orthodox economists insist that the government should just get out of the way.

Lawrence Summers said something of the sort in a 2001 interview, shortly after the end of his tenure as Bill Clinton’s treasury secretary:

There is something about this epoch in history that really puts a premium on incentives, on decentralization, on allowing small economic energy to bubble up rather than a more top-down, more directed approach.

More recently, the respected Northwestern economist Robert Gordon reiterated the conventional view in a talk at the New School, saying that he was “extremely skeptical of government” as a source of innovation. “This is the role of individual entrepreneurs. Government had nothing to do with Bill Gates, Steve Jobs, Zuckerberg.”

Fortunately, a new book, The Entrepreneurial State, by the Sussex University economist Mariana Mazzucato, forcefully documents just how wrong these assertions are. It is one of the most incisive economic books in years. Mazzucato’s research goes well beyond the oft-told story about how the Internet was originally developed at the US Department of Defense. For example, she shows in detail that, while Steve Jobs brilliantly imagined and designed attractive new commercial products, almost all the scientific research on which…


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