Yes, Government Creates Wealth

Mariana Mazzucato in Democracy:

President Barack Obama views the Hoover Dam during an unannounced stop there Oct. 2, 2012.
(Official White House Photo by Pete Souza)

The January 2010 edition of The Economist was devoted to the dangers of big government. A large picture of a monster adorned the magazine’s cover. The editorial opined: “The rich world has a clear choice: learn from the mistakes of the past, or else watch Leviathan grow into a true monster.” In a more recent issue, dedicated to future technological revolutions, the magazine was explicit that government should stick to setting the rules of the game: Invest in basic goods like education and infrastructure, but then get out of the way so that revolutionary businesses can do their thing.

This, of course, is hardly a novel view. Throughout the history of economic thought, government has long been seen as necessary but unproductive, a spender and regulator, rather than a value creator. But government’s ability to produce value has been seriously underestimated, an error that has in effect enabled others to have a stronger claim on their wealth creation role.

More here.