The Value of Everything: Making and Taking in the Global Economy

by Mariana Mazzucato

Value extraction in the innovation economy occurs in various ways. First, in the way that the financial sector–in particular venture capital and the stock market–has interacted with the process of technology creation. Second, in the way that the system of intellectual property rights (IPR) has evolved: a system that now allows not just the products of research but also the tools for research to be patented and their use ring-fenced, thereby creating what the economist William J. Baumol termed ‘unproductive entrepreneurship’. Third, in the way that prices of innovative products do not reflect the collective contribution to the products concerned, in fields as diverse as health, energy or broadband. And fourth, through the network dynamics characteristic of modern technologies, where first-mover advantages in a network allow large companies to reap monopolistic advantages through economies of scale and the fact that customers using the network get locked in (finding it too cumbersome or disadvantageous to switch service).