August 08, 2013

The state, instead of taking on more risks, should reorient its risk-taking, towards more basic research

Sir, from what I see from many letters, it would seem that Mariana Mazzucato’s “The Entrepreneurial State”, and Martin Wolf’s review of it, is unleashing a call for the state to run more risks on behalf of society.

Indeed, there is a big and unquestionable role for the state in helping to fund and carry out basic research, but, since the state takes enough risks already on behalf of taxpayers, like with fiscal deficits and quantitative easing, should not the real call be for the state to reorient its risk-taking?

And again I have to remind you. If a bank lends to a small private entrepreneur to carry out some risky research, it is required to have 8 percent in capital but, if it lends to the state so that the state performs exactly the same function, with tax-payer’s money, then the banks needs to hold zero capital. Frankly, is that not risking enough on the state’s capability for you?