Dave Zvenyach

Winners or Losers

The Entrepreneurial State and conventional wisdom

In the Entrepreneurial State, Mariana Mazzucato forcefully argues that much of the innovation seen out of Silicon Valley is the direct result of government adventurism. The book is effectively a critique of the dogma that government should avoid “picking winners and losers” and instead stick to addressing market failures and helping the innocent victims of creative destruction.

Because I read the book over the holidays, it was fresh on my mind when I read a recent article from Politico, entitled “Tech’s newest leaders shrug off D.C.” In the article, Transportation Secretary Elaine Chao is quoted as saying:

It's very important that we let the private sector flourish and we let the consumers decide which technologies they want. It is not a good idea for the federal government to choose winners or losers and for us to think we can look 20 years in the future and decide which technology is the best technology.

There's that line: “choose winners or losers.” The conventional wisdom on display. And I started to wonder: when folks make this argument (one I've made in the past), are we are arguing empirically or ideologically?

If it's the former (government is empirically bad at picking winners or losers), it might be worth examining which data or counterfactuals support the argument that the US government has been a poor supporter or regulator of innovation. If we accept Mazzucato's research, the empirical argument should be at least tested.

And if it's the latter (government shouldn't morally pick winners and losers), it's worth asking why government is institutionally inferior to regulating innovation or technology than the market. Is it strictly a market efficiency argument? Or does it speak to broader concerns about wealth redistribution?

In other words, is society actually less capable of picking winners and losers with government involvement? Or do we just wish it were that way? It's at least worth understanding the difference.