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

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Modern economies reward activities that extract value rather than create it. This must change to insure a capitalism that works for us all. In this scathing indictment of our current global financial system, The Value of Everything rigorously scrutinizes the way in which economic value has been determined and reveals how the difference between value creation and value extra Modern economies reward activities that extract value rather than create it. This must change to insure a capitalism that works for us all. In this scathing indictment of our current global financial system, The Value of Everything rigorously scrutinizes the way in which economic value has been determined and reveals how the difference between value creation and value extraction has become increasingly blurry. Mariana Mazzucato argues that this blurriness allowed certain actors in the economy to portray themselves as value creators, while in reality they were just moving existing value around or, even worse, destroying it. The book uses case studies - from Silicon Valley to the financial sector to big pharma - to show how the foggy notions of value create confusion between rents and profits, a difference that distorts the measurements of growth and GDP. The lesson here is urgent and sobering: to rescue our economy from the next, inevitable crisis and to foster long-term economic growth, we will need to rethink capitalism, rethink the role of public policy and the importance of the public sector, and redefine how we measure value in our society.


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Modern economies reward activities that extract value rather than create it. This must change to insure a capitalism that works for us all. In this scathing indictment of our current global financial system, The Value of Everything rigorously scrutinizes the way in which economic value has been determined and reveals how the difference between value creation and value extra Modern economies reward activities that extract value rather than create it. This must change to insure a capitalism that works for us all. In this scathing indictment of our current global financial system, The Value of Everything rigorously scrutinizes the way in which economic value has been determined and reveals how the difference between value creation and value extraction has become increasingly blurry. Mariana Mazzucato argues that this blurriness allowed certain actors in the economy to portray themselves as value creators, while in reality they were just moving existing value around or, even worse, destroying it. The book uses case studies - from Silicon Valley to the financial sector to big pharma - to show how the foggy notions of value create confusion between rents and profits, a difference that distorts the measurements of growth and GDP. The lesson here is urgent and sobering: to rescue our economy from the next, inevitable crisis and to foster long-term economic growth, we will need to rethink capitalism, rethink the role of public policy and the importance of the public sector, and redefine how we measure value in our society.

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

  1. 4 out of 5

    Dan

    Mazzucato's observations and conclusions won't surprise readers who've read more than one or two works of contemporary critical theory. But the fact that she is writing in a different register and for a largely different audience matters a great deal in this case, and I found the book very rewarding (and even rather moving in her concluding call for an "economics of hope").

  2. 5 out of 5

    Daniel

    Capitalism has a problem - and that is to confuse price with value. So not only we think a $6 apple must be nicer than a $2 one, we also think that someone earning $100k must be better than one earning $60k etc. Firms are also told to only maximise shareholder returns (a.k.a. ever lower Price/earning ratios), so they dutifully increase revenue (raise price), cut costs (outsource and sack staff). To boost stock price, they also buy back shares to decrease the number of outstanding stocks. Not onl Capitalism has a problem - and that is to confuse price with value. So not only we think a $6 apple must be nicer than a $2 one, we also think that someone earning $100k must be better than one earning $60k etc. Firms are also told to only maximise shareholder returns (a.k.a. ever lower Price/earning ratios), so they dutifully increase revenue (raise price), cut costs (outsource and sack staff). To boost stock price, they also buy back shares to decrease the number of outstanding stocks. Not only that makes workers suffer, increase inequality, but also decreases long term investment. That is because CEOs are rewarded with stock options and their performance is mostly based on stock price. Pharmaceutical companies charge enormous prices for new drugs. She wrote that historically, economists separate productive vs rent-seeking unproductive activity. According to the author finance is mostly unproductive activity. Corporate raiders buy companies with debt that was saddled on the very companies that were bought, and make quick profits while workers are laid off. Venture capitalists make enormous profits on companies built on government research (like GPS and internet both built by the military). Mazzucato also attacked the calculation of GDP, that it reflects not value but price. So we can boost our GDP instantly if we just pay each other to cook and clean our house, even if the amount of work done is the same and the net amount of money that changed hands is zero. Lastly, government has been put down as only the distributors of economic output, not generator of it. So government has been asked to step aside, to just provide some protection and order, and build some roads so that real private wealth generators can do their thing. The IMF and World Bank actually push this agenda to developing countries, asking them to sell almost everything to the private sector, and outsource essential services. This leads to higher cost, worse service and for the government to pick up the tab when private providers go bankrupt. Mazzucato suggested that we need to look at real Value, and that involves all the stakeholders. She does not have the solution yet but we need to start that conversation. She does have some suggestions: 1. Financial transaction tax to favour long term investment. 2. Grant fewer parents upstream so there is more open access. 3. Limit what pharmaceutical companies can charge 4. Any government support being conditioned on actual investment and not share buy-back. 5. Tax big tech companies more since they benefited from government basic research. This is a thought-provoking book, with very good ideas. However, finance workers are certainly important: our insurance, pension funds, and sovereign funds all depend on those guys to help us grow our money. The stock market exists to encourage IPOs and thus innovation backed by VCs (since they can then make profits by investing in start ups). It is also very hard to determine the value of something if we cannot rely on its price: who will decide then? A committee? That would be communism... And some government services are really inefficient. Nonetheless I am very inspired by this book because it really challenges many of my assumptions about the economy.

  3. 5 out of 5

    Tony Philpin

    Mariana is a post Keynesian, hence relies on observations of actual economic behaviour rather than doctrine and illogical theoretical assumptions (as did Keynes in his writings) and some of this book follows Keynes' discussions in his General Theory. She debunks the classicists in a comparable fashion. It is refreshingly entertaining writing. The whole book is readable, and is a logical sequel to her previous 'entrepreneurial state', developing similar themes. The chapters on theory of value do n Mariana is a post Keynesian, hence relies on observations of actual economic behaviour rather than doctrine and illogical theoretical assumptions (as did Keynes in his writings) and some of this book follows Keynes' discussions in his General Theory. She debunks the classicists in a comparable fashion. It is refreshingly entertaining writing. The whole book is readable, and is a logical sequel to her previous 'entrepreneurial state', developing similar themes. The chapters on theory of value do not actually reach a defined conclusion and she does skirt the issue of how utilitarianism led to neoclassicism a little, but it is still powerful stuff. Her arguments are compelling - the financial sector is basically parasitic, and the reasoning is solid. 21stC capitalism tends to extract rather than create value. A little more on how externalities - especially environmental damage, carbon emissions and pollution - are written out of the value equation would have been welcome, given that climate change is basically an economic issue. She is canny in citing Marx and Smith, and extracts residual value from all the classicists after her critiques. If only my own economics lectures at UCL had been as considered and with an equivalent standard of critical assessment, I might have not abandoned the dismal science (she is an optimist) all those years ago.

  4. 5 out of 5

    Jeff Kaye

    This is a follow-up to the Entrepreneurial State and is a consideration of how the public sector should be shown to be adding economic value rather than being seen as a drain on the economy. This is done via an analysis of rent seekers in the 21st C like banks that have taken over from land owners in their rent-seeking capacity. It then reviews the concepts of the previous book - how government adds value to research and risk-taking to enable companies in the private sector to stand on their shou This is a follow-up to the Entrepreneurial State and is a consideration of how the public sector should be shown to be adding economic value rather than being seen as a drain on the economy. This is done via an analysis of rent seekers in the 21st C like banks that have taken over from land owners in their rent-seeking capacity. It then reviews the concepts of the previous book - how government adds value to research and risk-taking to enable companies in the private sector to stand on their shoulders and reap the financial benefits. It also assesses why education, roads and other core government provisions add real value that is not shown in GDP statistics. It also provides a good analysis on how the new monopolies in the virtual world like Facebook add no real value, should be charged by the consumer for the information provided and earns its money through advertising, which is non-valued adding. Its real value add is via the information provision. Overall, there is no question that government adds value and should reap some reward for it via royalties, profit shares etc. In my old industry of defence and aerospace, the US government did take a royalty on international sales where they had paid for R&D - this was a norm. But, governments seem to have lost the thread in their desire to placate private industry. Can this change before it is too late? We are already in a GDP overkill period where natural resources are in grave danger. We are close to robots taking many millions of jobs and where the consumer has seen wages held very low and is moving into low paid work. Not sure that MM has a method for evaluating all the new threads of economics within the focus on value but it is an important work that refocuses the economic mind so that government and private industry are seen not as competitors but, somehow, symbiotic.

  5. 5 out of 5

    John Edgar Mihelic

    Mazzucato is one of the most interesting economists working today. I say this because her project in the last two books focus on a ground-up redetermination of what is important in the economy. To someone like me, who is interested in the social generation and distribution of resources but who think that policy makers went the wrong way in recent years (especially before 2008, see Bernanke to Friedman: “Let me end my talk by abusing slightly my status as an official representative of the Federal Mazzucato is one of the most interesting economists working today. I say this because her project in the last two books focus on a ground-up redetermination of what is important in the economy. To someone like me, who is interested in the social generation and distribution of resources but who think that policy makers went the wrong way in recent years (especially before 2008, see Bernanke to Friedman: “Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again. “) this book is just catnip. So much catnip that I stayed up too late a couple of nights in a row reading it. Mazzucato, in this book, looks at where value was theoretically derived historically from the physiocrats to Smith through Marx and into the marginal revolution. She focuses the critique on the marginalists and the composition of current GDP about how it focus to much on the market – how what has a price has value and nothing else. For Mazzucato, this sidelines non-market institutions like the government which are long-term value creators but left out of market considerations because what they do doesn’t have a price. It is a compelling argument to look at how we analyze “the economy” in a different light.

  6. 4 out of 5

    Jesper Döpping

    Easy read with a strong argument for re-instating value as a key concern I bought this book because I read the entrepreneurial state. This book in my opinion in a very easy to understand way for non-economists argues that we have to return to a much more basic question - the question of value creation, what is it and what is it not? The book starts with a theory historical perspective that are incredible easy to understand on how value have been conceptualized. This theory perspective gives a cle Easy read with a strong argument for re-instating value as a key concern I bought this book because I read the entrepreneurial state. This book in my opinion in a very easy to understand way for non-economists argues that we have to return to a much more basic question - the question of value creation, what is it and what is it not? The book starts with a theory historical perspective that are incredible easy to understand on how value have been conceptualized. This theory perspective gives a clear guideline to the different perspectives and the development towards a subjective understanding of value and what problems that rises. In particular the consistent discussion of rent seeking or value extraction is important - even though it might for some readers at first glance will be seen as a finance and neoliberal ideology bashing, it works by closer consideration as a tool to positive start a discussion of what value creation really means. By going this way the author succeed in forcing us to reconsider our everyday concepts of the state, and in particular its role in creating long term value and prosperity. Inevitable it comes to question and ask questions of how to define and understand the value of the common good, growth, innovation and entrepreneurship. From a more organizational and sociological perspective she forces us to consider how we run private business, how we extract value from the business both in terms of distribution (top versus other stakeholders). It forces anyone working in business to think if we are just rent-seekers or we actually create some value for all stakeholders. I find this book very helpful to think about politics, economy, sociology and organizational science.

  7. 4 out of 5

    Mike O'Brien

    A must read! "While wealth is created through a collective effort, the massive imbalance in the distribution of the gains from economic growth has often been more the result of wealth extraction, whose potential scale globalization has greatly magnified... I will argue that the way the word ‘value’ is used in modern economics has made it easier for value-extracting activities to masquerade as value-creating activities. And in the process rents (unearned income) get confused with profits (earned in A must read! "While wealth is created through a collective effort, the massive imbalance in the distribution of the gains from economic growth has often been more the result of wealth extraction, whose potential scale globalization has greatly magnified... I will argue that the way the word ‘value’ is used in modern economics has made it easier for value-extracting activities to masquerade as value-creating activities. And in the process rents (unearned income) get confused with profits (earned income); inequality rises, and investment in the real economy falls. What’s more, if we cannot differentiate value creation from value extraction, it becomes nearly impossible to reward the former over the latter. If the goal is to produce growth that is more innovation-led (smart growth), more inclusive and more sustainable, we need a better understanding of value to steer us."

  8. 5 out of 5

    Romilly

    I fear that confirmation bias makes me a poor judge; the author articulates and explains what I have been feeling for years. She's a respected economist and writes accessibly. If you feel that something may be wrong with our rulers' views on the nature of value, read this book .

  9. 4 out of 5

    Jason Harrop

    The author does a good job of drawing attention to the evils of rent seeking behaviour. Parasites! Although I agree there is a role for government in encouraging innovation, the author overstates government's contribution. This claim is stated repeatedly, but never treated in any depth. The government invented the Internet? It would have been interesting to discuss the great man theory of invention. In asserting government should get a larger share of the spoils, she ignores its take via tax. In th The author does a good job of drawing attention to the evils of rent seeking behaviour. Parasites! Although I agree there is a role for government in encouraging innovation, the author overstates government's contribution. This claim is stated repeatedly, but never treated in any depth. The government invented the Internet? It would have been interesting to discuss the great man theory of invention. In asserting government should get a larger share of the spoils, she ignores its take via tax. In this way it gets a large share, and it certainly doesn't always share in the losses of failures. When one thinks of government, one thinks of inefficiency. Acknowledging and addressing this somehow would strengthen the argument that despite this, government can do things of value. I would have liked her to be more forceful in her recommendations regarding patents. As in, get rid of them! It would have been interesting to cover the value of open source. As an aside, there are parallels with the role of pricing in monopolies thinking which she might have drawn out. Overall, a bit repetitive and lacking in depth. But worth reading.

  10. 4 out of 5

    Marco

    The value of everything addresses a vital question in today's economics. Where does value come from? What is it? Who creates it? Who extracts it? Mazzucato does a great job at exploring the conversation on value through the centuries and arrives at today's economy, touching upon finance, innovation, banking, investing, and the role of the public sector in shaping the long-term direction of our economies beyond being mere referees of the game. This book is highly informative and contributes many The value of everything addresses a vital question in today's economics. Where does value come from? What is it? Who creates it? Who extracts it? Mazzucato does a great job at exploring the conversation on value through the centuries and arrives at today's economy, touching upon finance, innovation, banking, investing, and the role of the public sector in shaping the long-term direction of our economies beyond being mere referees of the game. This book is highly informative and contributes many insights to a vital conversation. What I most enjoyed the book is how thoroughly she addresses the history of economics and how different theories addressed "value" over the centuries. The chapters on Finance and Casino Capitalism are illuminating and a bit frightening as they clearly show how finance has increased its dominion over the 'real economy' over time without necessarily adding much value but most likely (in the author's view) extracting it from other productive sectors. Chapter 7, Extracting value through the innovation economy is another very interesting exploration on intellectual property, where does credit land for major innovations, and the ways in which certain innovative sectors of industry extract vs create value. I found the chapter really interesting and Mazzucato brings home some valid points on how much innovation actually stems from an entrepreneurial state that takes charge of investments while it is private actors who take home the benefits. On this I do have some observations / objections. For one thing, I would have *loved* to see more on the Silicon Valley economy, their business models, and particularly an exploration of how they are structured and where does accumulation vs value distribution occur. Among my questions: - Are companies in the silicon valley built on the premise of value extraction or value creation? - And how could we tell, since Mazzucato's concept is very insightful yet difficult to operationalize or quantify? - Are the so-called unicorn companies built on the necessity of increased wealth/ income inequality disparity between their CEOs and their workers? Chapter 8, Undervaluing the Public Sector, makes a solid case for how unfair the game is for the government: it has only downsides and picks up the blame, while it is most often ignored for the value it produces and it is businesses who take the praise for producing value in society. This is a fundamental asymmetry that Mazzucato elucidates very well. Later in the chapter, two extremes of a government intervention are presented. On one hand, the hands-off government leaves the game unsupervised, neglects to control whether there are rent-seekers and market manipulators, and the game collapses under a market failure. The other extreme, nicknamed by libertarians as government-failure, materializes when government intervenes too much in regulating and taking control, and due to its incompetence, ignorance, or corruption (or any combination of the three) lets the entire economic ship sink. Mazzucato makes no secret in her confidence in a government that is able to steer and nudge the economy and that takes responsibility for long-term visioning. The examples of market failures due to lack of regulations are all too evident to see, and the book makes a compelling case for a government that takes a more proactive stance. At the same time, by the virtue of being Italian myself as is Mazzucato, I have seen very often examples of governments getting too heavily involved in market mechanisms and bringing about inefficiencies, incompetence, and corruption. Government failures are real. One needs only read Luciano Gallino's Il Declino dell'Italia Industriale to see multiple examples of healthy industries that headed downhill the moment the political parties put their eyes and hands on them. It is important to point this out in my view, because while one can easily agree with Mazzucato's central thesis and see how a stronger government is needed to regulate against the excesses of today's disproportionate power of sectors such as finance, I am less confident that the solution could be as easy as simply more government. While the entrepreneurial state is vital in making early investments such as the early days of the internet and new discoveries in the pharmaceutical field, a few questions remain open: where do we get buy-in for a state that invests heavily, in the current climate of tight budgets and high debt/GDP ratio? what kind of vision would be needed to justify such heavier involvement and spending? All in all, a great book that I recommend to make sense of a crucial conversation on value in today's economy.

  11. 5 out of 5

    Ayman

    The Value of Everything This new book by economist Mariana Mazzucato is an interesting take on the fundamentals of Economics 101. I believe, Some elementary finance and economics knowledge is necessary to follow and appreciate this book, however, here is my simplified layman summary: The book starts with a short background on the concepts of production boundary which is the scope of economic activities that are deemed "productive" as developed by classical economists, David Ricardo who considered The Value of Everything This new book by economist Mariana Mazzucato is an interesting take on the fundamentals of Economics 101. I believe, Some elementary finance and economics knowledge is necessary to follow and appreciate this book, however, here is my simplified layman summary: The book starts with a short background on the concepts of production boundary which is the scope of economic activities that are deemed "productive" as developed by classical economists, David Ricardo who considered agriculture as the only productive activity, then, Adam Smith who added manufacturing and finally, Carl Marx who redefined productivity as the value created by labour which provided the theoretical framework for labour and socialist movements worldwide. Classical economics was soon swept away by the neoclassical marginal utility concept which redefined production boundary in modern day economics to include everything that fiches a price in the market. Assuming that the free market is the grand equalizer and evaluator of all economic activity, this is what your Econ 101 professor would have told you on day 1 of the course. However, there are problems with the neoclassical model that equates unproductive value extraction with productive value creation, leading to a world where most of the benefits of economic growth are extracted by wealthy shareholders and investors, leaving nothing to improve stagnating wages of the working class. Mazzucato identified a few areas where this is most visible: 1- The financial sector: Financial sector profits are added to the GDP, so increase in such profits translate into GDP growth, a concept that would have Adam Smith tumbling in his grave because the financial sector is only an enabler to the "real" economy, therefore, the significant growth of profits and salaries in the Financial sector are inefficiencies to reprimand rather than achievements to celebrate. I know this will anger many of my banking friends, but I am happy to debate it, so bring it on ! 2- Financialization of the manufacturing sector: Private Equity, short term profitability targets, share buy backs are levers that top management and shareholders of the real economy companies utilized to extract value out of productive businesses into their pockets instead of investing back in growing their businesses. Business history is full of those companies that were stripped to the bones by predatory ownership and management. 3- Patents and innovation: While innovation is key value addition to real economy, many companies use their innovation edge to extract high rent and no one does it more obscenely than pharmaceuticals. In a way, price based value model of new-classical economics is to blame for that, because drug prices are set based on their value compared to the alternative, which in most cases is life of prolonged suffering or even death. In relation to that alternative any price is not high enough, that's why you see new drugs selling at stratospheric prices, extracting value from the economy to the pockets of big pharma shareholders. Although, a big chunk of this money is used to fund new drugs, the high profits and high salaries in the pharma industry are an indication to the inefficiency of such cycle. In conclusion, Mazzucato is arguing for economists to redefine the production boundary to differentiate between rent extraction growth versus true value addition growth and for governments to set policies that can reverse some of those trends, for example, any company applying for government funding programs, should commit to certain re-investment targets or limiting dividend and share buyback activities. This, in my view is a better approach than progressive taxation on high earners, because it addresses the cause of the income inequality problem rather than treating its symptoms. A great book, although has some annoying repetitions.

  12. 4 out of 5

    Maurício Linhares

    How do we define value? Mariana goes through the multiple definitions of value and how we've tortured both the original economy texts and today's numbers to come up with today's reasoning about what a price is and where it comes from. The book also goes through how we ended up with the overly complex financial system we have today and how banks and their friends make use of this to keep the economy and governments hostage of their whims, specially after the removal of the limits that were placed How do we define value? Mariana goes through the multiple definitions of value and how we've tortured both the original economy texts and today's numbers to come up with today's reasoning about what a price is and where it comes from. The book also goes through how we ended up with the overly complex financial system we have today and how banks and their friends make use of this to keep the economy and governments hostage of their whims, specially after the removal of the limits that were placed on them after the previous financial crises. It also talks about how patents and copyrights are actually hurting the economy by creating the wrong incentives and producing payoffs only to businesses that are mostly performing rent seeking, moving value around, instead of investing and creating new value. And then there's government. The most important piece of the book is how the demonization of government created the environment we have today and how creative accounting and media produced the idea people have nowadays that government doesn't do anything useful when in fact it is behind most of the development we've seen in a way or another. Worse, how the whole privatization movement saddled the population with the turds and gave away the profit makers to private entities that were ready to profit from them. It is eye opening and a great read if you'd like to know more about the economy and the direction we're going today.

  13. 4 out of 5

    Kevin Y

    Simply put: the book does what the author says - start a debate and dialogue about the concept of economic value. It is a good review of many past economic debates but also bringing forward the inherent built in assumptions.

  14. 5 out of 5

    Theodore Kinni

    Our assumptions about what economic value is, how it is generated, and who generates it play a major role in determining the economic playing field we end up on, argues Mazzucato. Here she shows how today's assumptions give the few license to steal value generated by the many.

  15. 5 out of 5

    Ivank

    This book is incredibly dry

  16. 4 out of 5

    David Hallam

    Very readable (always a bonus for an Economics book) and very much on trend. As I was reading it I kept hearing news stories and discussions that pertained the same ideas.

  17. 4 out of 5

    Allan J

    A significant book Not always an easy read but well worth reading cover to cover. Now amazon demands another eight words, seven, eight.

  18. 4 out of 5

    Justin Wong

  19. 5 out of 5

    Krzysztof Szazawí

  20. 5 out of 5

    Christian

  21. 5 out of 5

    Ernst

  22. 5 out of 5

    Wiek Kleijne

  23. 5 out of 5

    Fred Zimny

  24. 4 out of 5

    Scoutaccount

  25. 5 out of 5

    Charles Bennett

  26. 5 out of 5

    Kim K

  27. 5 out of 5

    Hamza

  28. 4 out of 5

    Chris Jaccarini

  29. 4 out of 5

    Brian

  30. 4 out of 5

    Guy

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