Note — Nov 04, 2018

Mariana Mazzucato on GDP, Price, & Value

Seen in → No.55

I’ve already mentioned her books a couple of times but it’s definitely a topic worth revisiting with these two interviews (quite a bit of overlap but both are good reads). This conversation is of vital importance for economies in general, for inequality, but especially when attached to climate change. We clearly don’t value nature, our health, and our children’s future enough. As much as I’d like humanity to fix things for moral reasons, if we can reevaluate and realign how we value things, especially in an economic discourse like Mazzucato does, we have a much better chance of fixing things.

Valuing the World, with Mariana Mazzucato

But the really basic problem with GDP is that by not making value judgements, we confuse rents with profits. If we don’t know the difference between value creation and value extraction activities—the kind that are charging prices or earning fees, and hence are included in GDP—we risk passing off anything included in GDP as value creation. […]

First of all, I believe the left has really lost its way in focusing too much on redistribution, and not enough on its own theory of value and of who the wealth creators are. […]

What really matters in both the public and private sectors is internal governance. Precisely because the private sector is respected as a value creator, questions about how to create value, be innovative, and restructure internally so you can take risks long-term are debated more.

Why We Need a New Way to Measure Economic Performance

I have to say that the highlight below gave me cold sweats.

We have an overly financialized business sector that is increasingly using profits not to fund actual activities like production, research and development, training for workers, but just purchasing back their own shares to boost stock prices and stock options, and — surprise, surprise — executive pay. […]

We might not want to comment so explicitly on that, but imagine a financial crisis with the level of fear that has been instilled in people in terms of this lack of solidarity between human beings that we’re seeing. […]

So, value in the economy is absolutely, collectively co-created. Instead, this whole notion of maximizing shareholder value ends up rewarding a very narrow group of people in the economy. […]

The salaries of teachers go into GDP, but the value produced by high-quality public education doesn’t.