Mariana Mazzucato, is there no beginning to her knowledge of economics?
It is, of course, becoming increasingly irritating to see Mariana Mazzucato being lauded for her stunning finding that the only reason we have nice things is because of government. Especially when one considers that this finding came from a research program funded by government. Biting the hand that feeds is really very terrible economics after all. The latest irritant is this, in her acceptance speech for an award:
The point is not to belittle the work of Jobs and his team, which was both essential and transformational. But we must be more balanced in the historiography of Apple and its founders, where not a word is mentioned of the collective effort behind Silicon Valley. The question is this: who benefits from such a narrow description of the wealth-creation process in the hi-tech sector today?
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If policymakers want to get serious about tackling inequality, they need to rethink not only areas such as the wealth tax that Thomas Piketty is calling for but the received wisdom on how to generate value and wealth creation in the first place. When we have a narrow theory of who creates value and wealth, we allow a greater share of that value to be captured by a small group of actors who call themselves wealth creators. This is our current predicament and the reason why progressive parties on both sides of the Atlantic are struggling to provide a clear story of what has gone wrong in recent decades and what to do about it.
She seems entirely unaware of the basic paper on this subject. Those "wealth creators", those "entrepreneurs", how much do they get from their innovations?
The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits. We then estimate the value of these profits for the non-farm business economy. We conclude that only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.
The answer is a little under 3% of the total value created by the innovations. Almost all of the rest ends up as consumer surplus being enjoyed by the great unwashed citizenry out there. Which is great, as it should be perhaps, the aim and point of this whole having an economy game is to make the average Smith and Jones as rich as they can possibly be without bursting with the pleasure of it all.
The complaint is that Professor Mazzucato seems to be entirely ignorant of all of this. Sure, Steve Jobs ended up with a pile of money that Scrooge McDuck would blush to surf down. But we don't actually care because Jobs ended up with a trivial amount of the value created. It is quite seriously being said that another 10% of the people in a developing country with a smartphone adds 0.5% to GDP growth (and no, not 0.5% of extant growth, an entire 0.5% of GDP more) in said developing economy. Whether Jobs ended up with $5 or $50 billion for sparking that amount of value creation is an entire irrelevance compared to that value creation.
And no, we don't insist that Jobs "earned it", nor "deserved it". It's a purely utilitarian calculation. If someone who innovates (for Mazzucato would insist Apple and Jobs did not "invent") something that adds entire percentage points of growth to the developing economies of the world then gets to have hot and cold running private jets for the rest of his life, well, that's just fine. Because we think that would be a pretty good incentive for the next person who is going to make the poor of the world richer to buckle down and get on with it.
The first point of economics is that incentives matter. So it would appear that there is no beginning to Professor Mazzucato's understanding of the subject.
Silicon Ovaries
It's only apt that Silicon Valley's new plan to tackle gender imbalance involves cutting-edge technology, a dose of futurism and flash-freezing things in sub-zero temperatures:
Apple and Facebook are offering to freeze eggs for female employees in an effort to attract more women on to their staff, according to US media reports.
Apple, the world’s most valuable brand, said it would offer the perk to US-based staff from January. “We want to empower women at Apple to do the best work of their lives as they care for loved ones and raise their families,” the company said in a statement to ABC News. “We continue to expand our benefits for women, with a new extended maternity leave policy, along with cryopreservation and egg storage as part of our extensive support for infertility treatments.”
Facebook offers up to $20,000 (£13,000) for egg freezing for female employees. The company also offers adoption and surrogacy assistance and “a host of other fertility services for male and female employees”, the company said. (The Guardian)
Even though the schemes are unlikely to have huge take up, it's an idea with a commendable sentiment behind it. The tech world is notorious for its lack of female representation and lingering sexism, and women make up only 30% of Apple and Facebook's workforce. Their support of 'cryopreservation' will benefit both the firms and their employees.
It's damn inconvenient that the years in which women are able to best forge a career are often also those of peak fertility. This not only creates huge opportunity costs when selecting a career/family/income combination, but restricts the pool of talent available to employees. Being able to keep young eggs on ice (and being aided financially to do so) expands the range of work/child options women have, and makes some of the tradeoffs a little less binary and severe.
There are a number of ways we try to reduce the 'costs' of raising a child, from statutory maternity pay and free childcare to paternity leave and work crèche schemes. All of these actions shift part of the cost of child-rearing from one figure (usually the mother) to another actor, such as the state, an employer or a partner. It's usually a good thing that these costs are shared out amongst others, but it would be even better if the costs were simply reduced. Something like fertility preservation does that— it uses technology to augment the options available to women and reduces the opportunity cost of pursuing a career— without the need for state intervention, relying on a partner, or for social behaviours and cultural shifts to occur. If a woman voluntarily choses to use her 29-year old self's eggs at the age of 39, everybody wins.
Of course, Apple and Facebook have chosen to foot the bill here, and no firm should be forced to provide such procedures for their employees. But these leading companies clearly think that $20k is a small price to pay to attract and retain top female talent. Certainly, a firm which signals that it is prepared to help employees overcome obstacles to their life choices (amongst many other generous perks) will be a draw for many, and can help women to achieve the success they've always been capable of.
Naturally, there will be those who recoil in horror at the idea of Facebook laying a frosty, calculating hand on their employees' ovaries. Some consider it a neanderthalic and clumsy way of improving women's standing in the workplace, whilst others worry that supporting such technology gives a strong and unpleasant message to women that forging a career whilst raising a family is a faux pas.
Cryopreservation's hardly going to become a mainstream phenomenon any time soon, and for now is only really an option for a small number of women. Were employers to start actively encouraging the treatment or making employment decisions based upon it, then we would need to have a serious conversation about the way in which it was used. Egg freezing's also in no way a panacea. If Silicon Valley really wants to boost the women in its ranks, there's plenty of other things which they can do, like offer more schemes for current parents, and foster a more female-friendly everyday culture.
Ultimately, egg storage is another medical innovation which — like the pill— affords women a greater range of life choices. And far from establishing expectations of what a female employee should do with her womb, Facebook and Apple's support of the proceedure indicates a commitment to heterogeneity and flexibility. It is smart of them to support such a range of lifestyle and career choices, and with luck initiatives like these will help to enrich the lives and bolster the careers of the women who've chosen to work there.