No to the “Common Good” Economy

The Common Good Economy: How to Make Capitalism Work for Us All, by Mariana Mazzucato (Basic Venture, 352 pp., $32)

Expanded state intervention in the world’s developed economies has been one of the most important economic stories of the past decade. Whether it’s neomercantilism’s resurgence in America or the welfare state’s relentless growth in Western Europe, we are far removed from the 1980s and 1990s, when market liberalization seemed triumphant.

Championing neo-interventionism, figures on both Left and Right have often invoked a notion of “the common good.” University College London economist Mariana Mazzucato makes the identification explicit in the title of her new book, The Common Good Economy: How to Make Capitalism Work for Us All. Perhaps the world’s leading exponent of the aggressive use of industrial policy, as set out in books such as The Entrepreneurial State (2011), Mazzucato believes that we should reorient economic policy, and economics itself, around a goal of achieving the common good.

As Mazzucato sees it, economic policy should focus on the creation of what she calls “collective value”—an idea, first developed in her earlier book, The Value of Everything (2018), that would supplement, if not replace, many emphases associated with market liberalism. These include liberty, free association, competitiveness, bottom-up innovation, private property rights, and the rule of law.

To realize this goal, Mazzucato advocates shifting away from the claim, common to most free-market economists, that the state exists to fill in “gaps” or furnish “public goods” that markets cannot provide under their own volition. From Mazzucato’s perspective, the state should become the central actor in economic life.

The way to actualize this, in her view, is through a conception of the common good that associates what is “common” with state-managed collective action. One need only read the table of contents to see how her proposed policies would use state power to direct economic activity toward realizing “public value.”

This neo-interventionist agenda is not limited to national governments. Mazzucato considers it essential not only to redesign but also to empower global institutions such as the World Bank to manage areas of life ranging from the distribution of water resources to finance on a planetary scale. Though she acknowledges many of these institutions’ well-established failures and the need for some decentralization, she nevertheless wants to endow them with authority and to ground legitimacy for such power in her notion of the common good.

Mazzucato’s account of how the idea of the common good developed is revealing. Beginning with Aristotle and working her way to contemporary thinkers ranging from John Rawls and Michael Sandel to Thomas Aquinas and Alasdair MacIntyre, she offers an abbreviated and, in some places, incomplete account of various figures’ understanding of the concept.

For example, she omits to mention that Aquinas’s theory of the common good underscores important limitations on state power, precisely because of the significance that Aquinas accords to individual free choice if people are to become moral.

Likewise, her description of Adam Smith’s position on these matters is problematic. She maintains that Smith believed “a good economy must be one that inspires virtue from our moral judgments, and empathy from the capacity to understand and share the feeling of others.” That claim is not to be found, however, in the corpus of Smith’s writings. The Theory of Moral Sentiments outlines three sets of virtues (commercial, classical, and those of benevolence) that Smith sees as essential for leading a good life. But he does not say that the economy must inspire virtue or empathy.

Reading The Wealth of Nations and The Theory of Moral Sentiments together makes clear that Smith thought that economic life should be embedded within a commercial society in which these virtues are taken seriously. That’s quite different from saying that economic activity should be driven by a desire to motivate people to develop certain moral habits. People often become more prudent, for instance, after they start a business; but they don’t launch businesses in order to become more prudent.

In short, Mazzucato doesn’t make the crucial distinction between the object of someone’s action and the unintended side effects of that same action—a difference that Smith himself understood well when he explained how millions of individuals pursuing their self-interest unintentionally bring about greater prosperity for others, a benefit of which they will likely never be aware, let alone feel empathy or gratitude for.

Even more curious is Mazzucato’s contention that “what counts as ‘good,’ and how this translates into economics, should be determined collectively.” The substance of what is good surely cannot be left up to collective determination. From the late nineteenth century until the end of World War II, for example, many Western societies collectively determined that eugenics was scientifically sound and morally good. In other twentieth-century settings, some governments determined the good to be whatever promoted the interests of a specific race or class. In short, if the common good is simply what a temporary majority of people or a specific regime wants it to be, this is just rule of the strongest at any one point in time.

Equally revealing is who Mazzucato supposes should be making these collective decisions about the economy. The responsibility for creating a world economy guided by what she calls her five design principles—purpose and directionality; co-creation and participation; collective learning and knowledge sharing; access for all and reward sharing; and transparency and accountability—lies, from Mazzucato’s standpoint, primarily with governments, NGOs, and international institutions.

This suggests a neo-Keynesian, top-down vision of economic life. Mazzucato also insists that this new economic order “demands creative bureaucracies and new dynamic capabilities within the public sector.”

“Bureaucracies” and “the public sector” don’t come to most people’s minds as synonymous with “creative” and “dynamic.” The telos of bureaucracy is to accentuate stability and predictability by injecting more standardization into life through various checks and controls on people’s activities. Many bureaucrats consequently elevate restraint over innovation and are often disinclined to take risks—at least, risks for which they might be held accountable.

Mazzucato’s common-good economy constitutes a distinctly social-democratic conception, on a global scale. Such economies are visibly imploding across the world in the form of out-of-control entitlement spending, low growth, net-zero mania, the bureaucratization of everyday life, the growing number of public-sector workers, and, in Europe’s case, weak levels of innovation that recent investments in industrial policy have not overcome.

None of these conditions is suggestive of a flourishing society. A global economy directed under Mazzucato’s social-democratic conception of the common good would universalize the deep problems enveloping many European nations, and even some parts of the United States. We should reject her proposed common-good economy.