Mariana Mazzucato’s ideas on the value of everything are of no value.

Near the start of her book “The Value of Everything” she tries to define value. In a passage which is highlighted and which is thus presumably supposed to be of central significance, she says:

“By ‘value creation’ I mean the ways in which different types of resources (human, physical and intangible) are established and interact to produce new goods and services.”

So she isn't using the word “value” in the normal way, i.e. to refer to the worth of goods and services (i.e. what the customer is prepared to pay for goods and services). Instead, “value” refers to a process bringing about innovations and inventions.

But the above sentence is immediately followed by this sentence (also highlighted): “By ‘value extraction’ I mean activities focused on moving around existing resources and outputs, and gaining disproportionately from the ensuing trade.”

But that second sentence uses the word “value” in something much nearer the conventional meaning of the word. I.e. it refers to coming by money in an unacceptable way: a monopoly or cartel which exploits its monopoly or cartel powers to make excessive profits is presumably an example.

If you’re starting to get the impression that her book is a car crash, then be warned: it gets worse.

Shortly after the above highlighted passage, there is another highlighted passage, as follows:

“I use ‘value’ in terms of the ‘process’ by which wealth is created – it is a flow. This flow of course results in actual things, whether tangible (a loaf of bread) or intangible (new knowledge). ‘Wealth’ instead is regarded as a cumulative stock of the value already created.”

Now wait a moment. In that second highlighted passage, she appears to be saying that “value” is the wealth production process (e.g. making steel, growing food, etc). Well that’s a lot different to the above “innovation and invention” meaning of the word referred to above!!

A page or two later she says, “If bankers, estate agents and bookmakers claim to create value rather than extract it, mainstream economics offers no basis on which to challenge them, even though the public might view their claims with scepticism. Who can gainsay Lloyd Blankfein when he declares that Goldman Sachs employees are among the most productive in the world? Or when pharmaceutical companies argue that the exorbitantly high price of one of their drugs is due to the value it produces?”

Well clearly having a go at bankers and estate agents will go down well with the more simple minded section of the political left. But on the more serious question as to whether “mainstream economics” is in capable of challenging the claim by bankers, estate agents and others that their activities are worthless, that is just plain nonsense.

Introductory economics text books make it perfectly clear that while the free market price of something is one way of valuing stuff, that method of valuation is clearly a long way from being flawless. The example often given in economics text books is the “nurse and prostitute” example. Some members of the latter profession doubtless get paid more than the former, but it’s blindingly obvious that claiming prostitutes are worth more than nurses is a very dubious claim.

To summarise so far, the opening pages of Mazzucato’s book are nonsense, so I can’t be bothered making much of an effort to get to grips with the rest of the book. But she has nothing to worry about on that score: in economics and some other subjects, as long as you can spew out a string of important, technical sounding terms, you’ll go far. And if you press lefties’ emotional pleasure buttons, which Mazzucato does very well, you’ll go even further.