2018 Leontief Prize

2018 Leontief Prize
Awarded to Mariana Mazzucato and Branko Milanovic

Dr. Mariana Mazzucato, Chair in the Economics of Innovation and Public Value and Director of the Institute for Innovation and Public Purpose at University College London (UCL), emphasized the need to change the discourse around how public value is created, nurtured, and evaluated. She presented a new perspective on the entrepreneurial role of the state in creating transformational growth in markets.

Dr. Mazzucato addressed the perception that the public sector should focus primarily on setting the “rules of the game” and fixing market failures. She argued that this traditional economic framework is problematic, characterizing the public sector as being passive by only responding to market problems and fixing negative externalities.

As an alternative, Dr. Mazzucato proposed a radically different lens, viewing the public sector not as market-fixing but as market co-shaping and market co-creating. This is expressed in her ROAR framework based on four guiding questions:

1. Routes and Directions: How to use policy to set new direction of change and enable bottom up experimentation?
2. Organizations: How to build explorative public sector organizations that learn-by-doing, and welcome trial and error?
3. Assessment: How to evaluate public sector market creating investments?
4. Risks and Rewards: How to form new deals between public and private sectors, socializing both risks and rewards?

Dr. Mazzucato concluded, “it’s not enough just to talk about the entrepreneurial state” and emphasized the need for “new practice-based ideas that policymakers can bring to the table” as well as, “new ideas, stories, narratives, and vocabularies about wealth creation.”

Dr. Branko Milanovic, Visiting Presidential Professor at Graduate Center City University of New York and Senior Scholar at the Stone Center for Socio-economic Inequality, discussed his work measuring global income inequality. He outlined the major changes in economic geography and inequality that occurred during the Industrial Revolution. During this time, the West became rich, leading to greater inequality between nations and individuals. Now, countries left out during the Industrial Revolution, such as China, are developing rapidly, and in the process driving new changes in global inequality. In the case of China, many households are moving toward the global median income, posing political considerations for the role of the West and the future of democracy.

Dr. Milanovic presented his renowned “elephant graph” to illustrate the positive and negative income effects of globalization on different groups. According to Milanovic, there were large increases in income for many Asian countries and the global top 1%, while the world’s poorest as well as the lower and middle classes in Western countries have seen limited income growth.

Dr. Milanovic concluded his lecture by addressing various political implications of global income inequality, including income distribution policy options, the power of the emerging global middle class, and the political fallout from the stagnation of middle income classes in Western nations.