When it comes to the role of government in industrial policy, is it sufficient merely to correct market failures? This question was raised by Professor Mariana Mazzucato of University College London.
In her book The Entrepreneurial State, Professor Mazzucato challenges the conventional view that the state lags behind the private sector in its capacity for innovation. She argues that, historically, the state has often taken on risk before the private sector, shaping and creating new markets.
One example is the iPhone, developed by U.S. technology giant Apple. This smartphone incorporates technologies such as the internet, the Global Positioning System (GPS), and touchscreen displays. Although a private company integrated these technologies into the iPhone, their development was supported by publicly funded research and development programs and government procurement, including support from the U.S. Department of Defense and the National Science Foundation.
Given that governments often take on substantial risks in promoting innovation while the benefits accrue primarily to the private sector, Mazzucato boldly argues that the state should receive returns commensurate with the risks it bears, through equity ownership, intellectual property rights, or other mechanisms.
Mazzucato proposes a “mission-oriented” approach to industrial policy as a way to shape and create markets in the public interest. Here, a “mission” sets a broad direction for societal transformation, rather than a narrow objective such as protecting a particular industry or company selected by the state.
Achieving plastic-free oceans is one example of such a mission. The public and private sectors are expected to collaborate on a diverse range of projects to address economic and societal challenges.
For a mission-oriented approach to address these challenges effectively, the public sector must develop the organizational capacity needed to design appropriate policies. Policy evaluation may also need to take long-term social benefits into account rather than focus solely on short-term economic outcomes.
Regarding the mission-oriented approach, critics question whether governments can reliably identify appropriate missions and point to a lack of empirical evidence of the approach’s effectiveness. Nevertheless, this approach raises a fundamental question about what role industrial policy should play and has influenced policymaking in Japan and other countries.
>> Original text in Japanese
* Translated by RIETI.
August 10, 2026 - Published in Nihon Keizai Shimbun's " Introduction to Economics—New Trend in Industrial Policy "
