How to build a market shaping state

Pop Research Robot Ep. 8

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An AI-generated, podcast-style, audio overview of "Market-Shaping States: A new theory of public sector capacities and capabilities," by Mariana Mazzucato, Professor in the Economics of Innovation and Public Value, University College London, and Founding Director of the UCL Institute for Innovation and Public Purpose (IIPP), and Rainer Kattel, Deputy Director and Professor of Innovation and Public Governance, IIPP.

From the paper's abstract:

This (paper) advances a market-shaping theory of the public sector to address one of the most persistent tensions in public administration: how governments can be both stable and agile, while also steering complex socio-technical transformations. We argue that prevailing approaches—centred on market failure correction, efficiency, and managerial reform remain insufficient for guiding transitions in areas such as climate, care, digital infrastructure, and industrial renewal.

Instead, we conceptualise the state as a proactive shaper of markets and co-creator of public value. We develop a three-layered framework of public sector capacities and capabilities that distinguishes among (1) structural capacities that enable governments to set and sustain direction; (2) organisational routines that translate direction into coordinated practice; and (3) dynamic capabilities that allow governments to experiment, learn, and reconfigure strategies under uncertainty. We show that public value emerges through the interaction of structural, routine, and dynamic elements, rather than any single attribute. This perspective reframes the state as an institutional system that is capable of shaping futures, not merely responding to failures.

Pop Research Robot is produced by the Shared-Use Mobility Center and the Global Network for Popular Transportation.