What is value? Seems like a simple question, but in actuality, it’s anything but. Even predating Adam Smith, various economic thinkers in history have grappled with the question in one form or another. The latest such thinker is Mariana Mazzucato in her book The Value of Everything.
Initial Summary
The Value of Everything seeks to shake up the idea of what constitutes value in the modern economy. Mazzucato herself said so, writing “My aim for the book is to stir a new debate, putting value back at the centre of economic reasoning.” (Page 279) To achieve this aim, Mazzucato created a book primarily divided into three parts.
Chapters 1 through 3 give a brief history of value theory in economic thinking. Several well-known economic thinkers, including the almighty Adam Smith and Karl Marx, tried to place something resembling objective measurements on the subject. Which parts of the economy were “productive” and which were “unproductive?” However, that all changed with the rise of Marginalism, which flipped the concept of value on its head. Suddenly, the concept of value went from being an objective measure to a subjective measure. Just because you wouldn’t pay sixty dollars for an opera ticket doesn’t mean it has no value. I, a pretentious art critic, might find that price to be a bargain and thus it means the ticket has value. In small instances like this, the Marginal might be fine, but what happens when everyone behaves like this? Then, the problem becomes clear. As Mazzucato put it, “price has become the indicator of value: as long as a good is bought and sold in the market, it must have value. So rather than a theory of value determining price, it is the theory of price that determines value.” (271)
This leads us to Chapters 4 through 6, covering the rise of finance in the economy and the pernicious applications of this “non-theory” theory of value. Mazzucato is, quite rightly, unimpressed with the creeping role of finance, which if you’ll recall nearly wrecked the global economy in 2008. This middle section of the book critiques the idea that finance is somehow creating value, ultimately concluding that the way finance operates is detrimental to the economy. The industry’s focus on short-term gains and maximising shareholder returns, among other things, are extremely problematic when applied to other sectors of the economy like healthcare and education which don’t naturally operate in the same way.
Finally, Chapters 7 through 9 look at the modern economy’s facets through a revamped concept of value. Most impressive is Chapter 8, which talks about the criminally underrated role of government investment and public sector projects in creating valuable entities in the economy. These chapters are familiar territory for Mazzucato, whose 2013 book The Entrepreneurial State made the case that private sector actors were overrated when it came to innovative ideas, as they drew on ideas that came from years or decades of public sector investment.
Mazzucato’s conclusion is clear: without a clear idea of what’s valuable and what isn’t, the economy will continue to be filled with a few winners and plenty of needless losers. A new idea of value is needed and needed now.
Elliott’s Opinion.
Upside, You Need to Know About This
If you made it through my summary or read the title, you might have picked up on what I like and don’t like about this book already. The positives should be quite apparent: Mazzucato’s idea is badly needed in a world where the price of stuff seems as connected to reality as Pink Floyd on their fifth acid trip. Why in the name of Christ does a first-class ticket on British Airways cost $10,000 Orlando to London? It’s not like that’s the flat price either. Depending on what time of year I’m travelling or hell even what day of the week it is, the amount of money going out of my wallet can be 50% more than that.
In this context, learning about the so-called Marginal Theory of Value (if it can even be dignified with such a description) was incredibly valuable (pun maybe intended). For that reason alone, I’d recommend a peruse of this book. Once you learn about this concept however minimally, you’ll start to see its applications everywhere and maybe how to avoid suffering as a consequence.
Another positive of this book is the extension of The Entrepreneurial State in Chapter 8, a book that I recommend to everybody, now even more so in an era where everyone thinks their government is composed of dopes, morons, and other ne’er-do-wells. Any work that builds upon The Entrepreneurial State needs to exist. That book and Michael Lewis’s The Fifth Risk (also recommended) comprehensively demonstrate that the average person has no idea what their government gets up to and they neglect it at their peril.
Downsides, What Do You Want To Be When You Grow Up?
For all the upsides of this book, I do have a few criticisms of it because I believe they hold the book back from having a more positive effect on readers. Books read by the right people in the right places can change the world (looking at you Gutenberg Bible and The Guns of August). I believe Mazzucato’s ideas should be treated in that way.
Here’s the kicker: notice the division of topics between the chapters. The first third of the book talks about the history of value, the middle third the negative role of finance and the final third a broader discussion of innovation via updated ideas from her last book. In other words, this book has no idea what it wants to be when it grows up because none of those thirds are sufficient enough to carry a book by themselves. The history of value is far too nebulous a topic to revolve a whole non-fiction book around, which dilutes the power of second and third sections of the book. Criticising finance and examining innovation could plausibly be their own books, but since these sections are sharing space with the first section, no topic feels like it received enough coverage. As a result, the title, The Value of Everything doesn’t really capture the essence of the book.
Another gripe I have is more personal, but no less important. Namely, there is an unspoken assumption running throughout the text that “if only people see the information I have, then they will see the light”. Mazzucato nearly says so on Page 268 when she writes “Once the story telling about value creation is corrected, changes can embolden private institutions as well as their public partners”. The prefix of that sentence is the tell at the poker table: “Once the story telling…is corrected…” This assumption, which exists in plenty of books besides this one, annoys me because it removes the idea that reasonable minds can disagree upon reviewing evidence.
If it were as simple as getting more information for people to see the light, then Steven Pinker’s latest book, Rationality, wouldn’t need to exist. That book runs through cognitive mechanisms like motivated reasoning which people employ to close their eyes and shut their ears to things they don’t want to be true. In fact, among the studies cited in Rationality is a paper by the scholar Daniel Kahan showing that opinions which reject the very best scientific evidence are not correlated to scientific literacy but to political affiliation. Climate change sceptics know the climate literature but reject it while climate change proponents say its a problem while thinking climate change is about toxic waste dumps.
In essence, Mazzucato makes the same mistake Kahan uncovered: plenty of smart people will know her ideas but reject them anyway; it’s not a failure of education but identity. Therefore, her goal of ‘starting a debate’ about value is in trouble, which is a shame because the idea is so important.
Conclusion
The Value of Everything is a book I would recommend to people for perusing. If you’ve never read a book on economics, this is so NOT the place to start. Few stories, lots of theories and abstract subject matter make it a slow-burner.
Overall, this book should be read in a quiet airport lounge and not on a noisy plane.