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time. These are necessary steps if an idea is to achieve success as an innovation benefiting consumers. It is important to understand which steps were missed when such a success failed to materialize and whether this “failure” was a good or a bad thing, but the government is seldom better placed to do so than private actors. To appreciate these points, one should recognize that a well-functioning CIB facilitates the joint mitigation of two error types (Eliasson, 2000).

The first error type is that of rejecting winners. Such missed opportunities often result from excessive pessimism on the part of entrepreneurs or other actors, and it is, we contend, from the fear of this type of error that the mission-oriented innovation argument draws much of its appeal. The other error type is perhaps more subtle, relating as it does to spurious discoveries that occur when an individual has partially or completely misread the data, thereby allowing failed projects to survive for too long. Market forces tend to systematically eliminate such errors as “market experience reveals the unfeasibility of some (hitherto sought after) courses of action and the (hitherto unnoticed) profitability of other courses of action” (Kirzner, 1997, p. 71). The two error types are linked and omnipresent. For example, if “picking the willing” entails accepting a project that one “should” reject, it becomes impossible to put the resources that go into that project to alternative use. Collaborations in CIBs are essential for identifying and correcting such errors early and at the lowest cost possible. Having the government pick the willing/winners hampers this crucial function, and because CIB actors are interconnected, the consequences will be cascading. Thus, even the selection of a relatively small number of winners may create an imbalance throughout the CIB (or system of CIBs), with unfortunate consequences for the long-term ability to select those innovations that benefit consumers the most. This can be appreciated by considering government grants intended to stimulate innovation and growth. Swedish evidence suggests that “highly productive entrepreneurs abstain from seeking grants, moderately productive firms allocate a share of their effort to grant seeking, and low-productivity firms allocate most resources to seeking grants,” but that receiving a grant negatively affects firm productivity and that several grants do so even more (Gustafsson et al., 2020). Still, mission-driven projects often have an end goal that cannot be directly measured in terms of profit and loss (or productivity), meaning the market-selection mechanism for having the winners emerge, bottom up, through the CIB may be a poor (or at least inadequate) guide. An urgent mission may require selecting winners through some other mechanism. Mazzucato (2018, p. 806) states that “[a] missionoriented approach uses specific challenges to stimulate innovation across sectors.” Possibly, she here refers to innovation prizes of the kind that were common in the eighteenth and nineteenth centuries, yielding substantial progress in such varied fields as navigation, air voyage, and food preservation (Abramowicz, 2003). Currently, they are used by private organizations like the XPRIZE Foundation and, incidentally, by DARPA. The competitions stipulate a clear goal to be achieved— say, the development of a climate-neutral technology for transportation—but can be formulated in an open-ended way technology-wise. Furthermore, innovation prizes Collaborative Innovation Blocs and Mission-Oriented Innovation Policy: An. . .

355are exempt from the welfare loss that comes from the monopoly rents associated with patents (Adler, 2011) and do not require an extensive bureaucracy that assesses and evaluates proposals and credentials ex ante. The use of such prizes to select winners would combine a minimal risk to taxpayers with innovation encouragement that does not commit to specific firms or a particular technology, hence reducing the risk of cascading errors in the CIB (Elert et al., 2019).

4.2

From Fixing Markets to Actively Co-Shaping them

“Missions do not fix existing markets but create new markets,” Mazzucato (2018, p. 806) states, offering examples from the “three classic mission-oriented agencies” NASA, DARPA, and NIH to exemplify the point that the “organizations are not about fixing existing markets but creating new landscapes.” This argument (developed further in Mazzucato, 2016) is indeed ambitious. At the same time, CIB activity rarely, if ever, takes place in a free market devoid of political influence. In fact, central segments of many advanced economies are heavily regulated or even monopolized by the public sector, especially the provision of private good social services such as health care, care of childcare and the elderly, and education (Andersen, 2008; Henrekson & Johansson, 2009). Some of these markets may be thought of as both created and maintained by the government.

Considering how this involvement affects CIBs is useful. For example, a government monopolizing both production and financing (or only production) will severely curtail the role of CIB actors, meaning a sufficient variety of actors with requisite skills and skin in the game will fail to emerge. In practice, it is only under free private provision of goods and services and private financing that incentives for all CIB actors can be harmonized. Moreover, even when private production is allowed but the government remains the sole buyer of goods and services, CIB development will suffer because the government qua monopsonist hampers the crucial function of consumers in the CIB. They are, after all, the ultimate arbiters of an innovation’s success—those whose preferences (rather than those of the entrepreneurs) essentially govern all CIB activity.

The supplanting of this broad and diverse category by the state will likely have profound effects. After all, the consumer role is far from passive; rather, a nation’s wealth rests crucially on its “venturesome consumption”—the willingness and ability of intermediate producers and individual consumers to take a chance on