86and ultimately to spread knowledge, because they are no longer as free to decide the direction of their efforts. It follows that a main problem with top-down policies is that this category of activity crowds out bottom-up solutions. Crowding out can happen either through higher taxes, more regulations, or direct competition. It can also happen since top-down policies by construction alter the profitability of firms in different sectors, as well as of firms that employ unequally preferred means toward similar ends. Even if you are the most innovative manufacturer of a product, you will face problems if the state chooses to back a competing technology. Even if you develop the best technology to produce renewable energy, the state may already have supported a competing technology and pushed it across the Valley of Death, to the point at which it is just too cheap relative to your own.

What then seems to be the key characteristic of the entrepreneurial state narrative, other than sheer ambition, is that it moves more responsibilities over to the state in terms of picking the direction of innovative activity. What is not currently discussed very much is exactly what to do if a mission, say, to reduce greenhouse gas emissions by some number, appears unfulfilled. Exactly which tools should the state have at its disposal to make a mission work, particularly if it appears to be failing? Should state bureaucrats be able to close firms that use carbon-emitting technologies? Should we be able to invade countries that counteract our missions? These are extreme cases in point, indeed, but not really knowing when to stop is an inherent problem with top-down policy. So are slippery regulation slopes; to make past efforts work, we need just one more tariff, one more regulation, or one last big-push subsidy. These questions raise a related problem: We seem to have absolutely no tools for evaluating these kinds of policy bundles, and in particular their effects on crowding out alternative technologies.

3.2

The Evaluation of a Mission

That mission-oriented innovation policy must be evaluated is uncontroversial. Nelson (2011, p. 684) noted that “one cannot learn from experiments if one does not have ability to identify, control, and replicate effective practice.” At present, there does not appear to exist a solution to this problem.

87Innovation Without Entrepreneurship: The Pipe Dream of Mission-Oriented. . .

One source of several problems with state entrepreneurship is that a state departs from issues that it thinks need solving, whereas entrepreneurs in the innovation machine generally depart from issues they think they can solve. The former issues are subject to substantially more uncertainty. Most entrepreneurs are ultimately forced to be realistic, at least in terms of large investments. When they have attempted to solve a problem for too long, they run out of investors. When they fail at solving actual problems, or when they succeed at solving immaterial problems, they are broken by markets. With state entrepreneurship, there are no such mechanisms. Taxpayers are not investors because they do not have equity. They do not know what is going on and even if they did, collective action problems would almost invariably stop them from showing up outside the board room. To the extent that there is a market, and often there will not be, a loss does not really mean anything if the politicians choose to remain committed to the enterprise. In democratic states, state entrepreneurship is venture without meaningful risk. These issues clearly call for other mechanisms to evaluate the progress of state entrepreneurship and its missions. Mazzucato (2016, p. 141) calls for missions to be “concrete enough to translate into specific problems to solve, so that progress toward the mission can be evaluated on a continual basis.” It is not controversial to say that such evaluation methods are still missing, and that is even if we disregard opportunity cost. Is there any reason to be hopeful that credible evaluation methods may emerge? To begin with, it is of course correct that missions must at the very least be concrete; they cannot simply consist of making the world better. But even in the case of something concrete, like cutting carbon emissions by 50% in ten years, a myriad of problems remains to be dealt with. Even if this is a national target, for an accurate evaluation, we would need to know the direct effect of the policy, the indirect effects of the policy, including opportunity costs imposed on seemingly unrelated sectors, and whether the policy was achieved or not achieved through acceptable means. The latter point is important because the state’s powers are so far-reaching. Simply regulating all carbon-heavy firms out of business would not seem like success to most people, although it could certainly achieve the goal.

Taken together, these points can be summarized to mean that it is not enough for the goal to be concrete and measurable. The indirect outcomes must be clear and quantifiable as well. And even when they are, there can be no one and nothing else to blame for failure. In the end, state entrepreneurs are often not accountable to anyone, whereas the Apollo and Manhattan projects, for example, were notable exceptions since the goals were perfectly defined and there were formidable competitors. Even when someone is accountable, one of the main tenets in the mission-oriented innovation literature is that we should be prepared for the state to fail in these high-risk and large-scale endeavors. Indeed, the state should experiment, and we should often expect failure, although to what extent is not clear. It seems as an entity, the entrepreneurial state cannot fail. Whatever we are to call this process, it is not entrepreneurship.

88J. P. Larsson

External Validity and Scalability: The Problem

with Arguing from Anecdote

I have argued that we should not expect the state to be able to act entrepreneurially, at least not in terms of the currently accepted use of the word. But one argument remains. Most would agree that some problems are clearly so large and so urgent that the market cannot properly address them, and perhaps whoever is addressing them may need both the resources and the capacity to make rules and regulations as well. What does that tell us in practice? As noted, an entrepreneurial state departs from issues it thinks should be solved, whereas the innovation machine departs from issues that its firms are likely to be able to solve. Sometimes we cannot direct the machine’s effort to the most important issues of our time. A common problem in a high-risk venture is embodied in the question, are we engaged with a problem that we can solve? Ask any producer of pharmaceuticals. One obvious problem that has flown under the radar in the debate about the entrepreneurial state and its ambitions is the seemingly innocuous fact that there is not one state out there. Arguing over what a state should do is like arguing what a business should do, without considering whether the business is a multinational firm with thousands of scientists or whether it is your local ice cream vendor. Sweden is currently less than one-thirtieth of the size of the United States. Sweden could never have mobilized a defense initiative to put a man on the moon, because it lacks the scale. If you depart from what needs to be done—as the state is prone to—rather than from what we can do, this fact is likely to be ignored.

So, is the international arena the solution? Perhaps, but the current track record of cooperation over global warming and resistant bacteria are not too encouraging. Politicians are also increasingly wary of centralizing policy because it turns out that people who are not centrally located tend dislike centralization and cast votes for parties that align with their views (Rodríguez-Pose, 2018).

By necessity, resources pooled in the international arena would probably need to go to the most efficient environments to make the most good. As noted above, cutting-edge knowledge is to a large extent a club good. Even absent patents and secrecy, advanced knowledge is tacit, and as Glaeser (2011) has remarked, it flows easier across hallways than oceans. Researchers in the regional sciences have shown that promoting research excellence in the central agglomerations is most efficient (Varga, 2015). This peculiarity clearly favors building those knowledge-creating environments that are already strong, and over time, to the extent they favor the best proposals to deal with our missions, funds will naturally favor already-strong environments. But taking resources locally and concentrating them in central locations is ever-less popular politics, even when it is nominally the right policy. There is perhaps a way that we could get over any democratic challenges. But the international arena would also need far-reaching regulatory power at the local level. If missions are to be effective politics, many issues remain to be answered in terms of how they can operate within, as well as across, democratic systems.

Within nations, efficient missions will need to be wrapped in an unpopular anti-