Is Government, Not Free Enterprise, The Engine Of Innovation?

David Lloyd George photo by Reginald Haines is in the U.S. public domain (published before 1924)
David Lloyd George, British Prime Minister in 1918, who wished to make postwar Britain a land fit for heroes.

Could the solution to the world’s collection of increasingly serious affordable housing crises find a solution in the risky, adventurous initiatives of your everyday garden variety government?

The free-enterprise promoted . . . myth? . . . is that great new ideas are spawned by muscular capitalist enterprises with the nerve to shake off the plodding bureaucratic mindset of government.

One voice speaking out strongly that this characterization is indeed a myth comes from economist Mariana Mazzucato. Her research on everybody’s darling of adventurous innovation — Silicon Valley — clearly shows that the roots of its current influence are set in a solid foundation of government risk-taking and financing.

Mazzucato’s thinking on the importance of government in the development of new ways of doing things is having a growing impact in both North America and Europe, with the EU government increasingly involved in building upon her exciting new economic perspectives.

Why is Mazzucato’s thinking of importance to affordable housing?

Here are two immediate takeaways for the future of affordable housing based on Mazzucato’s economic theories.

First, a major national and world challenge such as affordable housing is unlikely to be solved by tinkering around the margins of developer financial incentives, or neighbourhood density tweaks, or banishing the horse-and-buggy-era outdated civic regulations. Instead, it will involve dramatic and risky enterprise on the large scale.

A second essential ingredient to solving such a large and growing crisis is not the massive commitment and investment of free-market speculators, but government risk taking and government investment.

Read more about this extraordinary and influential American economist and her ideas in WIRED: This Economist Has A Plan To Fix Capitalism. It’s Time We All Listened

In the UK, such an audacious government risk and investment was taken 101 years ago by British Prime Minister Lloyd George, who wished to make postwar England a country fit for heroes. This year, 2019, is the 100th anniversary of the Addison Act, which permitted local governments to build unlimited numbers of houses to be provided at low, controlled rents, subsidized by the national government. The Act was the birth of social housing in the UK.