How should the wealth that an economy generates be distributed? Moral as well as economic arguments about who should be entitled to what frequently seek to link rewards to contributions, for reasons of fairness or efficiency. But how these contributions are quantified depends first on how they are theorised. In this way, different theories of how value is created can be used to justify very different distributions of income and wealth.

In this commentary, which accompanies the IFS Deaton Review chapter by De Loecker, Obermeirer and Van Reenen (2022), I argue that the contribution to value creation by the state – the different parts of the public sector – has been problematically theorised. Understating the contribution of the state has meant that the contribution of other actors has been overstated, with consequences for the overall distribution of income and wealth. It has also meant that the full potential of the state to drive both innovation-led and inclusive growth has not been realised. But with a new approach to policy and, more broadly, to the role of the public sector in the economy, it could be.

Cite this as:

Mazzucato, M. (2022), ‘The inclusive entrepreneurial state: collective wealth creation and distribution’, IFS Deaton Review of Inequalities, https://ifs.org.uk/inequality/the-inclusive-entrepreneurial-state-collective-wealth-creation-and-distribution