• market concentration
• entrepreneurial state
• socialization of investments
• efficiency/equity trade off
• economic thought

Abstract

Caffè and Mazzucato can be inscribed in the tradition of the institutionalism, despite none of them defined himself in this way. They attribute to institutions the non out-searchable task to lead the ways market should work in the long run, shaping at the same time the social interactions between economic actors and citizens. A comparison between them allows for the understanding of how the heterodox framework of thought developed in the last decades to face social and economic problems. They develop their proposals starting from the same streams of economic thought and investigate the same issues in the same western economies but in different time periods. The purpose of the dissertation is to show the relevance of the thought of Federico Caffè, an economist that has been a forerunner in the analysis of economic problems that are now crucial/relevant in the political and academic debate and are deeply investigated in the research of Mariana Mazzucato. Mazzucato carries on the analysis exploiting the advancements made in knowledge and disposable tools and adapting solutions to the new historical framework. The authors share as reference points Keynes, Minsky and in a certain degree Schumpeter, that in Mazzucato gains a more central role than in Caffè. The comparison is brought head analysing the main publication of the authors, i.e “Lessons of political economy” by Caffè and “The entrepreneurial state”, “The value of everything” and “Rethinking Capitalism” by Mazzucato, sided by their wide body of publications and policy prescriptions and by the writings of Caffè’s interpreters. The work is divided in four sections, each of them dealing with a relevant issue in the actual political and economic debate, as well as in their research program.

The first chapter deals with the role and features of state intervention in the economic system. Both the authors start from the Keynesian proposal of public intervention in the economic sphere and attribute to the state the role to plan, coordinate and set a direction to economic development, proposing models of institutions apt to perform these tasks. They discuss the evaluation of state intervention in a static and in a dynamic framework to show how the outcomes of the analysis can be reversed in favour of public action changing the assessment methodology. In the last section of the chapter, it is analysed the way in which in the last 40 years the economic policy focus shifted from the demand to the supply side policies and how this lead to leave behind the Keynesian thought. The aim of the authors is to renew attention on Keynesian policies adapting them to the new economic environment, shifting the role of the state from the “last resort employer” to the “entrepreneurial” one.

The second chapter analyses the shortcomings of the “perfect competition theory” to deal with a market of monopolies and oligopolies and how the solution proposed by Mazzucato is compatible with the methodology used by Caffè to choose the more proper body of thought to deal with a concrete economic issue. According to the authors marginalism applied to an oligopolistic market allows oligopolies to appropriate positive externalities and to reverse negative externalities on society, especially on workers and consumers. The solution is found in the intervention of public policy to rebalance the asymmetry of power between market concentrations on one side and consumers, workers and taxpayers on the other side.

In the third chapter, the focus is on the working of financial markets. Both the authors analyse the consequences of the diversion of investment from the real economy and of the instability of the financial system. In order to overcome these problems, Caffè proposed the socialization of the financial superstructures. This proposal derived from Keynesian “socialization of investments” and developed through Minsky’s idea of Community Development Banks is investigated also by Mazzucato. She proposes a public intervention by means of public finance to allow the state to perform the “Schumpeterian role” to finance innovation, that also Caffè recognized to not be pursued by the private sector.

The fourth chapter discusses the trickledown effect and the equity/efficiency trade-off. Caffè criticized the trickledown effect as an effective tool to improve general welfare and proposes public intervention to correct an unfair distribution of resources. Mazzucato does a step forward proposing to use public policies to shape a kind development aimed to improve social inclusion. Mazzucato, differently than Caffè, doesn’t clearly mark a line between what is socially optimum and what is efficient, but she looks for a kind of development where such trade off doesn’t exist.