Björn Rust (he/him) is a post-industrial designer, researcher and educator, developing context-sensitive solutions in service of people and the planet.

Recent writings

  1. On the limits of orthodox economic theory and the role of design in supporting state economic policy
  2. Opportunity hoarding
  3. Doing away with bullshit

On the limits of orthodox economic theory and the role of design in supporting state economic policy

political economy strategic design

In orthodox economic theory, it has long been accepted that within capitalist economies, free competitive markets are the most efficient mechanism by which resources can be allocated. This view holds that the individual pursuit of self-interest leads to optimal economic outcomes,[1] with some claiming that this behaviour tends towards the maximisation of social welfare.[2]

However, the 2008 global financial crisis was the first of many shocks to shatter this myth, motivating some scholars to challenge the claim on theoretical and empirical grounds, arguing that markets are neither perfectly competitive nor efficient and that the state plays a central, market-shaping role in capitalist development[3]—demonstrated by state bailouts and stimulus spending, which averted depression,[4] while austerity policies failed to reboot growth, further exposing the orthodoxy's flaws.[4:1]

The foundational assumptions concerning the efficiency of free competitive markets need to be revised—perfect competition is a theoretical abstraction far from reality, and the orthodox dichotomy between state and market is oversimplified.[5]

The problem

Contrary to assumptions, perfect information, zero transaction costs and market completeness are empirically unevidenced,[6] with recurrent asset bubbles, mispriced securities, excessive speculation and financial crashes revealing systematic market irrationality and significant limitations in orthodox market theory.[7]

Meanwhile, technologies and network effects often produce natural monopolies and oligopolies with immense market power, as digital platforms harnessing global integration and winner-take-all network dynamics appropriate immense amounts of user data and attention while locking in billions of global 'serfs'.[8]

Moreover, persistent heterogeneity among enterprises is the norm, with different managerial routines and organisational forms yielding vastly different performance outcomes,[9] particularly true for ownership structures that influence corporate strategy and, by extension, market performance.[4:2] The evidence shows that over the past 30 years in the US and UK, an ideological focus on shareholder value maximisation and short-term profits has dominated, diverging from historical norms.[4:3] The neoclassical assumption of the representative firms as profit-maximisers facing generic market forces cannot explain empirical diversity.[9:1]

Finally, long-term stagnation of wages and living standards amid widening income inequality indicates a grossly unfair distribution of the returns from growth.[4:4][10] At the same time, financial and biophysical systems show uncorrected market failures generating inequality and environmental harm.[11] Such outcomes reflect capitalism's structural dynamics rather than its temporary imperfections; strikingly, these crises that many of our contemporary economies now face are inadequately addressed in mainstream economic thinking.[4:5]

The opportunity

However, there is hope; as Greenwald & Stiglitz (1986) show, economies with imperfect information and incomplete markets virtually always have room for welfare-improving government interventions through taxes and subsidies—which applies even in large economies, where the actions of individual agents have negligible price effects.[12][13]

Meanwhile, firms structured primarily around broader stakeholder interests and long-term outcomes, typical in countries like Germany and across Scandinavia, demonstrate that profit maximisation is not inherently optimal for strong or stable economic performance.[4:6]

We must accept that private goods independent of public institutions are fictions; markets are embedded in legal, social and political frameworks.[14][15] Even the emergence of national markets required extensive state planning, regulation and investment, leading Polanyi to conclude that "The road to the free market was opened and kept open by an enormous increase in continuous, centrally organised and controlled interventionism".[15:1]

This style of interventionism also applies to innovation—a critical catalyst for productivity and growth—characterised by uncertainty, path dependency, and disequilibrium in systems of interdependent technologies, institutions, skills and demand—an area where orthodox competition theory demonstrates little understanding.[16] Radical innovations require patient, committed finance that the private sector cannot reliably provide.[17] During the 20th century, this type of committed state-funded public research and development, in addition to investments along innovation chains, has repeatedly incubated new technological and industrial landscapes that were unforeseeable or underestimated by markets.[18]

The efficiency gains of capitalist development have long relied on symbiotic state-market relationships, with the state playing the role of investor and risk-taker across innovation ecosystems.[17:1] Public agencies have repeatedly envisioned and funded the radical technological breakthroughs later commercialised by the private sector.

However, the state also sets rules, builds infrastructure, educates workforces, and constructs social protection systems essential for economic success, co-producing value with private enterprises.[19]

Through both hard and soft institutional measures, states actively co-construct markets through planning, infrastructure and regulation, shaping private enterprise[14:1][15:2] and markets towards collective goals such as environmental sustainability, equitably shared prosperity, public health and education.[13:1]

The solution

Entrepreneurial states balance capacities for agility and stability by configuring public organisations to stimulate innovation and manage socio-political dynamics.[20] This task emphasises a need for economic governance that can navigate complex relationships across state institutions, businesses, infrastructure, and civil society by embracing dynamic and expertise-driven elements.[20:1] This interplay of charismatic, fluid agencies and professionalised, stable bureaucracies is essential to enable the 'agile stability' characteristic of entrepreneurial states.[20:2]

Instead of relying on static equilibrium models, which poorly depict the dynamics across interdependent political, cultural, financial, and technological systems,[3:1] fostering mixed organisational capabilities allows the public sector to explore alternative policies amidst complexity.[20:3]

To contend with this complexity and the policy-novelty gap arising from rapid technological innovation, policymakers might increasingly adopt anticipatory practice—exercised through scenario planning or experiential futures, among other methods—to explore alternative trajectories.[21] Through tangible and participatory experiences of prototyped scenarios, experiential futures can reveal societal perspectives on emerging socio-ethical issues to inform and adjust policy goals rather than converge on specific objectives. This allows policymaking to navigate complex dynamics and reveal opportunities for structural transitions and mission-oriented policies towards socially negotiated objectives.[21:1]

Design implies economic structures' mutability, countering fatalism about market efficiency,[18:1] while mission-oriented innovation policies demonstrate the transformative potential of this approach. Public policy has long shaped new techno-economic paradigms. Today's complex challenges, like sustainable development, require systemic policies that can promote a rewiring of energy, transport and agrifood systems, to name only a few, rather than simply making marginal corrections and facilitating markets.[19:1]

Methods to align stakeholders, design institutions and guide structural change are vital for transforming markets towards collectively determined goals.[22]

Conclusion

Today's capitalist economies are not characterised by perfect competition, optimal efficiency and fairness. Instead, we are witnessing financial instability and rent-seeking that produce endemic market failures.

Therefore, state institutions and their policies must play a central role in shaping well-functioning markets and supporting economic development with a public purpose and shared value creation at their core.[4:7] During this moment of climate collapse and growing inequality, the state's role is to steer us toward a better future, not neutrally arbitrate.[22:1]

Adopting a mission-oriented approach to policymaking, which sets explicit goals for shaping new techno-economic paradigms, serves as a form of strategic design.

This evidence-based and design-driven policymaking, with missions actively creating and transforming markets, represents a shift beyond dominant technocratic methods and governance cultures, often reflecting twentieth-century conditions that have failed to govern capitalist dynamics to meet collective goals.

Strategic design integrates evidence, ideas and actions to navigate ambiguities when dominant expertise obstructs progress—reframing economic questions and solution paradigms to falsify equilibrium delusions and unlock policy effectiveness where prevailing methods fail.

  1. Smith A. The Wealth of Nations. 1776. ↩︎

  2. Landsburg SE. The armchair economist: economics and everyday life. Free Press; 2012. ↩︎

  3. Mazzucato M. From market fixing to market-creating: a new framework for innovation policy. Industry and Innovation. 2016 Feb 17;23(2):140–56. ↩︎ ↩︎

  4. Jacobs M, Mazzucato M. Rethinking Capitalism: an Introduction. In London: Wiley; 2016. ↩︎ ↩︎ ↩︎ ↩︎ ↩︎ ↩︎ ↩︎ ↩︎

  5. Nelson RR. The economic system question revisited. Industrial and Corporate Change. 2022 May 30;31(3):591–609. ↩︎

  6. Stiglitz JE. Freefall: America, free markets, and the sinking of the world economy. 1st ed. New York: W.W. Norton & Co.; 2010. ↩︎

  7. Shiller RJ. Irrational Exuberance: Revised and Expanded Third Edition [Internet]. Princeton University Press; 2016 [cited 2024 Feb 17]. Available from: https://www.degruyter.com/document/doi/10.1515/9781400865536/html ↩︎

  8. Conyon M, Ellman M, Pitelis CN, Shipman A, Tomlinson PR. Big Tech Oligopolies, Keith Cowling, and Monopoly Capitalism. Cambridge Journal of Economics. 2022 Dec 31;46(6):1205–24. ↩︎

  9. Nelson RR, Winter SG. An evolutionary theory of economic change. digitally reprinted. Cambridge, Mass.: The Belknap Press of Harvard Univ. Press; 2004. 437 p. ↩︎ ↩︎

  10. Piketty T. Capital in the twenty-first century [Internet]. Cambridge, Massachusetts London: The Belknap Press of Harvard University Press; 2017 [cited 2024 Feb 19]. 793 p. Available from: http://www.jstor.org/stable/j.ctt6wpqbc ↩︎

  11. Dorninger C, Hornborg A, Abson DJ, Von Wehrden H, Schaffartzik A, Giljum S, et al. Global patterns of ecologically unequal exchange: Implications for sustainability in the 21st century. Ecological Economics. 2021 Jan;179:106824. ↩︎

  12. Greenwald BC, Stiglitz JE. Externalities in Economies with Imperfect Information and Incomplete Markets. The Quarterly Journal of Economics. 1986 May;101(2):229. ↩︎

  13. Mazzucato M. Governing the economics of the common good: from correcting market failures to shaping collective goals. Journal of Economic Policy Reform. 2023 Dec 4;1–24. ↩︎ ↩︎

  14. Evans PB. Embedded Autonomy: States and Industrial Transformation [Internet]. Princeton University Press; 1995 [cited 2024 Feb 16]. Available from: https://princetonup.degruyter.com/view/title/550169 ↩︎ ↩︎

  15. Polanyi K. The Great Transformation. New York: Farrar & Rinehart, inc.; 1944. ↩︎ ↩︎ ↩︎

  16. Dosi G. Technological paradigms and technological trajectories. Research Policy. 1982 Jun;11(3):147–62. ↩︎

  17. Mazzucato M. The entrepreneurial state: debunking public vs. private sector myths. Anthem Press; 2015. ↩︎ ↩︎

  18. Mazzucato M. From market fixing to market-creating: a new framework for innovation policy. Industry and Innovation. 2016 Feb 17;23(2):140–56. ↩︎ ↩︎

  19. Mazzucato M. Mission-oriented innovation policies: challenges and opportunities. Industrial and Corporate Change. 2018 Oct 1;27(5):803–15. ↩︎ ↩︎

  20. Kattel R, Drechsler W, Karo E. Innovation bureaucracies: How agile stability creates the entrepreneurial state. 2019; Available from: https://www.ucl.ac.uk/bartlett/public-purpose/wp2019-12 ↩︎ ↩︎ ↩︎ ↩︎

  21. Sanchez C, Epp FA. Experiential Futures In-the-wild to Inform Policy Design [Internet]. arXiv; 2023 [cited 2024 Feb 19]. Available from: http://arxiv.org/abs/2303.14174 ↩︎ ↩︎

  22. Mazzucato M. Mission Economy: A Moonshot Guide to Changing Capitalism. Allen Lane; 2021. ↩︎ ↩︎