This doesn’t seem like an appalling constraint

From The Guardian’s commentary on the Spring Statement:

The National Wealth Fund (NWF) has been instructed to support clean energy, accelerate regional investment and strengthen sovereign capabilities. But its £28bn capitalisation pales in comparisonwith Germany’s €500bn (£435bn) infrastructure fund. And it is hamstrung by private banking logic that insists the fund should expect to make a profit on every deal.

That any investment portfolio will not make a profit on every investment is a given. We never do know what will work until it’s been tried out - humans and the economy just work that way. This is the logic of using markets, not planning, in the first place. Try everything, do more of what works and less of what doesn’t.

But a wealth fund should be trying to make a profit on each and everything, obviously. Which is the very idea being rejected here. Apparently instead there should be “investment” in “wealth” of things that are nice to have but which are not even intended to create wealth and are therefore not investment. Which, you know, seems to rather obviate the purpose of such a fund.

It is possible to square this circle. Simply assume that the National Wealth Fund is not in fact a wealth fund. It’s a honeypot to dip into to buy nice things which do not actually produce any wealth. Which is what our view of the NWF is, anyway. We think that’s a bad idea as it disguises what is happening but there we are. Others will think it a good idea. To coopt those positive connotations of investment and wealth to justify more spending upon the lanyard classes.

Have we mentioned, before, that we’re not in fact cynics, just realists?

Anyway, this is the insistence of Professor Mazzucato. That a National Wealth Fund shouldn’t be concerning itself with anything so trivial as trying to increase the national wealth as a result of the fund’s investments.

There is a reason we coined the neologism, Mazzonomics.

Tim Worstall