Review: Moonshots and the New Industrial Policy

[Moonshots and the New Industrial Policy: Questioning the Mission Economy, edited by Magnus Henrekson, Christian Sandström, and Mikael Stenkula]

This book arrives at a moment when confidence in state-led economic direction has not merely returned but surged with unusual intellectual force. The revival owes much to the influence of Mariana Mazzucato, whose vision of the “mission economy” has rebranded government as an entrepreneurial actor, capable of shaping markets rather than merely correcting them. What makes this resurgence especially striking is its ideological breadth. Institutions such as American Compass and American Affairs have carried industrial policy into the vocabulary of the American right, transforming what was once a marginal heterodoxy into a bipartisan ambition. Against this backdrop, the book does not simply dissent. It reconstructs—layer by layer—the case for why markets, not states, remain the most effective engines of innovation.

Before engaging fully with the book’s critique, it is necessary to understand what is meant by the “mission economy” that it interrogates. In Mazzucato’s formulation, the mission economy is not merely about correcting market failures, such as underinvestment in research or externalities like pollution. It is about shaping and creating markets altogether. Governments define bold societal objectives, such as achieving net zero carbon emissions or eliminating certain diseases, and then mobilize public and private actors around these goals. Innovation is encouraged through experimentation, public funding, and collaboration between the state, firms, and research institutions. The emphasis is not on passive regulation but on active direction, with the state acting as a catalyst that coordinates resources, sets priorities, and shares risks. Climate change is the paradigmatic example. The transition to a low-carbon economy requires new technologies, infrastructure, and business models that may not emerge spontaneously from market incentives alone. The mission economy seeks to accelerate this process by aligning incentives and investments toward a common purpose.

Yet it is precisely this ambition to direct and coordinate innovation that the volume interrogates with increasing intensity. At the center of its reconstruction lies an idea that quietly structures the entire argument, the Hayekian concept of spontaneous order. Friedrich Hayek argued that economic coordination emerges not from design but from the interaction of individuals, each holding fragments of knowledge that cannot be centralized. What follows from this is decisive.

Innovation cannot be planned because the knowledge required to produce it does not yet exist in any single mind. It must be discovered through a process of decentralized experimentation. The introductory chapter builds directly on this insight by framing modern economies as systems of continuous variation and selection, where entrepreneurs test ideas, markets filter them, and success emerges unpredictably from this evolutionary process. In contrast, mission-oriented policies attempt to replace this open-ended discovery with predefined goals, effectively assuming that policymakers already possess the knowledge that markets are designed to generate.

From this theoretical starting point, the volume moves into a deeper analytical register with Randall Holcombe’s chapter, “Engineering Is Not Entrepreneurship.” Here, the argument sharpens. Engineering begins with a known objective and seeks the most efficient means to achieve it, while entrepreneurship begins with uncertainty and discovers both ends and means through market interaction. The implication unfolds clearly when applied to policy. When governments design industrial strategies, they behave as if innovation were an engineering problem, something that can be specified, funded, and executed according to plan. Yet innovation operates under conditions of uncertainty, where neither the optimal technology nor the relevant demand is known in advance. Markets outperform the state because they allow countless entrepreneurs to test competing hypotheses simultaneously, with profit and loss serving as an immediate feedback mechanism. Governments, lacking this mechanism, commit resources based on conjecture and often persist even when those conjectures prove wrong.

Building on this distinction, Rodney H. Yerger Jr.’s contributions—“Analyzing the Effectiveness of State Guided Innovation” and “A Case Study on DARPA”—introduce empirical clarity to what might otherwise remain an abstract critique. Yerger dissects the common narrative that government agencies can replicate the innovative dynamism of markets. DARPA—often presented as the archetype of successful state intervention—turns out to be an exception shaped by highly specific institutional conditions. It operates with unusual autonomy, tolerates failure, and focuses narrowly on particular technological domains. Even then, its successes are deeply intertwined with private sector ecosystems that commercialize and scale innovations. When policymakers attempt to generalize this model, they retain the ambition but lose the institutional discipline that made it work. Consequently, resources become concentrated in politically-selected projects rather than dispersed across a wide range of experimental ventures. The contrast with markets becomes stark. Markets distribute risk across countless actors, ensuring that failure is localized and learning is continuous. State programs concentrate risk, magnifying the consequences of error.

As the volume shifts from technological policy to social intervention, the same pattern reappears with striking consistency. In “When ‘What Works’ Does Not Work: The United States’ Mission to End Homelessness,” David S. Lucas and Christopher J. Boudreaux examine a large-scale policy effort that embodies the mission-oriented approach. The program sought to eliminate homelessness through coordinated action and evidence-based practices, presenting itself as a model of rational policy design. Yet its outcomes reveal the limits of centralized solutions. Homelessness is not a uniform problem but a complex interplay of local factors, including housing markets, mental health systems, and community institutions. The policy framework—designed at a national level—struggled to adapt to this diversity. Local actors—constrained by standardized guidelines—could not respond effectively to specific conditions, while feedback mechanisms were too weak to facilitate learning. The failure reflects a deeper epistemic problem. The knowledge required to address homelessness is embedded in local contexts and cannot be aggregated into a single policy blueprint. Markets, by contrast, excel precisely because they allow decentralized responses to heterogeneous conditions.

A similar logic unfolds—with even greater intensity—in André Cherubini Alves’ chapter, “The Cost of Missions: Lessons from Brazilian Shipbuilding.” The Brazilian government’s attempt to create a competitive ship-building industry through subsidies and protection offers a vivid illustration of industrial policy in practice. Initially framed as a strategic investment in national capability, the policy evolved into a system of persistent inefficiency. Firms—shielded from competition—had little incentive to innovate or control costs. Projects became vehicles for political allocation rather than economic performance, with resources flowing to those with influence rather than those with efficiency. Over time, the industry failed to achieve global competitiveness, despite substantial public investment. The absence of market discipline allowed inefficiencies to accumulate, while the concentration of decision-making power amplified the consequences of error. In a market setting, firms that fail to innovate are displaced by those that do. Under state protection, failure is sustained rather than corrected.

Extending the analysis to the international arena, Kathryn Waldron and Christopher J. Coyne’s chapter, “You Can’t Develop What You Don’t Know: The Realities and Limitations of Foreign Aid Missions,” reveals the same structural weakness in development policy. Foreign aid programs attempt to replicate the logic of industrial policy on a global scale, designing interventions to stimulate growth in diverse and often poorly understood environments. The authors show that these efforts consistently falter because they rely on abstract models rather than context-specific knowledge. Development is treated as a technical problem to be solved, rather than as a process of discovery shaped by local conditions. The result is a pattern of misaligned projects, where infrastructure, technologies, and institutions fail to integrate into existing social and economic systems. Markets, by contrast, embed local knowledge in everyday transactions, allowing individuals to adapt solutions to their specific circumstances. Development emerges organically from these interactions, rather than being imposed externally.

Underlying these empirical failures is a political dynamic that the volume addresses through a public choice lens. In “A Public Choice Perspective on Mission Oriented Innovation Policies and the Behavior of Government Agencies,” Rickard Björnemalm, Christian Sandström, and Nelly Åkesson examine how incentives shape policy outcomes. Governments operate within a framework of political competition, where decisions are influenced by interest groups, electoral pressures, and bureaucratic incentives. Mission-oriented policies—with their large budgets and high visibility—create fertile ground for rent seeking. Firms lobby for inclusion in subsidy programs, while bureaucracies expand to manage them. This process distorts resource allocation, directing capital toward politically-favored projects rather than economically-viable ones. The informational problem identified by Hayek is thus compounded by an incentive problem. Even if governments could access the necessary knowledge, their incentives would still lead to its misapplication.

Viewed collectively, these chapters form a coherent and cumulative argument. Each contribution—whether theoretical or empirical—points back to the same fundamental insight. Innovation thrives in environments characterized by decentralization, competition, and continuous feedback. These are the defining features of free markets. State-led industrial policies, by contrast, centralize decision-making, suppress variation, and weaken feedback mechanisms. They replace the open-ended process of discovery with predetermined objectives, assuming a level of knowledge and foresight that policymakers cannot possess.

Yet, having absorbed the force of this critique, it becomes possible to identify a dimension that the volume could have explored more fully. The mission economy, as articulated by Mazzucato, does not necessarily require rigid centralization. In principle, it can incorporate bottom-up experimentation, public-private partnerships, and decentralized collaboration across firms, universities, and local governments. A mission such as tackling climate change could involve a wide ecosystem of actors experimenting with different technologies and approaches, with the state providing direction without micromanaging outcomes. This more flexible interpretation blurs the line between state coordination and market discovery, suggesting that mission-oriented policy need not always suppress entrepreneurial dynamics.

However, this flexibility introduces its own complications, and here the book’s broader critique regains its force. Expanding participation in mission driven projects creates a proliferation of stakeholders, each with distinct and often conflicting objectives. Activists, advocacy groups, firms, and political actors all seek to shape the mission according to their own priorities. In the context of a complex problem such as climate change, this multiplicity becomes especially problematic. Competing agendas can dilute focus, redirect resources, and generate policy instability. Instead of a coherent strategy, the result may be a fragmented landscape of initiatives pulled in different directions. The more expansive the coalition, the greater the difficulty of maintaining discipline and clarity of purpose.

What emerges, then, is a deeper appreciation of both the ambition and the fragility of the mission economy. It seeks to harness collective effort to solve large scale problems, yet in doing so it confronts the same informational and incentive constraints that the book so effectively documents. Free markets retain their advantage because they do not require consensus or coordination at the outset. They allow multiple approaches to coexist, with success determined through competition rather than negotiation.

In this light, the book’s central theme becomes unmistakable. Free markets are better at innovating than the state because they operate as systems of spontaneous order, where knowledge is continuously generated and tested through decentralized action. Industrial policy—even in its more sophisticated and collaborative forms—struggles to replicate this process without introducing distortions that undermine its objectives. The mission economy may aspire to shape the future, but it is the market that discovers it.