When a government develops an effective method of investing in its own technology sector, this can result in a ‘multiplier effect’ that stimulates additional private sector investment.
The concept is rooted in the economic theories of John Maynard Keynes and is used to quantify the additional effects of investment spending beyond those immediately measurable.
The UK government's decision to increase public R&D spending demonstrates its focus on generating a multiplier effect in technology investment.
An important aspect of this is the UK’s National AI Strategy.
‘A mission-oriented approach…’
Maria Mazzucato, a prominent economist, emphasises the importance of a mission-oriented approach led by governments to transform capitalism and address societal challenges effectively. She argues that governments should inject purpose into the economy, choose directions, and integrate efforts across different sectors to drive innovation and create public value.
Mazzucato's work highlights the significance of directed innovation policies and the multiplier effect in driving economic growth. She advocates for policies that focus on creating well-paid jobs, enhancing productivity, and fostering innovation, ultimately leading to a higher multiplier effect.