Empirically – picking winners works, and the CP doesn’t pick specific winners – instead it funds the directionality of innovation which allows experimentation within it

The path-dependent direction that the economy follows under 'free-market' conditions is problematic, particularly when the world is confronted with great societal challenges such as climate change, youth unemployment, obesity, aging and inequality. In addressing these challenges, the State must lead—not by simply fixing market failures but by actively creating and shaping (new) markets, while regulating existing ones. It must direct the economy towards new 'techno-economic paradigms', in the words of the technology and innovation scholar Carlota Perez. Usually, these directions are not generated spontaneously from market forces; they are largely the result of strategic public-sector decision making.

Indeed, nearly all the technological revolutions in the past—from the Internet to today's green tech revolution—required a massive push by the State. Silicon Valley's techno-libertarians might be surprised to find out that Uncle Sam funded many of the innovations behind the information technology revolution. The iPhone is often heralded as the quintessential example of what happens when a hands-off government allows genius entrepreneurs to flourish, and yet the development of the features that make the iPhone a smartphone rather than a stupid phone was publicly funded. The iPhone depends on the Internet; the progenitor of the Internet was ARPANET, a program funded in the 1960s by the Defense Advanced Research Projects Agency (DARPA), which is part of the Defense Department. The Global Positioning System (GPS) began as a 1970s US military program called NAVSTAR. The iPhone's touchscreen technology was created by the company FingerWorks, which was founded by a professor at the publicly funded University of Delaware and one of his doctoral candidates, who received grants from the National Science Foundation and the CIA. Even SIRI, the iPhone's cheery, voice-recognizing personal assistant, can trace its lineage to the US government: it is a spinoff of a DARPA artificial-intelligence project.

And this is not just about the military-industrial complex. It is just as true in health and energy. As the physician Marcia Angell has shown, many of the most promising new drugs trace their origins to research done by the taxpayer-funded National Institutes of Health (NIH), which has an annual budget of some $30 billion. Private pharmaceutical companies, meanwhile, tend to focus more on the D than the R part of R&D, and some slight variations of existing drugs and marketing.

And more recently, despite the myths about the shale gas boom being driven by wildcatting entrepreneurs operating independently from the State, the US federal government invested heavily in the technologies that unleashed it (Shellenberger, Nordhaus, Trembath and Jen- kins, 2012). When in 1976, the Morgantown Energy Research Center (owned and operated by the US Department of Energy) and the Bureau of Mines launched the Eastern Gas Shales Project, which demonstrated how natural gas could be recovered from shale formations, the federal government opened the Gas Research Institute, funded through a tax on natural gas production, and spent billions of dollars on research into shale gas. In this same period, the Sandia National Laboratories, also part of the US Department of Energy, developed the 3-D geologic mapping technology used for hacking operations.

The story of State-funded energy innovation is being repeated today, not just in renewable energy but even in the 'green' companies themselves. Tesla Motors, SolarCity and SpaceX, all led by entrepreneur Elon Musk, are currently surfing a new wave of state technology. Together, these high-tech ventures have benefited from $4.9 billion in local, state and federal government support, such as grants, tax breaks, investments in factory construction and subsidized loans. The State also forges demand—creates the market—for their products by granting tax credits and rebates to consumers for solar panels and electric vehicles and by contracting $5.5 billion worth of procurement contracts with SpaceX and $5.5 billion for the National Aeronautics and Space Ad- ministration (NASA) and the US Air Force. While some of this governmental support has recently been the focus of news articles, two things have passed relatively unnoticed (Hirsch 2015). First, that Tesla Motors also benefitted for a massive publicly funded guaranteed loan of $465 million. Secondly Tesla, SolarCity, and SpaceX have also benefitted from direct investments in radical technologies by the US Department of Energy, in the case of battery technologies and solar panels, and by NASA, in the case of rocket technologies. Technologies that SpaceX is now using in its business dealings with the International Space Station. This shouldn't come as a surprise—the State has been behind the development of many key technologies that are later integrated by the private sector into breakthrough innovations. These companies are of course helping to push the innovation frontier by further developing State-funded technologies, and, crucially, contributing to a transition to a more environmentally sustainable economy. But all we hear in the media is the one-sided myth of the lone entrepreneur.

The role of the State is massive not only on the supply side, but also on the demand side, that is, the deployment and diffusion of new technologies. Even in cases where private markets seemed to play a leading- role, such as in the automobile revolution, it was the State that established the enabling conditions for car diffusion (new street regulations, road construction works, licensing and traffic rules, etc.). In the mass-production revolution, for instance, the State invested in both the underlying technologies and their diffusion across the economy. On the supply side, defence investments in the United States, beginning in World War II, led to improvements in aerospace, electronics and materials. On the demand side, the US government's post-World War II subsidization of suburban living—by building roads, backing mortgages and guaranteeing incomes through the welfare state— enabled workers to own homes, buy cars and consume other mass- produced goods. And today, more of Tesla's electric cars are sold in Norway than in the United States due to the Norwegian government's policies stimulating the purchase of 'green' products. Supply-side support from the US government, demand-side support by the Norwegian government. Hardly a lone entrepreneur!

For policymakers, then, the question should not be whether to pick winners or not. Everything of relevance has been picked! From the Internet to fracking technology. What should become more central to the policy debate is how to pick broadly defined directions, within which bottom-up experimentation can take place. But private investments will only kick in after those directions have been picked, creating expectations in business about future growth opportunities in particular areas. Such directionality will of course involve some failures here and there, but the advantages that result from those supply-side and demand-side pushes will be more than worth the wait—creating decades of growth. Rather, the question should be how to do so in a way that is democratically accountable and that solves the most pressing social and technological challenges.