Fixing markets isn't enough. We have to actively shape and create them and tilt the playing field in the direction of the growth we want.

I often use the iPhone as an example of how governments shape markets, because what makes the iPhone ‘smart’ and not stupid is what you can do with it. And yes, everything you can do with an iPhone was government-funded. From the Internet that allows you to surf the Web, to GPS that lets you use Google Maps, to touch screen display and even the SIRI voice activated system - all of these things were funded by Uncle Sam through the Defense Advanced Research Projects Agency (DARPA), NASA, the Navy, and even the CIA!

The globalized nature of production and innovation means that the benefits don't necessarily stay in the country where the investments are made.

Our current model of capitalism and the dominant ideas in policy making have led to a failure of investment by both the public and the private sector in the things that drive productivity, and which affect its distribution.

An interesting attribute of public banks is that they don't only de-risk the downside, but also get a share of the upside.

If we want growth today to be more innovation-driven, more inclusive and more sustainable, then we need a more active state, not a less active one. Yet we still hear the dogma that we should just fix market failure by focusing on science and infrastructure, and to "level the playing field."

It's important that public funds be spent in research directions that are pushing market frontiers rather than working in existing areas. This means funding research not only on drugs but also on areas like life-style changes, even if the profit potential is lower for Big Pharma as you cannot sell that change as you can sell a medicine.