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Faculty of Economics

Monday, 15 February, 2021

The new online videos presented by the renowned investor and scholar Dr William H Janeway are based on his book Doing Capitalism in the Innovation Economy, published by Cambridge University Press in 2018, and the course he teaches at the University of Cambridge’s M.Phil in Finance and Economics.

The eight-part series uses the practice and performance of venture capital to explore the dynamics of economic growth through technological innovation. In the series Dr Janeway reveals the historic “Three-Player Game” played between mission-driven states and financial speculators that has successively transformed the market economy over the past 200 years.

The lectures provide context for understanding the Digital Revolution, sponsored by the U.S. Department of Defense and accelerated by the great Dotcom/Internet Bubble of the 1990, but now challenging the authority of states around the world. They conclude by examining the status of the forecast Green & CleanTech Revolution.

Dr Janeway’s work on the innovation economy emphasises the complementary roles played by the state and by financial speculators to overcome fundamental uncertainty and drive the development and deployment of transformational technologies. On the one hand, state programmes, while necessarily exposed to corruption and too often exempt from competition, have accelerated emergence of critical technologies. On the other, while bubbles are both ubiquitous in financial history and always bound to burst, occasionally they have proven to be extraordinarily productive. For example, the British Railway Mania of the 1840s through electrification in the Roaring 1920s to the Dotcom/Internet Bubble of the 1990s.

Throughout the lectures, launched by The Institute for New Economic Thinking, Dr Janeway emphasises the need for tolerance of inescapable economic waste at the frontier, where progress is only achieved through trial and error. This existential fact sets up the tension between an efficient allocation of resources versus effective programs of research, development, and deployment. Thus, the political and financial economics of innovation challenge conventional dogma rooted in the notion of efficient markets.

“My book and this course grow out of my 35-year sabbatical from the Cambridge Faculty of Economics, years I spent as a working venture capitalist in the core of the digital and biotechnology revolutions. My experience in the trenches confirmed the relevance of Keynes’ emphasis on the radical uncertainty under which investment decisions at the frontier are necessarily made. My goal is to contribute to the ongoing reconstruction of economics as a more relevant discipline for both practitioners and policy makers.”

Dr Janeway received a Marshall Scholarship to the University of Cambridge, where he matriculated at Pembroke College and received a PhD. in economics in 1971. His doctoral thesis on "The Economic Policies of the Labour Government of 1929-1931" was supervised by Professor Lord Kahn.