Rethinking Innovation

Townhall.com ^ | February 1, 2013 | Rich Tucker

[Kaslin]

Some people say they do their best thinking while in the bathroom. But The Economist recently took that notion one step further, photo shopping Rodin’s The Thinker on top of a toilet and asking, “Will we ever invent anything this useful again?”

Perhaps not.

“The unsung hero of human history was, of course, the Brain of Drains, the Hub of Tubs, the Power of Showers, the Brewer of Sewers,” author W. Hodding Carter writes. “The humble plumber.” And it’s true. Indoor plumbing has helped humankind prevent communicable disease and thus saved countless lives.

The 21st century isn’t promising such life-changing breakthroughs. Sure, there’s Twitter. But go back and watch The Jetsons: People 50 years ago looked forward to flying cars and moving sidewalks. Instead, we get wisecracks of 140 characters or fewer.

So what slowed the pace of innovation? Many things, but the growth of government is a big factor.

“Much of the economy is more heavily regulated than it was a century ago,” The Economist notes. “And poorly crafted regulations may unduly raise the cost of new research, discouraging further innovation.”

Consider banking. “Until the 1980s, bank rules were few in number, but broad in scope,” write Frank Partnoy and Jesse Eisinger in The Atlantic. “Regulation was based on commonsense standards.” Not these days.

The federal government’s latest foray into bank regulation was the 2010 Dodd-Frank bill. It weighed in at 2,300 pages and has proven difficult to implement. “As of July 2, 63 percent of the deadlines have been missed, which has intensified the cloud of uncertainty enveloping the finance sector—and the economy—since passage of the act,” writes Diane Katz of The Heritage Foundation. “Thousands of businesses do not know what the government demands they do differently or when they must do it. With financial firms constrained by undue caution, consumers will experience tight credit, higher fees, and fewer service innovations. Job creation will suffer.” That’s no way to spur innovation.

The overall growth of government is a factor, as well.

“Productivity is mostly stagnant in the public sector,” The Economist editorialized. “Unions have often managed to prevent governments even publishing the performance indicators which, elsewhere, have encouraged managers to innovate. There is vast scope for IT to boost productivity in health care and education, if only those sectors were more open to change.”

Unfortunately, those are the sectors of the economy where the federal government seems most active.

In education, charter schools offer some parents and students creative opportunities. But most of the sector is dominated by bureaucratic, government-run schools. Meanwhile, ObamaCare’s miles of red tape are likely to choke any innovation in health care. Instead of encouraging people to innovate, Obamacare will rely on a panel of 15 people to regulate; setting prices and deciding what services must be covered. Even those 15 jobs will be difficult to fill; as The Washington Post drolly asked, “Who wants to be a ‘death panelist’?”

But these sectors aren’t the only places that government intervention is holding up progress. Even when it attempts to innovate, government often falls short. “The worst, and (perhaps also unsurprisingly) the most prominent part of President Obama’s agenda, is for the government to play the role of venture capitalist and direct large sums of money to specific companies,” notes former Romney advisor Owen Cass at National Review. “Government is extraordinarily ill-suited to play this role, doing so crowds out private investment in an industry, and truly promising commercial-stage technologies should not need public assistance.”

Legend has it that Charles Duell, commissioner of the U.S. patent office in 1899 once declared that “Everything that can be invented has been invented.” The quote is widely believed to have been made up. In fact, it was probably meant to be ironic, since the dawning 20th century saw an incredible amount of innovation and an impressive number of inventions.

There’s no reason humans can’t continue to innovate through the 21st century and beyond. In fact, we’re going to need to do so in order to feed a growing population. Governments need to step back, and allow creative people to do the things they do best.

[KarlInOhio]

Consider banking. “Until the 1980s, bank rules were few in number, but broad in scope,” write Frank Partnoy and Jesse Eisinger in The Atlantic. “Regulation was based on commonsense standards.” Not these days.

Maybe because deposit insurance covered the depositors but the regulators were willing to liquidate insolvent banks. If you know that by over betting the bank's assets you risk losing the bank entirely along with your job, your cushy lifestyle and your prominent position in the community you will lend conservatively. On the other hand we have taught bankers that they can do anything and they personally risk absolutely nothing if they crash the system by lending to people who have zero chance of paying the money back, so now we have to give them books of rules to replace the old rule "If you screw up you are personally finished".

[Red Badger]

We should stop using the term ‘red tape’ and instead use the more correct term ‘Fed Tape’ to describe the intrusion of BIGovernment (sic intentional) into our everyday lives...............

[mjp]

So what slowed the pace of innovation? Many things, but the growth of government is a big factor.

To increase the rate of innovation:

1) lower taxes on the rich, the businessmen, and the capitalists
2) stop the the assault on greed and profits - in order to continuously earn a rate of profit higher than average a businessman must repeated outdistance his rivals. One way to do that is to innovate and produce new and better products and new and better means of production.