Innovation

How Central Planners Kill Innovation

It's no coincidence that most innovation happens in cities far from Washington, D.C.

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Most of life happens without a central planner. Yet people think we need one.

Suppose you'd never seen a skating rink, and I told you that I want to lay down some ice and charge people money to strap sharp blades on their feet. They will zip around on the ice—young and old, skilled and unskilled. My only rule: Go counter-clockwise.

Hillary Clinton would say the rink needs regulation. She calls herself "a government junkie." Government junkies like government plans. Hillary'd probably demand that my rink have an official who tells skaters when to zoom left or right, when to slow down.

I actually tried that while doing a TV special on "Spontaneous Order." I brought a megaphone to a skating rink and bossed people around. Some skaters fell. No one thought I'd made skating safer or better. That's because no "planner" knows the wishes and skills of individual skaters better than skaters themselves.

Most decision making works much the same way: Leave people free to make their own choices, and a spontaneous order arises—buyers and sellers adjust to changing prices; inventors invent; families raise kids; musicians create jazz.

Yet control freaks have criticized such spontaneity for at least 2400 years. Plato warned that music should be simple so that it does not stir up passion. In the 1920s, Ladies Home Journal complained that jazz would lead "to a breaking away from all rules." We're lucky America didn't have a U.S. Dept. of Music at the time.

On my TV show, one government-lover said decisions must be made "by technocrats … who have this expertise." But no central planner has enough expertise to direct the skaters on the ice. (I tried an expert, too. I got an Olympic skater to direct people. She was no better.) 

Central planning creates the kind of inefficiency that brought down the Soviet Union. While Americans shopped in malls full of goods, Russians waited in long lines.

Today in the U.S., innovation tends to occur in the freest sectors of the economy, while sectors most closely affiliated with government stagnate. Because LASIK eye surgery is largely funded by customers, it's improving by leaps and bounds. Government-subsidized hospitals, by contrast, can barely share equipment without running into a thicket of regulations controlling collaboration.

Eighty years ago, it took workers only 15 months to build the Empire State Building. But this century, using vastly superior construction equipment, building the new World Trade Center took 10 times as long. Eighty years ago, some trains ran faster than 100 miles per hour, but now even the "high-speed" Acela train averages only 90 miles per hour because government safety rules demand that American trains be heavier.

Venture capitalist Peter Thiel says the current state of regulation should frighten us: "You would not be able to get a polio vaccine … approved today." He's right. The first batch of Salk vaccine gave polio to 40,000 people. If that happened today, the FDA would immediately stop the research. Salk's vaccine would not have had a chance to save thousands of lives and prevent so much misery.

Thiel funded startups such as Facebook, PayPal, LinkedIn, and Yelp. It's no coincidence that such wonderful innovation happened in cities far from Washington, D.C. By the time regulators woke up, good things had already happened. But now the central planners want control over the Internet. Today, in response, Internet companies spend more on lobbying than Wall Street or defense contractors.

Today's innovators take for granted that there's only a short window of opportunity before regulators swoop in and ruin everything by dictating a single, centrally planned formula by which innovation may proceed. That may not bother CEO's who get in on the ground floor—their way of doing things becomes the template everyone else must use. But everyone else suffers. Bye-bye, innovation. But innovation was once what America was about.

© Copyright 2015 by Creators Syndicate Inc.

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  1. Bye-bye, innovation. But innovation was once what America was about.

    Now now, John. I’m sure some wise politicians will pass a law mandating the return of innovation to America.

    1. “According to the BLS, innovation was up 0.8% last month.”

      1. And competition has increased 0.72511111812 1/2%!

    2. INNOVATE NOW DAMMIT!

      1. We can’t! The speculators and corporations won’t let us!

        1. Oh shit, I just thought of a new future campaign slogan: “Regulate to Innovate!”

          1. Or maybe even better, “Innovation through Regulation!”. Playing to a black crowd? “We gots ta Regulate ta Innovate!”

            1. There was actually a NYT article making this exact argument several years back. They were reporting on the big light bulb manufacturers and how they were creating more efficient incandescent bulbs to compete with Fluorescent bulbs (LEDs were still nascent at the time). They were using new technologies to get more light per watt, thereby creating bulbs that would pass the more stringent efficiency standards.

              There was some smug statement in that article like “Environmentalists say this shows how regulation can spur innovation. No one was willing to make a better light bulb until the government forced them to.”

              Of course there is no mention of opportunity costs in that article- the fact that GE could have spent its R&D budgets building some better innovation rather than being forced to replace good-enough light bulbs.

              1. The catalytic converter served a similar narrative back in the 80’s.

                1. I still have a Jeep with a cat. It’s much more reliable in cold weather than the 2005 version I have.

              2. There was some smug statement in that article like “Environmentalists say this shows how regulation can spur innovation. No one was willing to make a better light bulb until the government forced them to.”

                Absolutely correct. Regulation is a brilliant means of spurring on competition. Just think of how much easier these techniques are than say than those outdated means like trucks, airplanes, and ships.

                1. Spurring on innovation, not competition…

  2. “I brought a megaphone to a skating rink and bossed people around. Some skaters fell. No one thought I’d made skating safer or better. That’s because no “planner” knows the wishes and skills of individual skaters better than skaters themselves. ”

    Nice!

  3. The smartest, most motivated and best trained thinkers all work for the government. They’re also accountable to the people. To think that anyone could do anything better than them is just backwards thinking.

    Roads, the internet, green energy, flight and space travel all came from the government. What has the private sector given us? Uber robberies and AirBnB rapefests. Enough said.

    1. I for one welcome our new government overlords.

    2. Don’t forget Comcast’s 97% profit margins.

      1. That’s not the best one.

        From “Time Warner Cable’s High-Speed Internet 97 Percent Profit Margin is a Big, Bright Red Flag; Critics Rebuked.”:

        In 1999, the Florida Public Service Commission did an analysis of profits above costs on “Calling Features”, from ‘Call Waiting to Caller ID’, In 1999, Call Waiting cost $4.00 for residential customers per month, but had a profit over the cost to offer the service of 48,680% — it cost less than a penny to offer.

        So, for each dollar a customer paid on Call Waiting, the phone company made $486.80 in profit.

        At least 97% actually works mathematically ? for dollar a Comcast customer pays, Comcast makes 97? in profit.

  4. Thiel funded startups such as Facebook, PayPal, LinkedIn, and Yelp. It’s no coincidence that such wonderful innovation happened in cities far from Washington, D.C.

    Maybe not the best example since most of those startups come from one of the least free cities in one of the least free states, and tend to be run by people who are very much a product of their environment.

    It’s only through the infinite resiliency of markets and heroic levels of cognitive dissonance that technology development continues apace.

    1. What city a startup comes from matters…somehow about something? That’s some first rate logic you have going there. But hey, as long as you can get some REGION WAR in there, it’s all good, amitrite?

      1. Stossel’s actually the one who mentioned it you retarded prick:

        It’s no coincidence that such wonderful innovation happened in cities far from Washington, D.C.

        I was actually making your point that innovation doesn’t necessarily only happen in laissez faire paradises, nor is it exclusively driven by freedom-loving capitalists. The beauty of markets is that even people who ostensibly hate them participate in, contribute to, and benefit from them.

        But hey, as long as you can be a total cunt for NO FUCKING REASON, it’s all good, amirite?

        1. I was going to chime in with the same point.

          Really, the better argument here is that all of this innovation has taken place in one of the least regulated sectors of the economy. That is a much better angle to look at this issue from.

          Of course, PayPal intersects with one of the most highly regulated sectors of the economy and unsurprisingly has seen much of its innovative nature sapped away as a consequence.

        2. Lighten up, Francis. If I misread your point, then I was wrong and I apologize; the constant drumbeat of REGION WAR from people becomes desensitizing. But–and I am only saying this because I care–there are a lot of decaffeinated brands on the market today that are just as tasty as the real thing.

          1. Oh come on, we all know you just wanted to let your inner cunt out for a bit.

            1. I need to douche it first. Trust me, you don’t want to see it right now.

              1. Sounds like we all missed another Epi/Warty/Pro L cum fiesta.

          2. I’m sorry if I overreacted. And I’m more than a little disappointed you didn’t at least call me an asshole or something in retort. I hope you’re not going soft on us.

            1. I don’t get to call you an asshole when I’m the wrong one.

              I hope you’re not going soft on us.

              I’m rock hard right now. It’s like an iron bar. I’ve been watching a Golden Girls marathon.

              1. I wish you assholes would shut the hell up.

                One thing that fascinates me is how much market forces in the U.S. seem to resist attempts to destroy them. We’re past the point when the regulations and spending should’ve taken down the economy even worse than they have. Imagine where we’d be now without people strangling the Golden Goose?

                1. I think part of the reason for that is the people who really despise the free market are the ones with no real power to affect it. Market strangulation is one area where we should be happy for government inefficiency.

              2. I don’t get to call you an asshole when I’m the wrong one.

                Well it’s not like it still wouldn’t have been a fair point.

                I’m rock hard right now. It’s like an iron bar. I’ve been watching a Golden Girls marathon.

                Oh no… they’ve gotten Epi too

                1. YOU NUTRASWEETED THE LINK DUDE

                2. Well, now I SF’d the link, so everybody is entitled to call me an asshole. Just remove everything before the “christwire.org” part, I’m too lazy to fix it (and we’ve all seen it anyway).

                  One thing that fascinates me is how much market forces in the U.S. seem to resist attempts to destroy them.

                  It’s not just here. Black and grey markets under the most oppressive regimes are truly fascinating case studies in market resiliency.

                  1. I knew it, I’m surrounded by assholes.

                    1. “He’s an asshole too, sir. Major Asshole.”

        3. Silicon Valley is an important example of the tension between innovation and regulation.

          When SV started up, California was far more business friendly than today. Up through the Dot Com Boom, you had a concentration of extremely smart, motivated people freely meeting and developing amazing businesses.

          Today, many of those same people thriving in a free market have created barriers to entry. There is a reason why many of the big founders back in the Intel, Sun Microsystems, etc days are now venture capitalists- it is extremely expensive to start a business now in Silicon Valley. There is also a reason why most startups in SV are acquisition plays- populists and liberals have made IPOs so difficult (Sarbanes Oxley, etc) that being eaten by a bigger fish is really the only realistic option for a majority of companies.

          Even so, the dynamics in Silicon Valley continue to educate. The same people who argue day in and day out for mass transit are also the ones benefiting from the private bussing that occurs for companies like Google and Yahoo. That innovation started ending once the government started getting involved, trying to shut down the ‘unfair advantage’ that innovative companies gave to their employees.

          1. The same people who argue day in and day out for mass transit are also the ones benefiting from the private bussing

            To be fair, the transit in SF is complete shit for a city that size. Everyone complains about mass transit there. Some of them are aware that most of the money is going toward boondoggles that benefit the connected, most aren’t.

            1. Mass transit is hated in most american cities- especially those like the Bay Area where you have to connect huge areas.

              The reason corporate transit is great is because everyone is going to the Hub. You don’t hop onto a Yahoo bus unless you are headed to Yahoo.

              Public mass transit must get everyone everywhere, which is much less efficient.

              1. Public mass transit must get everyone everywhere, which is much less efficient.

                No doubt – just pointing out that people in SF have more to complain about than other cities of similar size/density.

        4. Wow, what’s going on today? You people are at each other’s throats and we haven’t even seen an abortion thread yet.

          1. What do you mean, you people?

        5. AWAY FROM DC is the point. Cities, even shitty ones, don’t try to regulate internet companies. Yet.

      2. Actually it doesn’t matter where innovation starts – until it gets big and successful enough to get some control freak’s attention.

  5. You see, this is exactly the kind of anarchistic wishing that gets people killed. This isn’t the Wild West anymore, John.

  6. She calls herself “a government junkie.”

    Jesus. Really? This needs to pointed out in every future attack ad against her.

  7. government safety rules demand that American trains be heavier

    This. I have read that NYC subway cars are something like twice as heavy as they need to be. Keep in mind that half of them run on 100+ year old elevated structures which were built for much lighter cars.

    1. I smell a shovel ready project.

      1. Yeah, right after they get finished outfitting the remaining 300 or so stations with elevators and braille signage.

  8. I brought a megaphone to a skating rink and bossed people around. Some skaters fell. No one thought I’d made skating safer or better.

    Yet this shit keeps happening because the central controllers keep themselves separated from the victims of central control. You don’t hear entrepreneurs testifying before Congress on regulation, just pro-government shills like Sandra Fluke.

  9. You don’t understand! Without government bureaucrats there we’ll have innovation run amok! Innovators are like buccaneers! They’re reckless and need to be restrained by the wise hand of government!

    Besides, without government funded research there would be no innovation at all!

    That’s why we need government to control the economy! Without government control we would have too much innovation and none at all!

    1. Fucking innovators cluttering the market with all their options. How is an average guy supposed to choose the right one?

      A key question confronting policymakers is whether consumers are better or worse off when provided
      with as many health insurance choices as possible. Consumers Union reviewed the substantial literature
      in this area and the evidence is clear. While a few choices are good, too much choice undermines
      consumer decision making, particularly high stakes decisions involving health insurance. Cognitive limits
      with respect to decoding and analyzing data lead individuals to take decision making short-cuts or avoid
      choosing altogether.
      Policymakers should explicitly consider limiting consumers’ health plan choices in the new health
      insurance exchanges to a manageable number.

      http://consumersunion.org/pdf/…..v_2012.pdf

      1. That was shitty formatting. Let me try again.

        A key question confronting policymakers is whether consumers are better or worse off when provided with as many health insurance choices as possible. Consumers Union reviewed the substantial literature in this area and the evidence is clear. While a few choices are good, too much choice undermines consumer decision making, particularly high stakes decisions involving health insurance. Cognitive limits with respect to decoding and analyzing data lead individuals to take decision making short-cuts or avoid choosing altogether.

        Policymakers should explicitly consider limiting consumers’ health plan choices in the new health insurance exchanges to a manageable number.

        1. The wife-unit has been going on and on about this Ted talk about the “paradox of choice.” There’s just **so** much to choose from, that we’re all frozen with indecision!!!

          No, I said, that’s you; you’re completely indecisive about everything. This is confirmation bias talking.

          It’s complete shit, of course. How do I make a decision with all of these choices? JUST MAKE A FUCKING DECISION, THAT’S HOW.

          1. The question becomes “Who will narrow down the set of choices, and what makes them so damn omniscient so as to believe they’ll do it right?”

            Being in government doesn’t endow people with magical powers or knowledge, nor does it negate self interest.

            I was a good little proggie in my youth. At one point I wondered why there were so many different kinds of cars out there. Why not have some really smart people settle on a design for everyone? I’d never heard of the Trabant.

          2. People these days are making a big deal about decision fatigue.

          3. Americans=North Koreans

      2. Yes, the obvious answer is to reduce choices rather than make them easier to understand.

  10. $park?’s head exploded|2.11.15 @ 1:04PM|#

    I think part of the reason for that is the people who really despise the free market are the ones with no real power to affect it. Market strangulation is one area where we should be happy for government inefficiency.

    “The only thing that saves us from the bureaucracy is inefficiency. An efficient bureaucracy is the greatest threat to liberty. -Eugene McCarthy”

    -This Machine

    1. See that, I can sound like some apparently famous smart guy.

      1. Well, you don’t have to brag about it, asshole.

        1. I think Otto said it best when he said “Asshooooooooooole!”

    2. “Thank God that we don’t get all the government that we pay for.” -Will Rogers

  11. “I propose a series of initiatives to bring innovation back to America. It will be reviewed for safety by a group of bipartisan legislators, and will pay a living wage to Americans.”

  12. ‘I tried an expert, too. I got an Olympic skater to direct people. She was no better.’

    Brian Boitano is a she?

    But that was one of the brilliant things about that particular special (it was back when Stossel was still on ABC). He actually asked ‘What would Brian Boitano do?’

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