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Quotation of the Day…

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… is from page 346 of Matt Ridley’s important 2010 book, The Rational Optimist: The future will feature ideas that are barely glints in engineers’ eyes right now – devices in space to harness the solar wind, say, or the rotational energy of the earth; or devices to shade the planet with mirrors placed at the Lagrange Point between the sun and the earth. How do I know? Because ingenuity is rampant as never before in this massively networked world and the rate of innovation is accelerating, through serendipitous searching, not deliberate planning. When asked at the Chicago World Fair in 1893 which invention would most likely have a big impact in the twentieth century, nobody mentioned the automobile, let alone the mobile phone. So even more today you cannot begin to imagine the

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Don Boudreaux writes Quotation of the Day…

Don Boudreaux writes Quotation of the Day…

… is from page 346 of Matt Ridley’s important 2010 book, The Rational Optimist:

Quotation of the Day…The future will feature ideas that are barely glints in engineers’ eyes right now – devices in space to harness the solar wind, say, or the rotational energy of the earth; or devices to shade the planet with mirrors placed at the Lagrange Point between the sun and the earth. How do I know? Because ingenuity is rampant as never before in this massively networked world and the rate of innovation is accelerating, through serendipitous searching, not deliberate planning. When asked at the Chicago World Fair in 1893 which invention would most likely have a big impact in the twentieth century, nobody mentioned the automobile, let alone the mobile phone. So even more today you cannot begin to imagine the technologies that will be portentous and commonplace in 2100.

DBx: Economic growth beyond the trivial – that is, economic growth of the sort that has been so noticeable over the past two centuries – requires innovation. Innovation, in turn, requires creativity. Creativity by its very nature cannot be foreseen in detail. (Anyone who insists that he or she does possess such miraculous foresight can easily prove the claim by entering the stock market and in a matter of months becoming a gazillionaire.)

Creativity, therefore, cannot be planned or included in any meaningful way in any government plan for the economy or for any sector of the economy.

And so if and to the extent that government plans the economy – say, by adopting any of the many varieties of industrial policy proposed by the likes of Robert Reich, Oren Cass, or Daniel McCarthy – government rids the planned part of the economy of creativity and, hence, of innovation. By so ridding any part of the economy of innovation, the government would thereby prevent the economy from growing.

But the government would make matters even worse by ridding any part of the economy of innovation: it would also launch that part of the economy onto a path of decline. The reason is that innovation is necessary to deal with unexpected changes such as reductions in raw-material supplies and changes in consumer demand. Critical to the economy’s ability to ‘absorb’ such changes – changes which happen incessantly – is the process of discovering effective ways of dealing with them, and these effective ways are often the result of innovation (that is to say, of creativity).

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Don Boudreaux
He is a professor of economics at George Mason University in Fairfax, Virginia. Previously, he was president of the Foundation for Economic Education.

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