Innovation
One of the most important insights regarding innovation: it‘s reactive.
Innovation in Finance has been a reaction to lift financial constraints of individuals and organizations1. It is believed, that the human brain evolved as a reaction to volatility within the environment2. Researchers have documented how institutions are the reaction to environmental context 3.
Next to constraints, regulation is another impulse for innovation:
“The major impulses to successful innovations over the past twenty years have come, I am saddened to have to say, from regulation and taxes”. — Miller, in: Tufano:3184
As marvelous as bitcoin is, the arguments for it reveal a search for a solution as all the constraints within those arguments are already solved. What constraints does it solve? Bitcoin only makes sense if the government itself is seen as a constraint. Even autonomous driving will require insurance to make the case for it by pricing out individuals as human drivers are „so dangerous“5. Electric cars do not resolve some constraint, as long as prices for fossil fuels are subsidized by the externalization of their environmental impact.
Not only did state-financed research lay the ground for today‘s innovation6, a lack of regulation — as well as the mantra of deregulation in politics — have led western societies into stagnating productivity7 8.
Today’s lacking investment means that technology does not substitute for labour — the normal trajectory in capitalism, instead cheap labour substitutes for technology. — Denayer
Deregulation in general is not possible — rules define the system9. Behind the buzzword is just a mere transfer of regulatory power from the state to private corporations which results in volatility for citizens, externalization and applied innovation. Which is acceptable, in case of regulatory frameworks for accountability, informational transparency and competition as well as an sound institutional frameworks10.
It is time to accept, that politics is needed to set priorities for future development via fundings.
Silber, W. L. (1983). The American Economic Review, Vol. 73, No. 2, Papers and Proceedings of the Ninety-Fifth Annual Meeting of the American Economic Association (pp. 89–95). American Economic Association.↩︎
Townsley, G. (2013). Die Anfänge der Menschheit – Vom Affen zum Menschen. ZDF/ARTE.↩︎
Mayshar, J., Moav, O., Neeman, Z. and Pascali, L. (2015). Cereals, Appropriability and Hierarchy. CAGE Online Working Paper Series 238, Competitive Advantage in the Global Economy (CAGE).↩︎
Tufano, P. (2003). Chapter 6 – Financial Innovation. Handbook of the Economics of Finance, Vol. 1, Part A (pp. 1–604), Edited by Constantinides, G. M., Harris, M. and Stulz, R. M. Elsevier.↩︎
Williams, R. (2017). Driverless cars: the arguments for and against. Access via https://inews.co.uk/news/technology/when-will-we-become-comfortable-with-driverless-cars/ [Feb 18 2018].↩︎
Mazzucato, M. (2015). From Market Fixing to Market-Creating: A new framework for economic policy. Working Paper 2/2015. ISI Growth.↩︎
Denayer, W. (2018). How inequality is evolving and why. Access via http://www.flassbeck-economics.com/how-inequality-is-evolving-and-why/ [Feb 11 2018].↩︎
Kopf, D. (2017). Robots aren’t killing jobs fast enough—and we should be worried. Access via https://qz.com/1146747/robots-arent-killing-jobs-fast-enough-and-we-should-be-worried/ [Dec 8 2017].↩︎
Meadows, D. H. (2009). Thinking in Systems - A Primer. 978-1-84407-726-0. Earthscan.↩︎
Levine, R. (2005). Bank Regulation and Supervision. Access via http://www.nber.org/reporter/fall05/levine.html [Dec 30 2009].↩︎