An Innovation Agenda For Growth and Equality

In my last two posts, I suggested that technological innovation is an important and undercounted source of economic growth and that it helps temper inequality by creating new ideas that can rapidly be enjoyed by most people. Thus, any agenda for increasing economic growth and reducing inequality should focus on increasing innovation and decreasing barriers to its enjoyment. Here are four items for an innovation agenda.

1. Clear obstacles to innovation. Federal, state, and local governments should eliminate regulations that make it harder for new firms offering disruptive technologies to enter markets. At the local level, for instance, big-box stores are often thwarted by big-city labor unions. Low-income urban residents in particular would could purchase cheaper goods from such outlets. The middle class would benefit from access to new car services, like Uber, that allow individuals to contract with taxis and private cars by smart phone. It is a service that gives one almost the equivalent of a chauffeur at beck and call—previously the province of the extremely rich.

2. Shrink protections for firms that are “too big to fail.” By increasing returns in the financial sector, these protections encourage talented people go into banking instead of other areas, such as high tech, that would produce innovations that could be quickly shared.

3. Improve intellectual property laws. Some laws make it harder to share innovative ideas. In some sectors, such as software development, companies use patent litigation to prevent innovation by their competitors. Further, as Alex Tabarrok observes in his excellent book, Launching the Innovation Renaissance, IP protection is not a prerequisite for innovation. He cites the fashion industry as an example. Greater protection may be justified in areas that require large investments to develop products that are hard to discover and easy to copy, like pharmaceuticals. But not all industries are like that. Differentiated intellectual property laws could help promote innovation more optimally.

4. Fund basic science research. Basic science cannot easily be patented, and private companies will underfund basic scientific research to the extent that they do not capture all of its benefits. Some basic research, such as the discovery of some natural processes, cannot be patented at all, as the Supreme Court reminded us this last term in the Myriad case. Government could increase funding for this research to the enormous benefit of both companies and their customers, who derive value in excess of what they pay for innovative products. Programs like the President’s BRAIN initiative  which matches foundation funds to study the brain are worth taxpayers’ support.


John O. McGinnis

John O. McGinnis is the George C. Dix Professor in Constitutional Law at Northwestern University. His book Accelerating Democracy was published by Princeton University Press in 2012. McGinnis is also the coauthor with Mike Rappaport of Originalism and the Good Constitution published by Harvard University Press in 2013 . He is a graduate of Harvard College, Balliol College, Oxford, and Harvard Law School. He has published in leading law reviews, including the Harvard, Chicago, and Stanford Law Reviews and the Yale Law Journal, and in journals of opinion, including National Affairs and National Review.

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  1. R Richard Schweitzer says

    Innovation is a derivative of imagination.

    Imagination is an expression of individuality.
    (it is *not* a “committee” or “council” activity)

    The gestations of innovations require the functions of Entrepreneurs who bring together “ideas” with the means for realization. Sometimes the entrepreneurs are also innovators; more often the functions are disparate; but, both are sourced in individual imagination; individuality is requisite.

    A cultural or ideological objective of “equality” amongst humans and in their interactions results in eliminations or suppressions of the differentiations that mark individualities. Where those specific objectives rise in predominance in a society, individuality recedes; often is even repressed; or, shunted into perverted forms of expression which affect, but seldom enrich, the culture.

    Individuality, whose emergence scholars note in the 12th century, its developments in the lowlands of Northwestern Europe and England that formed the base of Western Civilization from about 1500, shows signs of recession in most of the West as specific objectives of social organization are formed from various concepts of “fairness” and “equality” as *results* of human interactions, rather than as qualities of the individualities of the members of society.

  2. says

    Good observation, RRS. However, there is more work to be done. Mr. McGinnis states:

    “…I suggested that technological innovation is an important and undercounted source of economic growth and that it helps temper inequality by creating new ideas that can rapidly be enjoyed by most people.”

    This leaves unanswered the leftist’s obvious retort: “So?”

    Innovation is not a universally desirable entity, and “inequality” is sometimes a euphemism for a means to very paradoxical ends. Opposition to innovation was not limited to some quirky Luddites; it was the policy of the Khmer Rouge, the “Down to the Countryside” movement of the Chinese Cultural Revolution, and virtually every centrally planned economy. Innovative advances such as genetically modified foods, fracking, drones and designer drugs are regarded as evils in themselves. Some very good people are innovation skeptics; the Amish are notably hard sells when it comes to technological advancement. On the flip side, the Nazis were big into innovation, from the V2 to T4, panzerfaust to selective breeding, they found innovation agreeable to some very dark purposes.

    “Innovation” is neither an inherent good or evil. It has its place; it has its uses and misuses. There are a great many innovations that instill an irrational fear of dystopian futures and totaliltarian excesses, just as there are innovations that hold out promise for better, more meaningful lives. The challenge for the libertarian thinker is to convince others that the best conditions for promoting the benefits of innovation and minimizing its threats arise from the character and decency of free people.

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