- - Sunday, July 26, 2015

In this age of accelerating technology, there is no more important policy than to encourage innovation. Innovation is the primary source of economic growth.

New innovative businesses, like Google and Uber, transform our lives for the better. Innovation builds on innovation, compounding growth from generation to generation. As the Nobel Prize winning economist Bob Lucas once said, “Once one thinks about exponential growth, it is hard to think about anything else.”

Innovation in the modern era also tends to make us more equal. Innovation creates a stream of new ideas that are rapidly enjoyed by the great mass of people. Material goods are scarce because individuals can by and large not enjoy the same material simultaneously. But ideas can be enjoyed by all. To be sure, some innovations are patented, but patents expire. And, as better innovations come along, the old patents rapidly become less valuable. That is one reason that smart phones have so rapidly become available to people of modest means. Thus, the greater the supply of innovations, the greater the common pool from which almost everyone can benefit.

Given that innovation can help both to promote growth and to temper inequality, we should demand that all politicians tell us what they will do to speed it up. That means, most importantly, clearing away obstacles that government puts in the way.

Locally, the government should eliminate regulations that block the entry of new firms offering disruptive technologies. At the local level, for instance, urban residents would benefit from innovative big-box stores and from new car-sharing programs enabled by smart phones. Sadly, however, many politicians, like Bill de Blasio, the Mayor of New York City, are trying to hamper Uber’s expansion rather than facilitate it.



Nationally, the government can curb the natural tendency of the administrative state to over-regulate. Congress should pass the REINS Act, which would make members of Congress, not bureaucrats, responsible for enacting the most burdensome regulations. Agencies should be required to periodically evaluate existing regulations and scrap those that do not work. Congress should consider the innovative proposal of Michael Rappaport of San Diego Law School for a deregulatory agency, whose sole job it would be to get rid of regulations.

Around the globe, more open immigration policies for the talented would increase innovation. The free movement of people allows collaboration where it will lead to the most innovation. Even in our era of digital communication, engineers in places like Silicon Valley in California and Silicon Alley in Manhattan innovate more effectively by working in close quarters.

Innovation would benefit more generally from restraints on government, because the ease of living off the government draws people away from innovation. For instance, the too-big-to-fail regime directs our best and brightest graduates to finance rather than creating the next Google. It is, of course, true that efficient capital markets help innovation, but the government need not prop up big banks to make these markets flourish.

Excessive protections of intellectual property can actually decrease the rate of innovation. In his excellent book, Launching the Innovation Renaissance, George Mason University economist Alex Tabarrok notes that there has been a great deal of innovation in the field of fashion, where intellectual-property protections are very limited. By contrast, software developers often use their strong intellectual patent protections to press litigation to prevent innovation by competitors. Of course, as Tabarrok also notes, firms in some sectors — like the pharmaceutical industry — do need protection to incentivize large investments. We need greater differentiation in the development of intellectual-property laws to ensure that they promote optimal innovation. One-size-fits all intellectual property is simply too blunt an instrument.

To be sure, there are some areas where we do need more government support. Private enterprise is not likely to invest sufficiently in basic research because it is often difficult to predict where there are opportunities for patents. Indeed, some ideas, like natural processes, are not patentable at all and companies cannot reap the advantage of discoveries, even if they would lead to beneficial breakthroughs. Thus, one of President Obama’s best decisions of was to provide more government funding for research on the human brain. Discoveries here could ultimately save the government huge amounts of money that would have otherwise been spent on dealing with degenerative neurological diseases.

Focusing politics on improving innovation also has a political benefit that transcends economics. Unlike government transfers from one group to another or social issues that split us along cultural or religious lines, innovation benefits us all. It is a politics of union rather than division.

John O. McGinnis is the George C. Dix Professor in Constitutional Law at Northwestern University. He is the author of Accelerating Democracy: Transforming Government Through Technology (Princeton 2013) and Originalism and the Good Constitution (Harvard 2013) (with M. Rappaport).

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