Here is another really interesting cover story from The Economist. I find their editorial stance to be perplexingly schizophrenic. They routinely support candidates and elected officials whose stance is for more government intervention. And yet whenever it comes to discussing the need for entrepreneurship, economic growth, or innovation, government is the wrench in the works. Here is a quote:
“So there are good reasons for thinking that the 21st century’s innovative juices will flow fast. But there are also reasons to watch out for impediments. The biggest danger is government.
When government was smaller, innovation was easier. Industrialists could introduce new processes or change a product’s design without a man from the ministry claiming some regulation had been broken. It is a good thing that these days pharmaceuticals are stringently tested and factory emissions controlled. But officialdom tends to write far more rules than are necessary for the public good; and thickets of red tape strangle innovation. Even many regulations designed to help innovation are not working well. The West’s intellectual-property system, for instance, is a mess, because it grants too many patents of dubious merit.
The state has also notably failed to open itself up to innovation. Productivity is mostly stagnant in the public sector. Unions have often managed to prevent governments even publishing the performance indicators which, elsewhere, have encouraged managers to innovate. There is vast scope for IT to boost productivity in health care and education, if only those sectors were more open to change.”
So — what do you think? What should the government’s role be in encouraging innovation? How can it best do this without “picking winners” (which government rarely does well; frankly – professional investors don’t do it all that well!)