An expert’s review of “The Internet And The Organization Of Innovation” from the National Bureau of Economic Research (NBER) casts light on the Rasmussen poll that “75% Say Free Markets Better Than Government Management of Economy, Political Class Disagrees.”
The Rasmussen survey, by contrast to the 75% of Likely Voters who say “more competition and less regulation is better for the economy“ finds “America’s Political Class is far less enamored with the virtues of a free market. In fact, Political Class voters [“the clique that revolves around Washington, DC, and Wall Street”] narrowly prefer a government managed economy over free markets by a 44% to 37% margin.”
Professor Shane Greenstein, Northwestern’s Kellogg School of Management examines the origins and development of the Internet.
From a synopsis provided by NBER, he “uses the example of the creation of the internet to analyze the strengths and weaknesses of two distinct ways of organizing a long-term program for accumulating innovation.”
One approach, which characterized the early development of the internet, relies on autonomous research institutions ("skunk works") to organize and nurture innovators. The other, which has applied more recently, relies on commercial markets to aggregate dispersed initiatives from a wide array of entrepreneurial participants.
The "skunk works" approach runs the risk that innovation will veer into areas where there is no demand, and thus no economic value. The pre-commercial Internet avoided some of those dangers because the participants in that phase of the internet assessed value from their own experiences. Their managers, in turn, nurtured them and permitted experimentation to blossom -- leading to useful and innovative applications, such as e-mail and packet switching. In addition, the Department of Defense and the National Science Foundation (NSF) played a pivotal role as "demanders" for innovation. Their substantial funding of research institutions, and their distributed investments to universities, supported the innovative activity that led to the breakthrough technologies that underlie today's Internet. This "skunk works" approach, however, restricted participation and truncated experimentation by excluding innovation along lines that did not support the "acceptable use" requirements of the government agencies. Such restrictions limited learning to an artificially narrow range of issues, and left a wide array of other applications untouched.
In contrast to the early "skunk works" days, the more recent commercial era of the Internet has played to the strength of market-based innovation. It has permitted decentralized exploration from commercial firms facing a wide array of incentives and a wide variety of circumstances. Once released to commercial interests, the Internet became the springboard for a dizzying array of applications that were not envisioned by the sponsoring government agencies. These applications include the World Wide Web and its associated browsing technology.
In other words, government funding or direction of basic research or new programs may be useful and in some cases critical but further development of useful applications, adaptation, and wider spread acceptance and utility are best the province of free enterprise, or as Greenstein calls it "market-oriented and widely distributed investment and adoption."
Instead, in most government programs, the initial laws enacted that seek to foster or enlarge reform or innovation are too often crafted with further government controls in mind or as ignored unintended consequences due to hidden agendas. Not unintended but usually hidden is the self-serving enrichment and enlarged sway of the political class. If initiatives have any validity, they are still often more dangerous than presented just by not being geared to a hand-off to the private sector to adjust and improve but to enlarge the power of the political class while – by the nature of government programs – hindering transparent review and adaptive innovation.
Even in the case of the Internet, as complex and involved in most aspects of business and individual lives as healthcare, if left in the hands of the centralized “skunk works” we wouldn’t have seen the developments we enjoy today. In the case of other government programs, like ObamaCare as one of the worst instances, the clear objectives and consequences are nationalization of close to 20% of the economy and 100% of our lives, and even more stultifying – indeed deadly - to free market development of improved access, delivery and economics.
