American Elephants


A Perpetual Motion Machine called Innovation by The Elephant's Child

British columnist Matt Ridley is always worth reading, but yesterday’s column was special.  He wrote:

When you think about it, what has happened to human society in the last 300 years is pretty weird. After trundling along with horses and sailboats, slaves and swords, for millennia, we suddenly got steam engines and search engines, and planes and cars and electricity and computers and social media and DNA sequences. We gave ourselves a perpetual motion machine called innovation. The more we innovated, the more innovation became possible.

It’s by far the biggest story of the last three centuries—the main cause of the decline of extreme poverty to unprecedented levels—yet we know curiously little about why it happened, let alone when and where and how it can be made to continue. It certainly did not start as a result of deliberate policy. Even today, beyond throwing money at scientists in the hope they might start businesses, and subsidies at businesses in the hope they might deliver products, we don’t have much of an idea how to encourage innovation at the political level.

What’s more, free-market economists have been in a special muddle about innovation for a long time. The economics profession spent a couple of centuries assuming that markets tend towards equilibria, through the invisible hand. Hence John Stuart Mill and John Maynard Keynes and pretty well everybody else in between assumed that we would see diminishing returns come to dominate human endeavour. But instead we experienced increasing returns, accelerating invention. As the author David Warsh put it in his book Knowledge and the Wealth of Nations (2006) some years ago, economists obsessed about Adam Smith’s invisible hand but forgot about his pin factory, where specialisation led to innovation.

One of my favorite histories is by John Steele Gordon, who deals with just that: the “Epic History of American Economic Power” in An Empire of Wealth. It’s a great read, and I recommend it enthusiastically. We are seeing all sorts of articles about the horrors of Socialism in the wake of Bernie Sanders, but this one deals with the other part: why Capitalism works and that a state that advances and encourages innovation is a result of a free people and an open society.

How some people can fail to understand those simple facts is apparently due to the failure of our schools and our colleges and universities. Many of our states do not require basic civics and history for graduation, a situation that drastically needs attention. Our colleges and universities are staffed to a significant extent with those who went for graduate degrees as a way to escape the draft for the Vietnamese War. You can hear that echo in banned or protested speakers on campus, and campus demonstrations.


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