Government Holds the Promise of Faster Growth … One of the U.S.’s biggest economic challenges is the slump in productivity. After climbing steadily for many decades, productivity has slowed dramatically since 2011: Productivity is the key to long-term prosperity. It represents a hard ceiling on the amount of valuable things that a society is able to produce. If productivity flatlines, it means that the pie isn’t growing, and there will be less to divide up among us. So finding the cause of the slowdown is a big, important task.-Bloomberg
We almost never agree with Bloomberg’s Noah Smith, but he is habitually provocative.
This editorial is no exception. His point here is that, “Many economists have slowly been warming to the idea that government, far from being ‘the problem’ (as Ronald Reagan put it), might actually be a big part of the solution.”
Recently, some economists have suggested that government can play a vital role in innovation, technological progress and productivity growth. One of these has been the University of Sussex’s Mariana Mazzucato, who champions the idea that government research is behind most of our major innovations.
But recently, she has been joined by some very heavy hitters: Daron Acemoglu of Massachusetts Institute of Technology and James Robinson of the University of Chicago. Acemoglu and Robinson are known for their theory that good government is critical to economic development.
They believe that strong institutions, such as property rights and the rule of law, are the key to allowing countries to unleash their productive potential. But more recently, these economists have come up with an even bolder thesis. Government, they say, might be central to technological progress itself.
This new approach to economics is called “state capacity.” The state, it turns out, supports innovation and creativity. “It’s a necessary and crucial input.”
To try to figure out if they could prove their hypothesis, they examined counties in the US that had post offices in the 19th century and then checked the amounts of patents filed.
In fact, they did find that having a post office correlated with increased patents.
Taken together – while we do not establish unambiguously that the post office and greater state capacity caused an increase in patenting – our results…suggest that the infrastructural capacity of the US state played an important role in sustaining 19th century innovation and technological change.
They suggest that people stop thinking of the government as the enemy of progress and start contemplating ways that government can help with problem solving.
Government provides “infrastructure, education reforms, more research funding, even government-sponsored angel investing.”
This seems to us to be a freakishly Pollyannaish perspective. Take government angel-investing.
The CIA put lots of money into various technologies companies in the past several decades. But its biggest successes are perhaps Facebook and Google.
Both Facebook and Google are relentless anti-privacy machines that collect data that inevitably finds its way into government hands.
Together, they are purposefully destroying the remnants of pre-Internet privacy. They are doing this at the behest of the US government in order facilitate further authoritarian snooping and worse.
Once government believes it has a firm comprehension of its “enemies,” much worse often takes place. This has happened over and over throughout history.
Government is rarely the people’s “friend.” Only perhaps when it is organized as a republic and rests lightly on the shoulders.
But that is rarely the case. In fact, the real problem with government is that the people running it are never the people who SEEM to be running it.
And the people who are really leading governments from a variety of secret places are almost always in conflict with the larger mass of the populace. They tend to be paranoid, suspicious and eventually murderous.
Within this context, it is hard to imagine that government can do much to foster innovation.
Almost everything government does, or wants to do, involves setting up additional controls to insulate the leaders from those they lead.
This leads almost inevitably, sooner or later, to various kinds of genocide. As a given government grows more bloody, it also begins to run down. Authoritarian governments implode.
Conclusion: The bottom line is that government operates by force. It is hard to comprehend how creative endeavors can be cultivated by authoritarian monopolies.