Risk, Regulation, and the Innovation Slowdown
The slowdown of innovation is a broad problem — and a growing one. It has nothing to do with limits to human ingenuity but rather reflects the flaws in the type of capitalism that has evolved in the West over the past 40 years. Now the existential challenge that capitalism faces is the growing resistance to innovation.
The great value of innovation is not merely in invention but rather in the forces of diffusion and adaptation. And real innovation requires an economy that runs on the culture of experimentation; one that is open to innovators and entrepreneurs contesting markets. Legislators today actively try to shield businesses from these forces. Now the existential challenge that capitalism faces is the growing resistance to innovation.
There are other forces and events shaping capitalism, and making it increasingly constrained. As they progressed and were enforced, capitalism changed its character and is now different from its textbook version. It is often argued that recent innovation has caused incomes to stagnate and employment opportunities to be reduced. That analysis is completely wrong. The West’s economic illness is due to too little innovation and creative destruction; not too much.