TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

Reihan Salam links to a post by Ross Eisenbrey which argues that government, not business or markets, is primarily responsible for innovation we’ve seen in technology:

Mazzucato suggests that, given the extent to which tech companies like Apple and Intel owe their great good fortune to the federal government’s investment in R&D, they should share more of their profits with the taxpayers. Instead, of course, Apple has been offshoring profits to avoid taxation and most of the tech industry is contributing to the efforts of the U.S Chamber of Commerce and the rest of the organized business lobby to cut corporate taxes and shrink the government. As Mazzucato makes clear, cutting taxes and the government is no recipe for an innovative, competitive future—just the opposite. 

Mazzucato points out that many of the iPhone’s core technologies, such as solid state storage, capacitive sensors and GPS, all have their roots in government-sponsored labs. She presumes, then, that government is therefore largely responsible for the innovation itself, and so (1) we should continue supporting government-funded research projects, and (2) those companies that benefit from taxpayer “risk-taking” should “share” more of their profits with the government.

But as Salam points out, companies have no moral obligation to do so. The government funded much of that research for its own purposes. Salam writes:

The U.S. government devised the technologies Mazzucato identifies for its own, usually defense-oriented reasons. Mazzucato implicitly suggests that in a counterfactual universe in which the Cold War had never taken place, and in which defense expenditures hadn’t diverted spending from other domains or forced higher tax levels, etc., innovations in information technology would not have taken place either. The decades that preceded the Cold War, during which there was considerable private sector innovation in early information technologies, suggests that this is not the case, but of course we can’t really say.

What’s worse, though, is that requiring some formative compensation for that research would undermine the very innovation that Eisenbrey and Mazzucato claim that the government was actually responsible for. Salam again:

As Amar Bhidé often notes, an Englishman pioneered the World Wide Web under the auspices of the government-financed CERN laboratory in Switzerland, yet the U.S. has been the main source of consumer internet innovation. U.S. internet firms do not, however, pay the Swiss and other European governments a formal innovation bounty. Part of the reason is that everyone profits from the free flow of knowledge, which is why excessive patents are such an economic scourge.

The reason is that doing so would reduce that free flow of information, and therefore the actual work it takes to create a useful product and bring it to market. Eisenbrey conveniently skips over the 1970s, 1980s, 1990s, and 2000s where technology companies invested huge sums of capital and work into developing these base technologies into something useful for consumers, and into something consumers would buy. There’s an implied derision at that effort as something other than innovation, but it absolutely is, and it’s what actually makes those technologies useful for people. Without those companies continuing to iterate on solid state storage, and without other companies creating salable products that utilize it, solid state storage never would have been anything more than a curiosity in a lab. Similarly, without Intel developing the microprocessor, and without Apple, Microsoft and the PC makers creating PCs for those microprocessors that appealed to consumers, they never would have developed like they have, either. And as a result, those technologies never would have evolved enough to create a handheld, touchscreen phone that’s always connected to the web. It would have been impossible.

Note, however, that story doesn’t minimize the role of government-funded research. Rather, it shows that it plays a role in innovation, but it is not the entire story by any stretch. And it shows, too, why the free flow of ideas and technology is so important. Without it, there can be very little actual innovation, because “innovation” inherently means seeing a connection between disparate ideas and technologies, how they can fulfill a need for people, and putting them together such that it creates something that didn’t really exist before. Innovation may be greater than the sum of its parts, but it is nonetheless the summation of many different things that already exist. Placing formal restrictions on those ideas, such as overbearing patents or, in this case, requirements to pay back more to the government which claims responsibility for them and state direction of innovation, impedes that flow of ideas and innovation as a result.

This is why simplistic stories about where new ideas and products come from, and simplistic moral stories about who deserves what for those ideas and products, can be so damaging—they elide much more complicated systems.