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The New American System – American Innovation to Help Us Break Out of This Economic Rut

american_innovationJim Manzi is the founder and chairman of Applied Predictive Technologies, and one of the originators of cloud computing. He is also a well-known libertarian/conservative thinker, a senior fellow at the Manhattan Institute, and a contributing editor to the National Review. Between his tech background and his politics, he’s about the last person you’d expect to praise the historic role government has played in the critical business of innovation — or to call for that role to be stepped up in the here and now.

But that’s exactly what Manzi has done in a new and important essay in the spring issue of National Affairs — an essay that is getting widespread attention. Titled “The New American System,” Manzi’s essential point is that American innovation — the key to our prosperity — has always relied, to some extent, on government support. In the early days of the republic, he writes, Alexander Hamilton proposed government help for the developing manufacturing industries — “the high-tech sector of its day.” Hamilton’s basic insight, he adds, was “that the enormous economic value that innovative industries could offer the nation merited public efforts to enable their success.”

The nation’s approach to achieving innovation has varied with the times, but it has generally demonstrated an almost ruthless pragmatism in implementing the core principles of free markets and strong property rights, overlaid with decisive government investments in infrastructure, human capital, and new technologies.

But significant government overlays have always existed to reinforce our free economy. Indeed, the federal government has been active in shaping specific kinds of innovation since the first months of the republic, when Alexander Hamilton published his epochal 1791 Report on Manufactures. The Report proposed subsidies and protections for developing manufacturing industries — the high-tech sector of its day — to be paid for by tariffs.

The most important part of Manzi’s article deals with what government ought to be doing now to promote innovation. The process of innovation has changed. In Manzi’s view, American innovation has become a process of trial and error, with companies “trying different approaches with relatively few limits on their freedom to experiment and consumers choosing freely among them in search of the best value.” Many efforts will end in failure — and propping up failure is precisely what the government should not do.

Read the full article here:

Via: The New York Times


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