Coyote Blog answers Ezra Klein


Why government can't invent
There's an outstanding article at Coyote Blog.

Let’s take a different example, because medicine is so screwed up by government intervention that it can be confusing.  Let’s imagine ourselves in the computer market in 1974.  The market is dominated by IBM mainframes, and innovation at the time was considered to be the penetration of mini computers (not to be confused with PCs, these were really just smaller mainframes) by DEC and HP.

Let’s say that for some reason the US government decides it is fed up with the IBM “monopoly” and the high cost of mainframe computing and it wants to take over.  It feels like there is a lot of waste in mainframes as some people are using them for frivolous reasons while other companies who really need them can’t afford them.  They might have created review boards to make sure that they thought each dollar spent on computing hardware and software was “worth it.”

So, how much spending is needed to maintain innovation?  We know in hindsight that the PC revolution is looming in the next few years.  And in that context, Klein’s question is absurd.  The answer is that spending per se, and even profits, in the mainframe computing market were irrelevant to the coming series of innovations.    The necessary preconditions were that entrepreneurs saw that new technology provided potential new value to consumers, and were allowed the freedom to launch these new products in hopes that the value these new products provided would be sufficiently high that consumers would pay enough for them to return their cost of manufacture and development and return them a profit.  Some succeeded, and some failed, but entrepreneurs were allowed to try, despite most “experts” predicting the PC was a silly toy.

Note that computer innovators were not required to trundle into some government computing board to justify the PC and its price, to justify how much, as Klein would say, needed to be spent on PC’s.   If in fact they were forced to do so, if Jobs and Wozniak had to fly to Washington to justify the Apple I to the Computing Spending Decisions Board, they would have almost certainly been shot down.  Or told they could sell it but only for $200 and not their initial price of $2000.  We would have never had a PC revolution in a government single payer computing world, no matter how much, as Klein asks, was “spent” by the government.   It is possible that the government might eventually have greenlighted a PC (years later) just as the increasingly bureaucratic IBM did, but can you imagine how frail the PC revolution would would be if only IBM had ever sold PCs, without the slew of competitors that emerged, and if every innovation had to pass the scrutiny of a government review board before it could be launched?   Only a tiny percentage of PC innovation and of what we think of as a PC today, mostly in the basic architecture, ever came from IBM.

The piece is worth your time. And while you're reading, you might look at Yesterday and today from the Pagan Vigil archives.

— NeoWayland

Posted: Sun - September 20, 2009 at 01:51 PM  Tag


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