I'm not a big fan of capitalism to the extent it leads to massive income disparities if unregulated.
Not surprised that the WSJ doesn't mentioned it. For the WSJ and its readers, capitalism is a given and it's not even worth acknowledging there may be alternative economic systems.
Thanks Jim! I agree, it's undeniable that class income disparities have increased in the U.S. I just found the census data showing that from 1967 to today (at the link below). So, what do you think we should do about innovation? The decades since 1967 in the U.S. have undeniably been phenomenal years for innovation, and overall, quality of life has increased for all quintiles, including the lowest ones, even though the disparities between quintiles have increased. The second link below is to a graph showing that even the lowest quintile has experienced a 17 percent increase in real wages (after adjusting for inflation) since 1967.
But economics and politics aren't my expertise, so I'm more interested in, what can we do about creativity and innovation? Maybe we can't avoid the politics. There's some evidence that some of the policies being proposed to reduce income disparities (regulation, guaranteed minimum income, increasing unionization, certain types of redistribution) would risk reducing innovation economy-wide, which would then reduce productivity increases, and this would keep everyone's life exactly the same instead of raising everyone up. I'd hate to think that regulations to even out the income distribution would necessarily reduce societal innovation. What can we do as a country to keep everyone innovating while also reducing income inequality?
I was reminded of the famous silly comment by Michael Dell about high tax rates, "Name one country where that worked." Capitalism works for everyone as long as it's regulated and focused on long-term stability instead of short-term profits. We also need to recognize that some people need assistance, and providing that assistance from the beginning --- maybe to the point of universal basic income ---will make our society stronger and better for everyone.
Billionaires don't get to be billionaires by being concerned about other people and fostering their creative opportunities.
Denis, I think you are exactly right. I knew my Substack would be provocative and maybe I made it overly provocative, but at least so far, I haven't gotten any hate mail--only these insightful comments from all of you. So, thank you all! But, see my response to JimS above, with a link to a graph showing that even the lowest quintile has seen an increase in real wages. You used the words "benefit proportionately" and that's exactly what is debatable, although the discussion of what is "proportional" is always political, I think.
So I come back to my question: How can we implement these sorts of government policies without reducing the incentives for innovation that markets provide? For example, I've read some economists saying that the reason why we have high drug prices in the U.S. is because it supports the invention of new drugs, a very expensive process. Almost all of the new pharmaceuticals come from U.S. for-profit companies, not from countries with government healthcare, at least that's my impression, and if we didn't allow those companies to benefit from their innovations, wouldn't we have fewer lifesaving new drugs? I'm not convinced of that argument, but it's the sort of defense of markets that I rarely read in the media. And, try to ask ChatGPT to say something good about capitalism: It's extremely hard to get it to; its first three or four answers are about how bad capitalism is. Then, eventually, it admits that yes, innovation is higher in a market-based economy.
It's provocative but I think the topic is avoided too often. I read a lot of innovation researchers who are business school professors, and they do great research on fostering innovation. But they never (or rarely) talk about the role of markets in fostering innovation. It's safer to talk about "creating value" and "increasing productivity" when what is also going on is "people losing jobs." Chuck, you are an innovation expert. Wouldn't it be depressing if we thought that innovations led to undesirable societal outcomes? I prefer to point to the graph showing that even the bottom quintile experienced an increase in real wages. But I've always been an optimist!
Hey everybody, I changed the subtitle of my post to "The United States has both. Is that a good thing?" I decided that my original subtitle was too uncritical. (It used to be "And that's why 2025 will be a great year for America") What do you think?
Hi Keith, I enjoyed your article and the links drawn between markets, productivity, and innovation. I’m curious what you make of this 2% increase in productivity as it relates to education. If US schools have been moving away from progressive notions of creativity in the classroom, how do you think companies learn to innovate? Perhaps this raises questions about the significance of schooling in preparing minds to innovate.
You mention that a lot of productivity "comes from making the economy more logical, more sensible, and more efficient." Would further integration of creative, innovative, and entrepreneurial learning in K-12 schools amount to even greater productivity and labor market efficiency down the road?
I am a free market guy who believes (and has observed by studying history) that capitalism outperforms all other systems. Is capitalism perfect? Nope. But the alternatives are far worse. Humans are not perfect, and capitalism does the best job of correcting for human imperfections. I've traveled a lot. Actually, more than a lot. So, I have seen first hand how the different systems work (don't work). Heck, I was in Russia six months after the fall/collapse. I also spent thirty years reading and thinking about different systems. Sorry that so many people are hostile to free market ideology. People will attack you for the views you expressed, even though you are correct. Thanks for your bravery.
It's funny how people recoil when I use the word "capitalism." Tim, I agree with you, and with JimS: of course, it is flawed; it results in an unequal distribution of wealth. If you've been through college, you will be familiar with the criticisms. But I wouldn't be surprised if you never learned of any benefits during your four years in college; I didn't. I'm a professor in a School of Education, where everyone takes it as gospel that capitalism is evil, racist, white supremacist, you name it. They don't simply think it's a bad economic system; they think it's an immoral affront to human nature. Wait a second, that sounds familiar...Oh, right, that was Karl Marx, who I read in graduate school, but that professor also assigned Adam Smith--thank you, Professor Moishe Postpone, the brilliant neo-Marxist Habermas scholar (he also assigned Habermas). Rest in Peace
Thanks for sharing. It is an interesting analysis. I think it is obvious China is a capitalist society, with some state-owned companies.
Fact:
China has the world's 2nd largest venture capital industry. The industry literally has "capital" in its name.
If you still think China is going to lose because it is not embracing capitalism, I don't know what to say. No wonder China is closing the gap so quickly and America is still dreaming.
China is embracing capitalism so much that it draws a lot of criticism of treating workers poorly and paying low wages, although both aspects are improving over the years.
Many people treat authoritarian government as a symbol of communism, as if capitalist society cannot exist under an authoritarian regime.
Kai, Welcome to this Substack and thank you for posting! I went to your Substack "about" page and it says that you are a published expert in creativity and innovation and you have a Ph.D. in technology management. I wanted to learn more about your research, and you've had a Substack for ten months, but you don't have any Substack posts yet. So then I looked and found a list of your publications on Google Scholar. I looked at a couple, and you are an interesting scholar! I also found your YouTube channel with several interesting videos. So, again, welcome to my Substack! If you're based in the U.S., you probably already know that what I say in my post about China's economy is conventional wisdom in the U.S. foreign policy establishment--I didn't just make this up on my own.
Anyway, I didn't mean to get in an argument about China! What I'm more interested in is creativity, and you are a creativity expert, so I'd like to know what you think: What is China doing to foster innovation in the economy? If there are such policies, they are not reported in the U.S. discussion about China's economy. And also, what do you think that China could do better? If you were hired as a consultant by the Chinese government, what changes would you recommend?
I have worked in the creativity and innovation sectors for three decades. I know many of the gurus (globally) first hand. China has used a lot of Edward de Bono's thinking tools. I know, because I was asked to go there to do the training. China also uses a lot of TRIZ. Check of the TRIZ conferences. I recommend Keith's book Zig Zag if you want some quick wins to become more creative. If you want to understand creativity better, read Keith's other books.
I'm not a big fan of capitalism to the extent it leads to massive income disparities if unregulated.
Not surprised that the WSJ doesn't mentioned it. For the WSJ and its readers, capitalism is a given and it's not even worth acknowledging there may be alternative economic systems.
Thanks Jim! I agree, it's undeniable that class income disparities have increased in the U.S. I just found the census data showing that from 1967 to today (at the link below). So, what do you think we should do about innovation? The decades since 1967 in the U.S. have undeniably been phenomenal years for innovation, and overall, quality of life has increased for all quintiles, including the lowest ones, even though the disparities between quintiles have increased. The second link below is to a graph showing that even the lowest quintile has experienced a 17 percent increase in real wages (after adjusting for inflation) since 1967.
But economics and politics aren't my expertise, so I'm more interested in, what can we do about creativity and innovation? Maybe we can't avoid the politics. There's some evidence that some of the policies being proposed to reduce income disparities (regulation, guaranteed minimum income, increasing unionization, certain types of redistribution) would risk reducing innovation economy-wide, which would then reduce productivity increases, and this would keep everyone's life exactly the same instead of raising everyone up. I'd hate to think that regulations to even out the income distribution would necessarily reduce societal innovation. What can we do as a country to keep everyone innovating while also reducing income inequality?
https://www.advisorperspectives.com/dshort/updates/2023/09/13/u-s-household-incomes-a-50-year-perspective
https://www.visualcapitalist.com/growth-in-real-wages-over-time-by-income-group-usa-1979-2023/
You pointed out what was missing from the WSJ article. I believe what was missing from your analysis was any mention of the rising gap between productivity and wages, e.g., https://www.epi.org/productivity-pay-gap/, https://usafacts.org/articles/what-is-labor-productivity-and-how-has-it-changed-in-the-us-over-time/. That's why people are against capitalism as currently practiced: those working to effect the increases in productivity do not benefit proportionately.
I was reminded of the famous silly comment by Michael Dell about high tax rates, "Name one country where that worked." Capitalism works for everyone as long as it's regulated and focused on long-term stability instead of short-term profits. We also need to recognize that some people need assistance, and providing that assistance from the beginning --- maybe to the point of universal basic income ---will make our society stronger and better for everyone.
Billionaires don't get to be billionaires by being concerned about other people and fostering their creative opportunities.
Denis, I think you are exactly right. I knew my Substack would be provocative and maybe I made it overly provocative, but at least so far, I haven't gotten any hate mail--only these insightful comments from all of you. So, thank you all! But, see my response to JimS above, with a link to a graph showing that even the lowest quintile has seen an increase in real wages. You used the words "benefit proportionately" and that's exactly what is debatable, although the discussion of what is "proportional" is always political, I think.
So I come back to my question: How can we implement these sorts of government policies without reducing the incentives for innovation that markets provide? For example, I've read some economists saying that the reason why we have high drug prices in the U.S. is because it supports the invention of new drugs, a very expensive process. Almost all of the new pharmaceuticals come from U.S. for-profit companies, not from countries with government healthcare, at least that's my impression, and if we didn't allow those companies to benefit from their innovations, wouldn't we have fewer lifesaving new drugs? I'm not convinced of that argument, but it's the sort of defense of markets that I rarely read in the media. And, try to ask ChatGPT to say something good about capitalism: It's extremely hard to get it to; its first three or four answers are about how bad capitalism is. Then, eventually, it admits that yes, innovation is higher in a market-based economy.
Thanks for this eye-opening analysis, Keith! Thanks for uncovering the connections between capitalism, creativity and innovation!
It's provocative but I think the topic is avoided too often. I read a lot of innovation researchers who are business school professors, and they do great research on fostering innovation. But they never (or rarely) talk about the role of markets in fostering innovation. It's safer to talk about "creating value" and "increasing productivity" when what is also going on is "people losing jobs." Chuck, you are an innovation expert. Wouldn't it be depressing if we thought that innovations led to undesirable societal outcomes? I prefer to point to the graph showing that even the bottom quintile experienced an increase in real wages. But I've always been an optimist!
Hey everybody, I changed the subtitle of my post to "The United States has both. Is that a good thing?" I decided that my original subtitle was too uncritical. (It used to be "And that's why 2025 will be a great year for America") What do you think?
Hi Keith, I enjoyed your article and the links drawn between markets, productivity, and innovation. I’m curious what you make of this 2% increase in productivity as it relates to education. If US schools have been moving away from progressive notions of creativity in the classroom, how do you think companies learn to innovate? Perhaps this raises questions about the significance of schooling in preparing minds to innovate.
You mention that a lot of productivity "comes from making the economy more logical, more sensible, and more efficient." Would further integration of creative, innovative, and entrepreneurial learning in K-12 schools amount to even greater productivity and labor market efficiency down the road?
I am a free market guy who believes (and has observed by studying history) that capitalism outperforms all other systems. Is capitalism perfect? Nope. But the alternatives are far worse. Humans are not perfect, and capitalism does the best job of correcting for human imperfections. I've traveled a lot. Actually, more than a lot. So, I have seen first hand how the different systems work (don't work). Heck, I was in Russia six months after the fall/collapse. I also spent thirty years reading and thinking about different systems. Sorry that so many people are hostile to free market ideology. People will attack you for the views you expressed, even though you are correct. Thanks for your bravery.
It's funny how people recoil when I use the word "capitalism." Tim, I agree with you, and with JimS: of course, it is flawed; it results in an unequal distribution of wealth. If you've been through college, you will be familiar with the criticisms. But I wouldn't be surprised if you never learned of any benefits during your four years in college; I didn't. I'm a professor in a School of Education, where everyone takes it as gospel that capitalism is evil, racist, white supremacist, you name it. They don't simply think it's a bad economic system; they think it's an immoral affront to human nature. Wait a second, that sounds familiar...Oh, right, that was Karl Marx, who I read in graduate school, but that professor also assigned Adam Smith--thank you, Professor Moishe Postpone, the brilliant neo-Marxist Habermas scholar (he also assigned Habermas). Rest in Peace
Thanks for sharing. It is an interesting analysis. I think it is obvious China is a capitalist society, with some state-owned companies.
Fact:
China has the world's 2nd largest venture capital industry. The industry literally has "capital" in its name.
If you still think China is going to lose because it is not embracing capitalism, I don't know what to say. No wonder China is closing the gap so quickly and America is still dreaming.
China is embracing capitalism so much that it draws a lot of criticism of treating workers poorly and paying low wages, although both aspects are improving over the years.
Many people treat authoritarian government as a symbol of communism, as if capitalist society cannot exist under an authoritarian regime.
Kai, Welcome to this Substack and thank you for posting! I went to your Substack "about" page and it says that you are a published expert in creativity and innovation and you have a Ph.D. in technology management. I wanted to learn more about your research, and you've had a Substack for ten months, but you don't have any Substack posts yet. So then I looked and found a list of your publications on Google Scholar. I looked at a couple, and you are an interesting scholar! I also found your YouTube channel with several interesting videos. So, again, welcome to my Substack! If you're based in the U.S., you probably already know that what I say in my post about China's economy is conventional wisdom in the U.S. foreign policy establishment--I didn't just make this up on my own.
Anyway, I didn't mean to get in an argument about China! What I'm more interested in is creativity, and you are a creativity expert, so I'd like to know what you think: What is China doing to foster innovation in the economy? If there are such policies, they are not reported in the U.S. discussion about China's economy. And also, what do you think that China could do better? If you were hired as a consultant by the Chinese government, what changes would you recommend?
I have worked in the creativity and innovation sectors for three decades. I know many of the gurus (globally) first hand. China has used a lot of Edward de Bono's thinking tools. I know, because I was asked to go there to do the training. China also uses a lot of TRIZ. Check of the TRIZ conferences. I recommend Keith's book Zig Zag if you want some quick wins to become more creative. If you want to understand creativity better, read Keith's other books.