Economic Factor #4: Innovation and Regulation
In my years of teaching at the college level, I have noticed that U.S. students do not work as hard as foreign students. But I have also noticed a persistent tendency of U.S. students to be far more creative and perhaps even more rebellious than foreign students. I believe that Americans generally possess a self-confident entrepreneurial and creative spirit that accounts for the fact that almost every major technology that has changed the world in the last 150 years was created or at least made available to consumers in the U.S. Think about it. Light bulbs, phones, planes, television, photography, recorded sound, cars, refrigeration/air conditioning and computers were invented or first made widely available to consumers in the U.S. There is no doubt that a society’s creative abilities and entrepreneurial spirits play a key role in economic growth.
A little over 100 years ago, half or more of the workers in most societies were devoted to producing enough food to fend off starvation. Today the U.S. economy devotes only about 2% of its workforce to agriculture – freeing up resources to manufacture goods and produce increasing levels of services such as healthcare. The root of increased efficiency is innovation.
Regulation is a major enemy of efficiency and innovation. Have you noticed how many government notices are posted in the workplace, on gasoline pumps, on consumer products, and on and on? A series of studies conducted for the Federal government’s Small Business Administration indicates staggering and increasing regulatory burdens on small businesses.
I decided to group innovation and regulation together as a single factor since they are opposing sides to the same force. Innovation is the voluntary decision to experiment with better ways of becoming increasingly efficient. Regulation is the use of force to prevent people from exercising free choices to make their own decisions. An optimal economic policy balances these two powerful forces. I see the U.S. as having been too aggressive in regulating most sectors of our economy, but the 2016 election may have changed that trend.
Importance of factor in general: A
Prospective influence of this factor on the U.S. economy: B+