Founder, Sterling-Bond Escrow Services & Rumbler Cars
"All the social, economic and environmental problems facing the world today can be solved,
the problem is that the solutions are not politically-correct."
The free market encourages new innovation, but is it fast enough to avoid major crises in the world?
Imagine the scenario. There is an urgent problem to solve or a need to be met, for example the impending world shortage of oil or the runaway greenhouse effect that's been predicted for decades. How do you solve it?
According to the ideology of the free market as a need arises so new innovations and services will "naturally" be stimulated by the growing demand to meet and solve that need.
This costs money to research, develop and deploy a solution. Many hundreds of solutions might have to be explored before the best ones are found. Each solution then has to be popular enough to be sold in the market and recoup all those costs. That's a lot of barriers to progress in the free market.
Of course it can encourage innovation and rapid breakthroughs. Look at the enormous strides in the mobile phone market with new designs, performances, innovative technologies being released every few months. But this wouldn't be happening without decades of ongoing research in the first generations of technology and the enormous sales volumes providing the income for new innovation.
Even in the mobile phone market innovation isn't as rapid or extensive as you might assume from all the new products flooding the market. Profit margins are tight, so only the highest volume suppliers will recoup their costs or afford the next generation research and development, and whatever they produce must appeal to very large markets selling hundreds of millions of units. This means that bolder, more imaginative designs or technical innovations might be too much, too risky, for some products and markets. Here then free market competition can force both prices/income and the pace of innovation downwards.
What about innovation for important issues like the environment?
The market system allows anyone to offer a solution to a problem but only when there are enough people prepared to pay for the right kind of product for their needs. It takes time, possibly years, before mass society, the market, is ready for the kind of products they are prepared to pay for. Even then it may not be the ideal solution, just the one that can be developed quickest and cheapest.
What if a better product could be devised but requires a revolutionary change in social attitudes? How could you develop it and convince enough people to adopt it?
In the problem I first suggested, the carbon-pollution-oil issue, we have a situation that's been known about for decades but barely touched upon until the last few years and then only due to a combination of political pressure and recession to force a change to the market. Now we are beginning to see the development and adoption of high-efficiency, low operating cost car designs to meet new legal standards on air pollution carbon emission and the need to save money on running a car in the recession.
I do not believe this is an ideal or even effective way to deal with major problems in the world. There is a better answer.
While the market is slow to act the political answer to command the market through legislation could be just as poor at dealing with situations that demand social, market or other answers.
Like the demand economics of the market, the command economics of the political system takes time to acknowledge, explore and answer a problem. Just like the free market a political answer has to be popular to avoid upsetting the electorate and "simple" enough for politicians to grasp. Both the free market and the political market can fail to deal with an issue in the best and quickest fashion.
This is a natural aspect of human behaviour. We're lazy and highly risk averse. Only a handful of people might grasp an innovative solution to begin with. The rest of us prefer to trust in well-tried answers adopted by the herd, the masses, the market.
Yet some problems can be solved quickly with bold, innovative new ideas. If we can find a way to nurture them.
While the markets and politicians take their time, scientists, entrepreneurs, designers, innovators - the creators - can make leaps of imagination often described as ahead of their times. What that means is ahead of the pack. While mass society prefers a safe idea innovators challenge convention to push boundaries and solve problems. Many will fail, many will lack resources and a few will slowly, successfully struggle against the obstacles to entering the market.
It could be made easier.
The current answer for new pre-market innovation is through such economic mechanisms as research grants or venture seed capital. Even these can be influenced by public resistance to change or preference for conventional ideas over revolutionary ones.
I believe an answer to major problems lies in embracing and encouraging innovative ideas at the earliest opportunity - the moment a problem or opportunity is identified - and at the highest possible level of support. While it can take years for society to accept a problem exists innovators can accept and answer the challenge almost instantly.
Instead of waiting years or decades for the market we should in some critical cases be prepared to invest on a large, long term scale to solve a problem and trigger new market development as quickly as possible. Why wait as the market stumbles to a solution when we could leap forward by committing ourselves to innovation right away?
Mistakes will be made, thousands of false paths explored and abandoned, but this is a normal part of any market system, where companies test and abandon thousands of experiments each year. The difference is that this is an accelerated innovative market, an artificial system of investment in technology, innovation, design, when the returns, profits or tax revenues, may not be earned for many years, decades.
This isn't driven by political or market objectives. They remain trapped in their long, slow, meticulous, low/no-risk processes. It needs a new, high risk, method of funding and direction to pay for development and keep it on track to meet the objectives of solving a major problem. Above all it must be completely open to any and many new answers, no matter how off the normal track they may appear. Conventional management bureaucracy would not work in such a system.
Such a mechanism aims to avoid rather than address problems. We've known about the greenhouse gas-road congestion-oil shortage problems for decades. Imagine if, instead of endless debate, hesitation and protest we could have solved them thirty or forty years ago. We could now be living in a far better, healthier, cleaner world.
In this particular case I've been working, struggling, on my own answer for several years. While huge volumes of cash are being spent on "conventional" answers to road traffic congestion and air pollution in our cities I have answers that don't need any radical new technology, just an improvement in and better adoption of existing products and techniques.
Sometimes innovation doesn't mean scientific breakthroughs.
Like many innovators, engineers, designers I've face the upward struggle with a market that doesn't comprehend the meaning of innovation, of thinking laterally about an answer to a problem. This has also encouraged me to think about the larger issues and limitations of both command and demand economics. I can see the market system allows people to freely choose which solution to adopt, but it takes times we might not have and might deliver weaker solutions than we could have. And there are many problems, all the failed paths, with any pre-market innovation economics. Huge resources will be wasted if we're too eager to throw ourselves down one or another path, but acting quicker than we currently do can reap rewards in stimulating the economy and solving a small problem before it becomes a world
Following my own experiences I'm now working on that new financial model. How do we look accurately into the future, identify problems or opportunities and solve them in the best most innovative way possible before they become a crisis, and how can we pay for it?
There are ways to do this innovatively, just as solving the problems of urban traffic congestion and air pollution need new innovation.
The market is not the sole answer, just one, later part of the process of our evolution.
Sometimes innovation can move so swiftly and in such direct and indirect paths that often one idea can be superseded quickly by another, making the problem of investment even more difficult and potentially very wasteful.
This week (it's now 16th, August, 2013) the wealthy entrepreneur Elon Musk proposed the "Hyperloop" underground magnetic levitation train concept. This is one of many such concepts that have been proposed over the decades since the first work on magnetic levitation by Prof. Eric Laithwaite. I have had my own concept for such a nation-wide MagRail system for the last twenty years.
The question is which would be the most efficient or would we be in an endless cycle of renewal, tearing up and replacing each new innovation as it arises? Could we ever devise a suitable system of evaluation and design that reached the best answer more quickly and efficiently without wasting too many resources?
This, I believe, will be the fundamental question for the next few decades or generations as we establish the pre-market innovation economy model. Perhaps a greater understanding of the history of technological progress will give us the hindsight and wisdom to make better choices in the future.
Oh, and the urban traffic/air pollution solution called for £7,000 million and a new television channel.
The writer is a former finance specialist.
For the last few years he has focussed his attention on the development of an alternative economic strategy for the UK and world economy through the stimulus of new technology innovation, design and the arts.
In his estimation the true unappreciated economic potential of the UK is enough to solve all UK economic, social and environmental problems without additional increases in taxation or regulation. This is the basis of the Commonwealth Prosperity Plan, a "Plan B" for Britain.
Learn more about the prosperity plan from the HOME PAGE.
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[Key words, etc: These pages are subject to frequent changes. Subject matter relates to the economic strategies of the British government, with regard to the banking financial crisis, the ongoing austere recession and factors to revive the economy through such measures as quantitative easing, tax cuts, reduction in planning permissions and much more. Benefits of the Prosperity Include large-scale employment solution to the national housing crisis, protection of the green belts and countryside against urbanisation.]