Unproven dogmas: Technological innovation and the benefits of free markets

Last updated on: May 7, 2013 at 6:41 pm by Svend White

Unproven dogmas: Technological innovation and the benefits of free markets 2013-05-07T18:41:02-05:00 Svend White

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An article in the New Scientist reports on physicist Jonathan Huebner’s rather counterintuitive claim that the rate of technological innovation today is actually quite slow compared to the past–he thinks we experiencing the least innovation, measured in technological breakthroughs per billion people, since the 17th century–and that we may be approaching a "dark age" of technological innovation.

As a non-scientist, I am certainly in no position to judge his claim (which will no doubt be submitted to the most withering of scrutiny) from an empirical perspective, but I certainly appreciate his willingness to critically examine the gospel of limitless technological growth that we’re bombarded with in the media and popular culture. Perhaps he’s wrong, but I think his arguments should remind us the we shouldn’t automatically accept convenient, self-serving assumptions that industry and business make.

A related, and I think far more pernicious, fallacy is the almost religious faith of many in the media and government today in the ability of the market to solve all problems and to behave in the most rational and efficient manner at all times. (This belief system was insightfully analyzed by theologian Harvey Cox in The Atlantic Monthly.) A corollary of this assumption is that government regulations and guidelines affecting businesses are always counterproductive.

This libertarian claim is counterintuitive and highly idealistic dogma rather than a historically proven phenomenon. (Only a hopeless idealist would assume that companies are guided by noble principles; in fact, as the ground-breaking and highly recommended documentary "The Corporation" proves, corporations are designed to focus on short-term profits and are even legally barred from protecting anything other than the financial interests of their stock holders.) Recent events such as the Enron meltdown and the terrible collapse of the Argentinian economy would seem to call into question these optimistic expectations.

There is something odd about how Libertarians–a significant core of which are disciples of hack novelist and ice-blooded philosopher Ayn Rand–talk about the Market. They posture as being matter of fact and pragmatic, but there is something profoundly quaint, anachronistic and surprisingly religious about their limitless faith in the Market. At times they sound like a 19th century German Idealist philosopher like Hegel. Just as Hegel believed, regardless of what the empirical evidence indicated, that world history was being guided by a wise and benevolent intelligence (a kind of god) towards a logical and perfect world, so do these theo-libertarians, like some wide-eyed end-of-the-world sect confidently expect the Market to solve all problems in the imminent future.

Another problem with this naive view of the market is that, even if one accepts the assumption that the Market always acts rationally, we must remember that economic rationality does not necessarily concide with the dictates of morality, sustainability, or even long-term stability. Unrestrained markets are often highly cyclical ("boom and bust"), which make be very efficient economically, but it is very destructive for the people and communities involved. More disturbingly, economic historians have recently argued that slavery, while morally reprehensible, was highly efficient and profitable. I suspect a similiar economic case could, and would have been, made for the cruel child labor system during the Industrial Revolution (which was partly fueled by the ceaseless toiling of young children in unhealthy mines and factories). In neither case were these inhumane practices ended by the proverbial "invisible hand" of the Market.

I don’t think it is a coincidence that the rise of the development of the philosophy of free markets and free trade in the West has concided with conditions in England, Europe and the U.S. where exports were needed to fuel local economic growth. Might this convenient faith in the wonders of free trade be at least partly motivated by self-interest?

The public is ill served by these simplistic and ultimately self-serving assumptions by business interests being promoted as scientific facts by the mainstream media.

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