Can creative destruction be an inclusive process?

This question is prompted by my reading of Innovation and Its Enemies, Why people resist new technologies, a recently published book by Calestous Juma. The author takes much of his inspiration from Joseph Schumpeter, who famously described the innovation process as one of creative destruction. Juma argues that new controversial technologies are likely to enjoy more local support “where the business models include provisions for inclusive innovation”. I will explain later.

As the title suggests, the book explores resistance to introduction of new technologies. It does this mainly by telling the stories of nine innovations: coffee, printing of the Koran, margarine, farm mechanization, AC electricity, mechanical refrigeration, recorded sound, transgenic crops, and AquaAdvantage salmon.

Anyone who has an interest in innovation is likely to enjoy reading the stories presented in this book. Without reading a book like this one it would be difficult to fully appreciate that goods, like coffee, that are now commonplace, were once highly controversial innovations. The stories told in the book make me wonder whether future generations will look back with bemusement about my concerns about artificial intelligence and neural lace.

Although Calestous Juma delves into history in these case studies, he does not seek to provide much historical perspective on changing societal attitudes toward innovation. I doubt whether he believes that we are living in a time when opposition to innovation is particularly great by historical standards, but his views on such matters are not obvious from this book. Readers need to look elsewhere (e.g. The Enlightened Economy, by Joel Mokyr) for an understanding of the industrial enlightenment that began to occur in western Europe around 300 years ago. The author’s neglect of this big picture of attitudinal change is surprising in view of his acknowledgement that he obtained “early inspiration” from an article by Joel Mokyr on innovation and its enemies.

   

The stories told in Juma’s book are enlightening about the nature of resistance to new technologies. The general message is that resistance should not be lightly dismissed as irrational fear of change:

“Many of these debates over new technology are framed in the context of risks to moral values, human health, and environmental safety. But behind these genuine concerns often lie deeper, but unacknowledged, socioeconomic considerations. This book demonstrates the extent to which those factors shape and influence technological controversies, with specific emphasis on the role of social institutions”.

One of the things the book demonstrates is that resistance to innovation is often fuelled by people who have reason to fear competition from new products and new ways of doing things. Those faced with potential for economic loss have used every trick available in an attempt to protect themselves from the consequences of innovation. It is certainly true that many members of the public have genuine concerns about the potential impact of innovations on public morals, health and the environment, but the losers from change often exploit such concerns mercilessly to persuade governments to protect their interests. Thankfully, since the industrial enlightenment, the efforts of the losers to protect themselves from new competition have not been particularly successful.

Although he has chosen a similar title for his book, the author is clearly not a fan of Virginia Postrel’s The Future and its Enemies (which I discussed here).  He has little faith in the capacity of the spontaneous processes of free markets to manage innovation:

“Managing the interactions between change and continuity remains one of the most critical functions of government”.

Again:

“Political leadership on innovation and the existence of requisite institutions of science and technology advice are an essential aspect of economic governance. Such institutions need to embody democratic practices such as transparency and citizen participation that accommodate diverse sources of expertise”.

The author’s apparent faith in government regulation of the innovation process sits oddly with his acknowledgement of shortcomings in existing regulatory processes which focus largely on the risks of introducing new products. He acknowledges that these processes often fail “to compare the risks and benefits associated with the new product to those of existing production systems, even though it is precisely this difference that should form the basis of a regulatory decision on new technologies”. The author also acknowledges the potential for consumer protection regulation to be used for protectionist purposes:

“What may appear as a legitimate appeal for the right to know may in fact be driven by an effort to brand a product so it can be rejected by consumers for protectionist reasons”.

I agree with the author that sensible political leadership is a fundamental requirement, but sensible political leaders will aim to confine regulatory interventions to those circumstances where there are good reasons to fear that spontaneous processes might lead to outcomes that will be widely regretted. When political leaders set out to manage interactions between change and continuity they open their doors even further to interest groups seeking preferential treatment. It would be nice to think that sensible policies and social harmony will emerge from citizen participation that accommodates diverse sources of expertise, but experience suggests that elected politicians are more representative of broader community interests than are the interest group spokespersons that governments select as citizen representatives. The most likely outcome is for the interests that would be represented in such forums (e.g. consumer, environmental, industry and union groups) to conspire to protect their interests in regulating markets, at the expense of the interests of the broader community in allowing free competition to determine outcomes under most circumstances. The critical requirement for sensible policy development is for the claims of interest groups to be subjected to critical scrutiny within the context of a public inquiry process that is capable of providing trustworthy independent advice to governments. (Australia’s Productivity Commission may provide a useful model for other countries to consider.)

Calestous Juma suggests several ways in which innovation could be made a more inclusive process: greater involvement of public sector institutions in providing training in the emerging fields; creation of joint ventures; equitable management of intellectual property rights; segmentation of markets to enable the technology to be used for non-competitive products, and improvement of the policy environment to support long-term technology partnerships.

Smoke and mirrors may help political magicians to appear to be ‘inclusive’, but they cannot alter the fact that some people are adversely affected by innovations that provide widespread benefits to the broader community. In her book, Bourgeois Equality, discussed on this blog a couple of months ago, Deirdre McCloskey uses the term, ‘bourgeois deal’ to refer to societal acceptance of innovations that compete with and displace old ways of doing things in exchange for widespread improvements in living standards. I doubt whether ‘inclusive’ innovation policies - even if designed by intelligent and well-meaning people - can do much to help sustain public support for the bourgeois deal. Ongoing support for the bourgeois deal depends on expectations that innovation will continue to generate widespread improvements in living standards.

Postscript:
Calestous Juma has responded as follows:

"I appreciate your thoughtful review of my book. You raise important points that need addressing. First, you wondered why I did not address the question of whether public attitudes on new technologies have changed over the centuries. I address this issue by showing that the public responses to new technologies appear to be conserved over the 600 years that the case studies cover. At face value this may appear not to be the case because of the remarkable proliferation of technology into every aspect of human life. I think that the change has been in the availability of technologies due to the exponential growth in science, technology and engineering. Public perception of technological risks has not changed, mostly because as humans we have not changed in any discernible way over the last 600 years. We have not found a way to reprogram the amygdala, to simplify a little.

Now to your more complex question: is inclusive innovation compatible with creative destruction? My answer is yes. In many cases disruptions, to use the term in a more prosaic way, is largely a result of the business model used. There are two examples that illustrate this. The introduction of mobile phones in Africa was by any measure disruptive. But it was also inclusive because from the outset the focus was to ensure that the poor had access to the service. Inclusive innovation was achieved through low-cost handsets and pre-payments for airtime. The early concern that mobile phones would be toys for the rich never came to be. The second example involves the strategies adopted under the Montreal Protocol to develop alternatives to the ozone-depleting substances. In this case those firms such as DuPont that were likely to be disrupted by alternative chemicals were included in new research efforts. The Protocol went further and introduced an amendment that promoting the sharing of the new technologies with developing countries.

Both examples involved private-public partnerships that were committed to promoting inclusive in innovation. In both cases incumbent technologies were displaced. Both case provide lessons of inclusive innovation. We can trace other examples of inclusive innovation in history. We have café au laite, as the name advertises, because of compromise to create a recombinant product. Proposals for co-existence are not new. It was tried, without success, to leave a niche for horses in American agriculture in light of the relentless march of tractors. The proposal came too late and the superiority of tractors over horsepower illustrates that there are many areas of technological transformation where inclusive innovation is not a viable option. In other cases there has been a long period of co-existence between butter and margarine. This wasn't a result of an inclusive innovation strategy but it offers some lessons worth considering."

Does your flourishing depend on having a meaningful life and being true to your self?

The idea that people gain happiness by acting in accordance with their perceived identity has interested me since I read (and wrote about) Identity Economics, by George Akerlof and Rachel Kranton quite a few years ago. The idea was used in their book to consider the incentives that people have to conform to the norms and ideals of the social categories to which they belong (e.g. gender, race, social class, age group) but I wonder whether the idea of being true to one’s self might shed light on the relationship between happiness and deeper concepts of identity related to personality, signature strengths and values.

A search of the relevant literature in psychology has not uncovered any direct tests of this idea, but I have found a couple of articles that seem to point in the direction of a hypothesis that might be worth testing.

My starting point is that the extent to which people assess their lives as being meaningful seems to be closely related to their perceptions of their identity. We know from research by Roy Baumeister (with Kathleen Vohs, Jennifer Aaker and Emily Garbinsky) that the extent to which people view their lives as meaningful is closely related to doing things that express themselves (for a summary discussion see Baumeister’s essay entitled The Meanings of Life).

The research by Baumeister et al was focussed on the differences between happiness and meaningfulness of life as assessed by the individuals in their survey. The two states overlapped substantially: almost half of the variation in meaningfulness was explained by happiness, and vice versa. The researchers used statistical techniques to abstract from this interdependence and to look for factors that had different impacts on happiness and meaning.

The research suggested that the extent to which people identify as being wise or creative was associated with them viewing their lives as meaningful, but did not make them happier. Other factors adding to meaningfulness but not happiness included working, exercising, meditating and praying. Stress, negative events, worrying, arguing, and reflecting on challenges and struggles all seem to be part and parcel of a highly meaningful life.

Factors that added to happiness that had little impact on meaningfulness of life included satisfaction of desires, having enough money to buy the things one wants, good health, and the frequency of good and bad feelings. There is a trade-off between happiness and meaningfulness of life because people have to choose at the margin whether to allocate more time and other resources to the things that make them happier or to things that make life more meaningful.

Unfortunately, the research I have been discussing did not consider to what extent people perceive themselves as actually acting in accordance with the values that add meaning to their lives. It might be possible for some individuals to feel that their lives are highly meaningful but to be unhappy because they lack the self-control to live up to the high standards that they set themselves. Alternatively, greater self-control may make it possible for people to attain more meaningful lives through a smaller sacrifice of happiness.

There is some research which shows that inadequate self-control has a deleterious effect on happiness. Psychologists define self-control as the ability to override or change one’s inner responses as well as to interrupt undesired impulses and to refrain from acting on them. An article entitled “Yes, But Are They Happy? Effects of Trait Self-Control on Affective Well-Being and Life Satisfaction” by Wilhelm Hofmann, Maike Luhmann, Rachel Fisher, Kathleen Vohs and Roy Baumeister concluded: “our data clearly indicate that people who have more trait self-control feel happier and are gladder about their life”.  The authors found that “many benefits of high self-control are linked to handling and avoiding conflicts among goals”.

Adding all that together suggests to me that it might be reasonable to hypothesize that an individual’s happiness depends on: (1) the extent to which they perceive their life to be meaningful (this variable accounts for factors that jointly influence the meaningfulness of life and happiness); (2) factors that add to happiness that have little direct impact on meaningfulness of life; (3) self-control.

That relationship could be turned around the other way to view meaningfulness of life as a function of happiness and the other two variables (with opposite signs expected for the estimated coefficients expected for those variables).

The important point is that there may be potential for many people to flourish to a greater extent by improving their self-control. Roy Baumeister and Ron Tierney wrote a book about how to do that, which was discussed on this blog a few years ago. 

Postscript:

After writing this piece I had some doubts about whether it makes sense to suggest that people with self-control problems would claim that their lives are meaningful. Then it occurred to me that just about everyone I know is a reforming sinner – a fallible human trying to live a better life. I don’t know many saints!

Introspection can’t take me far, but it does tell me that sinners who try to reform themselves often do so because they feel their lives are meaningful and should not be wasted. Introspection also tells me that reforming sinners cannot live with no regrets unless they are willing to expose themselves to temptation, and that when people are tempted they find themselves outside their comfort zones - they tend to succumb to temptation from time to time and feel somewhat unhappy.

For example, while I was giving up smoking I would have certainly said that my life was highly meaningful. However, in order to live a normal life I had to expose myself to situations where I was tempted to have a cigarette. So, I spent a fair amount of time suffering from withdrawal symptoms and would probably have rated my happiness somewhat lower than when I was smoking full-time.

That story has a happy ending. For many years I have been able to observe other people smoking without craving for a cigarette. I would now give myself a higher rating for self-control, but I’m still a fallible human trying to live a better life! 

Does stasis now make more sense than dynamism?

It is now about 18 years since Virginia Postrel suggested in The Future and Its Enemies that our political, intellectual and cultural landscape was increasingly being defined by “stasis” and “dynamism”:

“How we feel about the evolving future tells us who we are as individuals and as a civilization: Do we search for stasis – a regulated, engineered world? Or do we embrace dynamism – a world of constant creation, discovery, and competition?”

The author was writing about the United States, but the ideas in her book have much wider application. The old political divisions seem to breaking down all over the world. On many issues there is not much political distance between social reactionaries, green reactionaries and technocrats. The social reactionaries yearn for the kind of world our parents lived in, green reactionaries yearn for a premodern society and technocrats fear change that is not managed by governments. They all see virtue in government regulation of innovation. As a result, we see strange alliances forming on issues such as fracking.

By contrast, dynamists share beliefs in a spontaneous order. They emphasize individual flourishing and individual responsibility, and the possibilities for progress that emerge when people are free to experiment and learn. They care about “protecting the processes that allow an open-ended future to unfold”.

Virginia suggested that dynamists don’t yet share a political identity. She notes that they may view themselves as libertarian, progressive, liberal or conservative. That still seems to be true. Many dynamists eschew politics. Of those who take an interest in politics, people who see themselves as libertarians or classical liberals would have least objection to being labelled as dynamists - if they understand what the label is intended to mean.

Misunderstanding of the meaning of ‘dynamist’ might be a problem. To the uninitiated, the word could appear to refer to history’s hastening agents who seek to activate what they perceive as ‘historical forces’ to achieve a particular vision of future society. I can’t think of a positive word that adequately captures the idea of allowing an open-ended future to emerge. A new word might be required: e.g. ‘catallaxist’ - a believer in catallaxy, or spontaneous order.

Advances in technology have helped those who believe in spontaneous order to achieve some important victories over the last 18 years. For example, the emergence of services such as Uber are helping to break down regulation protecting incumbent service providers.

Yet, on balance, it looks to me as though the stasists have been winning the economic policy debate. In the aftermath of the GFC, deregulation has often been perceived as a cause of economic crisis, overlooking the effects of the regulatory environment in encouraging some financial institutions to believe that they were too big to be allowed to fail. The actions of some leaders of the economics profession in distancing themselves from market liberalisation policies has lent weight to populist demands for a return of stasist policy prescriptions.

As I see it, identifying myself as a believer in spontaneous order does not involve an ideological commitment never to advocate government intervention under any circumstances. It has to do with where the onus of proof should lie. In the case of migration, for example, I would argue that the onus should be on those favouring restrictions on international movement of people to justify why such restrictions should exist. It is argued that free international movement of people is incompatible with welfare systems in which immigrants can qualify for social assistance, but it is not obvious why immigrants should qualify for social assistance.  A more persuasive argument immigration restrictions can possibly be mounted in terms of potentially adverse social consequences of a large influx of migrants with different cultural traditions.

Similar considerations apply in relation to new technology. It is easy to mount a persuasive argument for regulatory restrictions on access to nuclear technology, but that is obviously an extreme example. Some statists have argued that innovations in home entertainment should be regulated to avoid adverse social impacts, but they imply that individuals are not capable of learning how to make sensible decisions for themselves and their families about use of new technology. Some of us had difficulty in making good decisions about use of our leisure time following the introduction of television, but that is not a powerful argument for the government to make such decisions for us. Of course, as suggested by Daniel Lattier, we have a responsibility to learn to use technology wisely, i.e., temperately. Similar considerations have applied in many aspects of life, e.g. food, beverages, sex, since ancient times.

How should we view decisions about whether to enhance brain power with neural lace? I ended a recent post on this topic suggesting that neural lace will not be worth having unless it can be developed in such a way as to enable humans to protect the privacy, autonomy and responsibility that is integral to their individual flourishing. I should have added that the decision to have a neural lace implant will be best left for individuals to make for themselves. Anyone wants to argue that choosing to use some particular form of neural lace would be tantamount to selling oneself into slavery, is of course free to try to make a case for regulation or prohibition.

My reading about potential consequences of artificial intelligence (see blog posts here and here) has left me feeling somewhat more cautious about new technology, but that does not mean that stasis now makes more sense than dynamism. Virginia makes some relevant points. She acknowledges: “the open-ended future can be genuinely scary, the turmoil it creates genuinely painful”. However, she follows with the observation:

“Statist prescriptions … stifle the very processes through which people improve their lives – from the invention of new medical treatments to the creation of art. In their quest for stability, statists make society brittle, vulnerable to all sorts of disasters”.

Like other technological innovations, the advent of super-intelligent machines has potential to expand the possibilities for human flourishing. It will also expand the range of technology by which the flourishing of individual humans could be threatened by other entities, including governments.  New technology will not alter the fundamental principle of liberalism and that adult individuals should be free to flourish as they choose, provided they do not interfere with the rights of others.

Does individual human flourishing require entrepreneurial qualities?

Source: Gifts for professionals

When I was young it seemed possible for most people in relatively high income countries to choose a career suited to their personal abilities and inclinations, obtain the qualifications necessary to pursue that career and then look forward to working in the same occupation until their retirement. It seemed possible for people to plan their lives around stable career paths, in order to obtain the optimal combination of income, interesting work, job security, or whatever else they were seeking. Educational opportunities depended to a larger extent on wealth and/or ability, and career opportunities for women were more restricted that at present. Nevertheless, everyone who applied themselves diligently was predicted to end up having a successful career.

From an individual's perspective, such predictions were always problematic. For one reason or another, some people were more successful than predicted. Others made mistakes in their career choices and either changed paths, or came to perceive themselves as square pegs trying to fit into round holes. There was always a lot of adjustment going on in the labour market as people moved between firms and industries in search of better opportunities, or as a result of retrenchments. Most people ended up with satisfying careers, but some didn’t.

These days there is much greater uncertainty about whether young people will be able to pursue the careers they prepare for, even though educational opportunities are more widely available. Predictions can be made about the kinds of skills that are likely to be in demand in future (see, for example a post I wrote last year on this question) but we cannot be confident that any particular academic pursuits (including STEM subjects) will necessarily produce the skills that potential employers might want.  Acquiring useful skills and obtaining rewarding employment seems to be becoming more akin to an entrepreneurial process of discovering and gearing up to supply a market niche.

In thinking about the process of skill acquisition and job search it may be helpful to reflect upon Israel Kirzner’s view of the way entrepreneurial decision-making differs from economizing decision-making i.e. efficient use of known means to achieve known ends. Kirzner notes that entrepreneurial decision-making requires a posture of alertness:

‘In addition to the exploitation of perceived opportunities, purposive human action involves a posture of alertness toward the discovery of as yet unperceived opportunities and their exploitation. This element in human action – the alertness toward new valuations with respect to ends, new availability of means – may be termed the entrepreneurial element in the individual decision’ (Perception,Opportunity and Profit, p 109).

Of course, occupations are just one aspect of life. How does the forgoing discussion relate to the question I asked at the outset was about human flourishing? Is it reasonable to argue that the entrepreneurial alertness discussed by Kirzner is an important component of the practical wisdom required for individual human flourishing?

In my view, Douglas Den Uyl and Douglas Rasmussen make a strong case for that in their recently book, The Perfectionist Turn, aspects of which have been briefly discussed in the last two posts on this blog (here and here). After acknowledging Kirzner’s insights, the authors suggest that just as entrepreneurship involves a discovery process, so too does human flourishing. This is contrary to the view of people who imply that pursuit of our final end in life is merely an optimisation process:

‘Knowing what our end is, so it is said, will leave us only the task of utilizing the means at our disposal to effectively achieve that end. Yet, as we have tried to show in our various discussions of freedom and self-direction, our end of a perfecting or flourishing life is not like one of using known resources in their most effective manner. Rather the perfecting is more like discovering means available to such an end that are as yet unknown, or only partly known, to us. Moreover, once those means are discovered, it is equally mistaken to suppose that efficient usage is the only remaining challenge. Because perfecting or flourishing is not a passive state but an activity, there is virtually a constant reassessment of the adequacy and appropriateness of the means; this, as a consequence, suggests openness and alertness to new opportunities amidst changing circumstances. Finally, optimization suggests efficiency along only one dimension, but flourishing (at least in our view) is inclusive of multiple dimensions’ (p 287-8).

While such observations about the qualities required for individual human flourishing would probably have been as relevant in ancient Greece as they are today, we are helped to comprehend them by a sympathetic understanding of the qualities required for successful entrepreneurship.