The issue, for us here, is not the role of knowledge or innovation in economic growth–but is it the role of government to create and diffuse that knowledge to trigger constant innovation. And constant innovation destroys whatever it makes obsolete. That is a terrible two-edged sword and is our government up to the task? Forget about whether you like government or not. Put aside the old Democrat vs Republican, conservative vs liberal election year hoopla! I’m talking about whether the real government in day to day life has the capacity, judgement, and independence to play  the role Innovation Economics cuts out for it? What worries the Curmudgeon about government and creative destruction is that: (1) it does involve picking winners (sectors, occupations, basic research priorities, which monopolistic firms to break up, etc.); is government good at this? (2) diffusing education, usually thought of as a state and mostly local activity in the USA, invites the Federal Government to either be a third-party payer for somebody else’s decision-making, or it will make those decisions itself and mandate them downward–making Federalism obsolete; (3) and letting losers die, despite political pressures to protect them, is not something democracies do very well;

What’s the Theory Behind Innovation and the Knowledge-Based Economy | Journal of Applied Research in Economic Development Saturday, April 26, 2014 @ 1:44pm