Arnold Kling  

An Army of Consumers

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The Economist discusses the work of one of my favorite economists, Amar Bhide.

But nowadays innovation—a complex, gradual process, often involving many firms making incremental advances over many years—is not much constrained by national borders, argues Mr Bhidé. Indeed, the sort of upstream innovation (the big ideas of those scientists and engineers) most celebrated by those who fear its movement to China and India is the hardest to keep locked up in the domestic market.

The least internationally mobile innovation, on the other hand, is the downstream sort, where big ideas are made suitable for a local market. Mr Bhidé argues that this downstream innovation, which is far more complex and customised than the original upstream invention, is the most valuable kind and what America is best at. Moreover, perhaps the most important fact overlooked by the techno-nationalists, notes Mr Bhidé, is that most of the value of innovations accrues to their users not their creators—and stays in the country where the innovation is consumed. So if China and India do more invention, so much the better for American consumers.

Read the whole thing. I think that one point that strengthens Bhide's argument is the Army of Davids phenomenon, so that innovation can be prodded forward by small producers, or by consumers-as-producers.

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COMMENTS (2 to date)
Randy writes:

"Consumers as Producers". Exactly right. Our customers drive our product forward - often in directions the engineers would never have imagined.

Scott C. writes:

It seems like this improvement by small increments would be better served by less onerous patents and other kinds of "intellectual property" restrictions. If small producers can't just take something and work on it without worrying about permission and lawsuits, they may be less likely to experiment.

I'm specifically thinking about all the ridiculous software patents out there. The little guy can't research all patents to see if they are infringing and sue to overturn the "wrong" ones. And it's going to hamper his (or her, obviously) efforts if he can't use many of the obvious ideas that are now patented.

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