Arnold Kling  

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The book is Abundance: The Future is Better than You Think. I think it is a must-read.

1. I am skeptical of Peter Thiel's view that regulation is holding back progress. I recall Ray Kurzweil's remark that regulations are like stones in a river. They do not slow down the river. Abundance gives me the impression that if progress is slow, it is because problems are complex. The authors see opportunities in water conservation and purification, energy production and conservation, health care, and education. However, the picture I come away with is one of a number of competing potential solutions, not all mutually compatible, and none yet proven to work at scale. In the field of alternative energy, I think it would be hard to argue that government is holding back innovation, even though it certainly is distorting the market. I think that the best argument one can make for Thiel's view is that water conservation is being held back by resistance to genetically-modified organisms, but that would not be quantitatively significant. In the grand scheme of things, I think that what is standing in the way of the innovations described in Abundance is the need for more research and trial-and-error learning; regulation is at most a minor hindrance.

2. My favorite quote in the book is from Bill Joy.


"It used to be that you were considered healthy and wealthy if you were fat," says Joy. "Now it's not. So now we think it's healthy and wealthy if we have all these things; well, what if it's actually the opposite? What if healthy and wealthy means that you don't need all those things because, instead, you've got these really simple devices that are low maintenance and encapsulate everything you need?"

The term for this is de-materialization. I read Abundance on a Kindle, for example. When I was the age of one of my daughters, I had a record collection that took up a lot of space. Her (larger) music collection fits in her pocket. Soon, you won't need that big-screen TV, because you are happy with your cell phone (perhaps augmented by special glasses). You won't need a car, because you can always get to work via video conference, or catch a ride with a self-driving taxi. Etc.

3. Abundance points out that Africa has skipped a step in telecommunications, because cell phone adoption is taking place without prior adoption of land lines. I wonder if this is going to happen in other fields as well. Could education and health care innovation be adopted more readily in underdeveloped countries, because demand cannot be satisfied using first-world solutions?

4. On the topic of education, they tell the story of Sugata Mitra's TED talk, which is amazing. At the end, he discusses learning as an emergent phenomenon. You could have an interesting discussion of the Hayekian ideas expressed in that minute alone.



COMMENTS (19 to date)
Rich writes:

"I recall Ray Kurzweil's remark that regulations are like stones in a river. They do not slow down the river."

Proof by analogy is fraud.
-Bjarne Stroustrup

DPG writes:

Stephenson's "Young Lady's Illustrated Primer" grows more prophetic.

Ken B writes:
I am skeptical of Peter Thiel's view that regulation is holding back progress

Pharmaceuticals. Explain.

Ted Levy writes:

Enough stones in a river dams a river. Water runs through a sieve, but not a sufficiently large series of sieves.

mdb writes:

Have to agree with Ken B. FDA approval process is a direct killer of drugs (costs exceed expected profits), not to mention that a drug has to unique (if an option exists that has been approved it is not considered). I would also mention that many regulation have exception for existing players (environmental regs are great examples of this) that make it costly for new entrants that have to adopt new technologies. Validation in the FDA environment basically means no manufacturing process ever changes once it has been approved. I could go on, but this from my experience working in labs (Pharma, biotech, environmental, and healthcare) regs kill innovation daily.

Ken B writes:
Jeff writes:

Yeah, I was just going to chime in and say something about the healthcare industry being a good counter-example to the Arnold's position on regulation. Haven't we been hearing for years about how the cost of developing new drugs is so high that fewer and fewer companies are even trying, anymore?

Still, in fairness to Arnold, most industries aren't as effed up as the healthcare industry is in this country, so maybe he does have a point.

Costard writes:

If progress is a river, then history is a wetlands and the EPA absolutely forbids you to build anything on it.

Adam writes:

I'm not seeing the newness of Sugata Mitra. He sounds like a disciple of John Dewey or Maria Montessori. The videos of a few students teaching themselves with a computer are nice anecdotes, but perhaps the key word is "few". Like Montessori, it's not clear that Mitra's methods are useful for more than a tiny fraction of students nor is it clear that his approach works for more than isolated skills.

Chris Koresko writes:

Arnold Kling: I am skeptical of Peter Thiel's view that regulation is holding back progress.

In my understanding of your PSST model of economic development, economic actors are always seeking out new and better patterns of specialization and trade. Regulations that limit their ability to do that must cause the results to be less optimal than they would have been in a less regulated environment. Or am I missing something?

Becky Hargrove writes:

I too wish I shared your confidence that regulations do not stand in the way. More regulations are being created by the day that prevent numerous knowledge based economic activities from even take place, unless they are in fact spontaneous and non-monetary. Plus, cities and towns continue to put more regulations into place that prevent entrepreneurs from forming businesses. The very things that Hernando de Soto praised our country for in the Mystery of Capital - the systems that allowed the efficient sale and transfer of property and business formation, continue to be compromised. We have actually gone backwards in the time formation of businesses compared to the rest of the world since that book came out.

Daublin writes:

Education. Public schools are backwards even by the standards of brick and mortar schools. Imagine where education would be if parents had more freedom and there was a vibrant market of educational opportunities competing for those parents to choose them.

Anand writes:

A couple of people have cited pharma as an example of regulation holding back innovation.

There is a reason the FDA is so risk averse. Trial and error is great, but the cost of the error matters. Yes, lower barriers to shipping experimental drugs will results in more successful drugs getting to market. But the cost is more bad drugs will get to market and spread for several years. The success rate for compounds is in the single digits, so the bad products will far outnumber the good.

Second, the regulations are fairly reasonable. In simplistic terms, the FDA requires two things (a) Prove that your device/drug is safe and effective, and (b) document everything systematically so you can reconstruct the entire process if needed. I'm not sure which part can be removed or reduced.

Finally, I'd like to point out that every major pharma company trials drugs in India and elsewhere. Countries that don't even have the equivalent of the FDA, much less strict regulations. If deregulation was a magic fix, there would a ton of miracle drugs available in the developing world that haven't yet been approved in the US.

Eric Evans writes:
There is a reason the FDA is so risk averse. Trial and error is great, but the cost of the error matters.

And what's happening at the FDA has little, if anything, to do with that. If you really want to know what's going on, watch Burzynski The Movie.

Jeff writes:
Second, the regulations are fairly reasonable. In simplistic terms, the FDA requires two things (a) Prove that your device/drug is safe and effective, and (b) document everything systematically so you can reconstruct the entire process if needed. I'm not sure which part can be removed or reduced.

The effectiveness part would be a great place to start. If a drug has been established as safe, shouldn't that be the end of it, as far as the public interest in regulating it goes? Why not let doctors, patients, pharmacists and insurance companies figure out whether drugs are effective in treating a certain condition? Do we need a vast, expensive bureaucracy that drug-makers need to convince of the effectiveness of their products before they're allowed to market them?

libfree writes:

I'm more skeptical than Arnold in at least some fields. Why is heavily regulated healthcare one of those few markets with small innovations and rapidly increasing costs? Why do cosmetic surgeries and things like Lasik see large amounts of innovation and rapidly decreasing costs.

Ken B writes:

Anand makes a simple and common error. He thinks effects are binary: either all innovation is killed or none is.

JKB writes:

I'm sorry but stones in a river to slow the river. Even the smallest stone will cause friction even if not perceptible due to the large flow. But enough of the smallest stones will lodge together and impede causing breakers and eventually stop the flow. The water for a time will stagnate as pressure builds before it either overtops the stones or breaks the dam. Regulations work the same.

3. Innovation will be adopted more readily because their are no vested interests to fight the change. Barring elites, NGOs or bureaucrats enamored with first-world prestige regardless of the solutions functionality in the environment.

4. Mitra's talk is amazing. Although I don't think he's gone far enough. The granny cloud could ask questions to elicit interpretive answers on the material to prompt the development of critical thinking in the kids. They don't need to know the topic but just ask questions that avoid recitation and prompt answer that require integration of the learning to answer.

Also, the group dynamic reminds me of Paul Graham's observation that it is almost impossible to be a successful solo startup founder. The successful founders are always a tight group who work well with and complement each other.

mdb writes:

Anand,

I suggest you familiarize yourself with some of the current cancer research - genetics is really starting to make a difference - then think to yourself even if a breakthrough drug is found TODAY, it will be 15 years till it is on the market - how many does that kill?

efficacy - off label use - once a drug is approved it can be used for everything and anything - I am sure you have taken a drug for off label use - were you concerned. Safety - look at the safety record pre and post FDA - not much of a difference - none really.

If the India market was great the $100 laptop would be a reality (maybe it is now). Financial reward matters a lot, and there is not much of that marketing in third world countries. To say lack of innovation there proves regulations don't matter - is really ridiculous.

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