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Free Market Capitalism Produces Innovation – That’s The Practical Justification For It

We can all think up various justifications for why we should follow, or allow, free market capitalism. From if people want to do this why not all the way through to some Randian call for the ubermensch being allowed to do what the hell they like. We can also all criticise the arrangements with anything from expropriation through to inequality, D’Oh!

And moving off into the practicalities of things, the actual justification in purely those practical terms is that it’s the system which best produces innovations. As here with this nice little story about the manufacture of fake tits.

It would take several years before the two could bring their product to market.
Lanternari and Kehat, who were living in Israel at the time, spent the next five years on research and development, testing their bottle with hundreds of parents, infants, lactation consultants and pediatricians.
“This wasn’t just another product. Babies were going to use it. So we had to be very careful,” says Kehat. Besides the efficacy of it, they designed the bottle with a modern, stylish look and made it easy for babies to hold.

OK, fake tit isn’t how we normally describe baby bottles but from a functional point of view…..

The actual innovation, in principle at least, was very simple indeed:

His son, Daniel, was hungry and there was nothing Lanternari could do to speed up the process. The only safe way to heat up cold or frozen breast milk is by putting it under running warm water or in a bowl of warm water — a process that can take 10 minutes or more.
“You can’t microwave breast milk or heat it directly on the stove because it will damage the nutrients and the immunological property in the milk,” says Lanternari, a biomedical engineer.
But like most new parents, he was tired and frustrated, and thought there had to be a better way. That’s when he got an idea: What if he designed a baby bottle that spread out the breast milk into a thinner layer? Doing that would expand the liquid’s surface area, allowing it to warm up faster without damaging the nutrients.

The shape is, err, breast shape. -ish.

OK, now think about doing this in a planned economy. A planned economy being one where there is no room for serendipity at all. And no room for non-experts to contribute to product design either. We might even have institutes of new product design and development but they’re quite obviously only going to operate upon ideas from their own staff. That random sleet of inspiration which strikes in the general population* is going to be missed. Then the idea has to be passed through the varied layers of the bureaucracy in order to get resources allocated to it for production. Meaning that it’s got to pass through all those committees.

As it happens we’ve tried this. We call the experiment the 20th century. The Soviet system had ball bearings because they had tanks. They had electric motors. And they had concrete, they definitely had concrete. So, they could build washing machines, they being reliant upon those three base technologies – given them the 19th, heck the 18th century could have built them. But the Soviets never did**. Something about planning meant that such liberation of womens’ labour never did happen.

The results of our experiment being that yes, markets produce innovation in a manner that planning does not. Despite what Mariana Mazzucato keeps saying.

As to the capitalism, the two involved here look set fair to gain hot and cold running Ferraris soon enough, the kids access to Yale and or Harvard without those bothersome student loans. That’s a pretty good incentive to do the work of trying to get people interested.

Capitalist free marketry, it encourages innovation in a manner no other socio-economic system does. So much so that Brad Delong retails a point about it. In terms of just pure economic growth the 20th century, in those roughly capitalist and free market economies, left the average bloke some 8 times better off. When we add in innovation, the things that could be newly done, perhaps 80 times better off.

And yes, this does seem to be true of fake tits too. As many specialist movies don’t show but this story does.

*From Sir Pterry.

** I have actually owned a Soviet washing machine, a plastic tube with a stick to twiddle. Remarkably ineffective even when placed in the bath.

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5 years ago

A more interesting subject, possibly, is the growing hostility towards innovation, especially “disruptive” innovation. Or perhaps I just glance at The Guardian too often. However, it seems there is a pretty substantial population that thinks the primary benefit of a planned economy is the lack of innovation. Consider Bernie Sander’s quote “You don’t necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country.” Bernie, of course, knows just how many deodorant brands or sneakers that we do need and would be happy to put it into effect… Read more »

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