Unconventional thinking does not mean we should stop thinking

It's entirely true that at times we need to be a little unconventional in our thinking. Possibly even prioritise some out of the box conceptualisations as an urgency to set the ball rolling. But unconventional thinking is not the same as asking us to stop thinking.

At which point gurning from stage left is Andrew Simms, he formerly of the not economics frankly groupuscule:

Conventional thinking will not solve the climate crisis

Andrew Simms

Choosing the best possible future means considering radical scenarios that align energy use and industry with climate action

OK, many of us don't share his obsession with the amount of plant food in the atmosphere. But it is always worth examining someone's logic within the structure of their own beliefs. So, what is it that we are urged to do?

Rarely considered but important variables come from new economics, including the shorter working week, the share economy, shifts in corporate ownership and governance, and intelligent but deliberate measures for economic localisation. Compare these to the “stumble on”, or business as usual scenario, in which we give up control of our future to a permanently destabilised climate change, but also assess seriously the consequences of the argument for planned so-called “de-growth” of the economy.

That is not thinking rather than unconventional thinking. For all of these were examined, in detail, a quarter century back. It was considered in the Special Report on Emissions Scenarios, the economic models upon which the entire IPCC process is built. Absolutely every meeting, treaty, gabfest and report since then has been working on the basic logic of that examination.

The results of that examination being most interesting. The most obvious of which is that, even within that obsession with plant food, if we reduce carbon emissions then we're done. There is no other problem in this area. The other seriously interesting result being that economic localisation makes the problem, such as it is, worse, not better. 

Approximately speaking we have four models, families of models. A, in which we're capitalist free marketeers and B in which we do the Swedish socially democratic cha cha cha. 1 in which we're doing the globalisation waltz and 2 in which we revert to economic localisation. A1 and B1 are markedly better in terms of living standards and also the size of the climate problem than A2 and B2. Better as in the problem is smaller.

The reason is obvious - more trade will produce a higher living standard with the same resource use, or the same living standard with lower resource use, than less trade will. Because the process of trade is producing where resource use is least.

Which leaves us where we came in. Unconventional thinking is undoubtedly necessary at times. But this is not a synonym for not thinking. As with Simms and his idea here that the solution to climate change is economic localisation, the very thing we've known for 25 years which makes the climate change problem worse.

The free market case for hard Brexit doesn't add up

Ryan Bourne is a great guy, but I think he’s wrong about ‘hard Brexit’ being desirable, as opposed to the ‘open Brexit’ alternative. By ‘open Brexit’ (aka ‘soft Brexit’) I mean leaving the customs union but staying in the Single Market or getting a trade deal that is very similar in practice. His recent City AM piece makes strong claims about this without, I think, sufficient evidence to back them up.

First off, he contrasts a European Commission report, which concluded that the Internal Market has added 2.1% to the GDPs of EU member states, with a pre-referendum Treasury report, which suggested that we would suffer permanent losses of up to 6 percent of GDP if we were to leave the Single Market and Customs Union.

Ryan suggests that there is a contradiction here, but these estimates are looking at different things: the Commission’s study only looks at the gains from the post-1992 integrations that took place (the Single Market proper), not the gains from pre-1992 economic liberalisations the then-European Economic Community brought on. 

So it doesn’t make much sense to compare this with the scenario the Treasury modelled of the UK leaving the Single Market altogether, which obviously includes all the GDP-boosting reforms that took place before 1992 as well. So Ryan isn’t comparing like with like here – and that explains why the Treasury study seems much worse than the European Commission study. If they’d been looking at the same question, it’s quite possible that they’d have agreed entirely.

So Ryan’s point doesn’t add up, but maybe the Treasury’s model is wrong for other reasons. I’m sceptical of economic models at the best of times. But the ‘gravity’ model of trade, so-named because it assumes that countries’ size and proximity is an important predictor of how much trade can profitably take place between them, is a very robust one. It makes predictions that are very reliable – indeed John van Reenen, who is a very good and pro-markets economist, has described it as "the most reliable empirical relationship in international economics". As empiricists we should be careful about dismissing it.

This approach also compares favourably to Patrick Minford’s models of the GDP gains from unilateral free trade, because Minford makes several very unrealistic assumptions. These include the premise that distance does not affect ease of trading (so it’s literally just as easy for British firms or consumers to buy goods from Mongolia as it is to buy them from Ireland or France) and that the quality of items is the same in every country in the world. 

Let me give an example: socks may cost £3/pair in the UK, and 30p/pair in Mongolia. Minford’s approach assumes that the only reason we don’t all buy and wear 30p/pair Mongolian socks is tariffs, and that by abolishing tariffs we could all save £2.70 per pair of socks. This is probably not true, because (a) those 30p socks might be made out of polyester rather than cotton and hence actually be inferior as a product to the socks we wear here, and (b) the cost of transporting socks from Mongolia to Britain is probably higher than zero. I am sympathetic to the idea of unilateral free trade, but people like Ryan and Minford have an over-optimistic idea about how much better off it can make us.

With this in mind, the budget payments to the EU, while annoying, are probably not the biggest issue on the table. If those budget payments net out to 0.5% of GDP but our GDP shrinks by between 2% (let alone 6%) by leaving the Single Market, we’re not exactly better off keeping them. Shrugging off 2.1% of GDP (the low-range estimate Ryan cites) is not sensible, to my mind – since it’s a permanent loss it means that over time, it’s like shrugging off a year’s worth of income.

I’m surprised also to see Ryan, and so many other free marketeers, say things like “The depreciation of the pound already vastly outweighs any adverse tariff effect on exporters to the EU”. I suspect Adam Smith and Milton Friedman would have been too: both realised that exports are things you give up to get imports, and depreciation in a currency’s value really just means you’re getting less for what you’re giving up than you used to. 

This might still be good for exporters, but it effectively means that importers (that is, consumers) are losing out to help them. It is puzzling to see this argument in a free market case for a hard Brexit.

When Ryan refers to the opportunities open to the City from leaving, there's just no plausible market of a meaningful size anywhere in the world that we can gain share of if we lose regulatory access to EU27. Ryan’s point about not listening too much to established firms is well taken, but we have to weigh against that the fact that most people not involved in finance don’t know all that much about passporting, equivalence and so on. We shouldn’t simply ignore the people that do because they might be looking to keep rivals out, and I suspect if they were saying things in favour of a hard Brexit Ryan would be less sceptical about their motives.

Ryan doesn’t make the point here, but he has elsewhere, that there are lots of successful countries that are outside the Single Market like Japan and Canada, so why not Britain? Well, yes. But to get there would mean liquidating a lot of what we’re good at and, over time, the UK economy developing entirely different comparative advantages. Think of it like someone who has to re-skill after their old skilled job ceases to exist. It’s do-able, but the transition can be painful and costly. And there's no guarantee we'll be as rich as we were before. (By the way, maybe Canada would be richer if it was in the Single Market – they're certainly keen to get an extensive trade deal with the EU passed.)

Finally, I am somewhat annoyed by free marketeers describing the Single Market as a ‘single regulatory zone’ or similar. Yes, it involved harmonising some regulations. But mostly it relies on mutual recognition of other countries’ rules, and that harmonisation is overall a restraint on interventionist national governments. It also, obviously, makes trade substantially easier across borders. Governments like to protect domestic firms with regulations, not just tariffs, and the Single Market goes some way to preventing that. Just because it involves regulation does not make it automatically anti-market: if the alternative is more domestic regulation, and I think generally it is, the Single Market is the liberal option.

I strongly dislike many of the regulations that the EU passes. I don't like rules that stop kettles from boiling 'too fast'. But I think it's noteworthy that people criticising the Single Market focus on these annoying but relatively trivial regulations, because in terms of the big regulations that actually matter I don't think it does too badly. Outside the Single Market, even if we do scrap stupid laws about straight bananas and kettle heating times, I fear that we'll get much worse laws that cap energy prices and part-nationalise industries – many of which would be illegal in the Single Market.

My own view is that Brexit can and quite possibly will be a success but it depends on us being smart about it. I think many Brexiteers object most of all to symbolic aspects of the EU – the flags, the passports, the irritating and stupid lightbulb and kettle regulations – and we will probably end up with something that in practice is ‘soft Brexit’ but looks like and is sold by the government as ‘hard Brexit’, and ditches most of those symbols that they really hate. It may, in effect, be the EEA Option. That would get us out, and do it without turning Brexit into something that makes us poorer.

Once more into the breach on Brexit and trade

The Cabinet has been told that Brexit will be bad for trade, very bad. The problem here is that the sources of this information are the same scaremongering reports that were passed around before the referendum, those reports that were part of Project Fear. And the current precis of them doesn't include the most important part of the Treasury report, which is the mechanism by which trade makes us richer in the medium to long term.

The Cabinet is thus being feed information that is not entirely and wholly true

Cabinet ministers have been given detailed warnings that the UK pulling out of the EU customs union could lead to a 4.5% fall in GDP by 2030 and the clogging up of trade through Britain’s ports.

The predictions were contained in a paper circulated at a meeting of Theresa May’s special Brexit cabinet committee, which concluded that ministers were not yet prepared to decide whether the UK should withdraw from the EU’s free trade bloc.

The 4.5% cut is the average prediction made in three studies that were carried out before Britain’s EU referendum, in a move that could anger Brexit supporting MPs who believe that the old estimates are out of date.

To get to this result people are just doing sums. Exports are positive in GDP, imports negative, add up what you think the volumes of them will be and there's your answer.

But the Treasury report itself was very clear that this is not the medium nor long run effect of trade. Rather, there, the real effect is upon the productivity of domestic producers.

It's only the top 10 to 15% of companies, or producers, in any economy who partake in international trade. Why ship mediocre goods half way around the world when there're plenty of local mediocrities to be dealing with? Imports thus represent competition from the most efficient producers in the world - being exposed to such competition means that local producers either buck up their own productivity or they go bust.

Imports thus boost local productivity - and as Paul Krugman has said, productivity isn't everything but in the long run it's pretty much everything. Increased productivity is the very thing that makes us richer.

The sums being done in these reports do not take account of this effect. They are, essentially, doing sums not economics.

When we do economics, and take account of this effect, then we get to Patrick Minford's result. Assume that our exports face the usual WTO barriers. But that we offer unilateral free trade on imports to us. This exposes the British economy to that productivity enhancing competition from the best of the whole world's producers, not just those from the rather sclerotic economies of mainland Europe. The net result is a 3% addition to British GDP in this timescale, rather a far cry from the 4.5% contraction given here.

Which leaves us with a rather important point. The effect of Brexit upon trade and thus GDP is an economic question. We should therefore be doing economics in trying to answer it, not just sums.  

Nick Clegg is flat out wrong about food prices and Brexit

Nick Clegg has been doing the rounds insisting that a hard or clean Brexit will lead to a rise in British food prices.

Nick Clegg is wrong, entirely so. The claim is:

He said: "A hard Brexit will lead us off a cliff edge towards higher food prices, with a triple whammy of punishing tariffs, customs checks and workforce shortages.

"We must hold Theresa May's Government to account and fight to ensure what comes next is best for British consumers and businesses.”

The claim that food exports could face higher tariffs is at least potentially true. But that would of course mean that British food prices would decline. For some of what is now exported would remain available for consumption domestically. 

However, their real claim, from the full report, is this:

In the case of such a “hard Brexit” the UK will be obliged to impose tariffs on imports, while the EU and the rest of the world will be obliged to impose tariffs on our exports.  

This is simply not true. To check our understanding we bothered to call a source in Geneva, something that perhaps Clegg and the Lib Dems should have done.

The claim is that a clean Brexit will mean that we must revert to WTO rules. Just for the avoidance of doubt yes, Britain is a member of the WTO in its own right, so definitely and definitively WTO rules would apply.

Those WTO rules say that there are ceilings to the tariffs which can be applied to imports from other WTO members. All British exports could and would face duties up to but possibly below those ceilings. Clegg is claiming that Britain would thus have to impose equal tariffs to imports into Britain. This is nonsense. We cannot apply higher tariffs than those ceilings, but we can apply any rate that we wish below them. Yes, we did check, 0% is an allowable rate below those ceilings.

Further, all that Most Favoured Nation means is that whatever rate we do decide to apply must be applied equally to products sourced from whatever WTO member nation. We can have a special low rate for camembert if we wish - as long as camembert from France gets charged the same rate as that from New Zealand then we're obeying the law. 

The central contention here is therefore wrong. WTO and MFN rules allow us to increase tariffs up to the agreed ceilings on imports into Britain on the understanding that whatever rate chosen applies to all sources.

WTO and MFN rules do not insist that tariffs must be imposed upon imports. We are entirely at liberty to impose any rate we wish below those ceilings, including offering tariff rates of 0%. Which, given that we import some 40% of our food seems like a sensible idea. Why would we be so damn stupid as to make our own food more expensive for ourselves through our own actions?

Nick Clegg was once Deputy Prime Minister wasn't he? How well we must have been ruled back then.


Brexit means leaving the EU

Tim Stanley who, as a teenager, was an enthusiastic member of The Next Generation, and who, as a journalist, has been a featured speaker at it, wrote a typically good column in Saturday's Telegraph.  He has a remarkably simple insight: 

First, we all know what Brexit means. It means we’re leaving the EU. That’s all. Simple really. Lots of other countries apparently exist outside the EU, some of them are doing rather well. China, Japan, America… oh, the list is surprisingly long.

Yes, it is what more people voted for than have ever voted for anything in the history of our democracy.  It is what I voted for.  We voted to leave the EU and make our own laws instead of having them imposed from outside.  People were fed up of having no say in whether their kettles had to take an extra minute to boil or their light bulbs another three seconds to light up.  They were irritated that outsiders were banning the sale of packs of 10 cigarettes to poor people, or of packs of 16 or 17 in vending machines, or of menthol cigarettes, and they voted to stop it. 

I added some economics to the sovereignty arguments because I want the UK to trade globally rather than remaining part of a narrow protectionist bloc of diminishing importance.  We can do this outside the EU but not inside.  As Tim Stanley says:

We are leaving the EU; the details will out as the process takes its course. Why is that so hard to grasp? It’s not, of course. Most of the high-profile critics of the Prime Minister are fiercely intelligent and they understand entirely how Brexit works. They just don’t want it to happen. So they take every bit of bad news, every bump in the road as an excuse to shout: “Stop the car! Reverse, reverse!”

He points out that the critics use a variety of specious arguments to thwart the democratic decision from being effected:

For instance, they are all now fans of parliamentary sovereignty and insist that Parliament debate Brexit. These are people who for forty years were happy to let Brussels dictate UK legislation. No, they are not reasserting the power of Parliament. They are using Parliament in a last ditch attempt to overturn the result of the referendum.

Tim Stanley accepts what he says Theresa May has accepted, that the UK's future will now be outside the EU.  It is a bold step into an unknown future, and critics of it should now recognize that it will happen instead of hoping that it won't.  They would be welcome on side to join those of us who are going to make it work.

The book you should be reading

Miles Saltiel is one of us, a Senior Fellow here at the ASI. He is also author of an interesting little new book available here. Given that Saltiel is one of us it is of course a perfectly formed volume and at a very free market price of only 99 p.

However, it's also rather more than that as it's a little bit of instant history. Saltiel was running a blog and discussion group of various connected and high level people in the run up to the Brexit referendum and beyond. This is a collection of pieces from those discussions. And the joy of such collections is that they are indeed that instant history.

All too often the historian is looking back, knowing how things turned out, and then fitting events into that knowledge structure. The advantage of something like this, a diary almost of the discussion, is that we can see opinions changing as they really did change, without that hindsight. How we all thought that leave got a head of steam up in that last couple of weeks to be derailed by the awful murder. The Remainiacs attempting to capitalise on it rather being ignored by the public - but even so, right on the eve of the vote most thinking that remain had won. And then the realisation that we really were going to be free and sovereign again.

Quite the most important part is the discussion after the vote. As it becomes clear that the EU will offer nothing without freedom of movement. And as that's the red line over on our side (while Saltiel and we think said freedom a jolly good idea that's not what either the people nor the government believe) then the rest of the decision is already taken for us.

As we are going to restrict immigration therefore we will be having hard, or as Eamonn Butler, also of this parish, puts it, clean, Brexit. For there isn't anything else to be had given the migration stance.

As a whole it's an interesting read as a record of how people realised and when what was going on. The important policy part is what is said after the vote has been won. And as a guide to what will happen that analysis seems spot on to us.

How we solve Brexit might reduce inequality

It's an odd thought, but a potentially true one, that how we leave that delightfully social democratic ideal of the European Union will reduce inequality here in the UK. As we say, odd but potentially true.

For there's something dreadfully underappreciated about inequality. It's not so much about certain professions or jobs getting paid more than others. It's rather more about certain firms paying better than others in the same field. We are, rather than inequality between say, classes, seeing inequality increasing between firms. This is true of the US and the UK:

The reason, according to a new paper from Harvard University’s Richard Freeman, is that over time inequality is growing between different companies.

“The earnings of workers with near-clone similarity in attributes diverged so much by the place they worked that rising inequality in pay among employers has become the major factor,” in rising inequality, Mr. Freeman said.

This may sound obvious: Of course some firms do well and others don’t. But if inequality is growing sharply among workers with the same attributes, it casts doubt on theories that peg inequality to primarily demographic, educational or geographic factors. The link is tighter than one might expect. From 1992 to 2007 (the period in which the data in this study was available, and also the period over which much of the rise in inequality occurred), the average worker at a given percentile, and the average firm of a worker at that same percentile had almost equal earnings increases.

The likely reason is that the economy is becoming less competitive. It is competition that makes firms scramble for productivity and it is productivity which enables higher wages to be paid. If we're finding that productivity is increasing only in certain firms, rather than across firms in general, then we are seeing the effects of too little competition.

Which brings us to Brexit. One potential outcome, one which we desire of course, is that Britain reverts to proper, even if unilateral, free trade. This exposes all domestic manufacturers to competition from the top producers around the world - it being, of course, usually the top 10 or 15% of any economy that even tries to export. Under the pressure of such competition the urge to increase productivity will bear upon all firms and thus both make us all richer and also reduce the inequality of pay across firms.


In which I learn from Shelter that my flat is unacceptable

I have a lot of time for Shelter’s policy team, because apart from basically being in agreement with them about the evils of strict planning policies I think of them as being smart, open-minded people who are happy to debate with their opponents in good faith.

I’m not sure about their most recent report, though, which purports to show that four in ten homes in Britain don’t meet ‘acceptable’ standards. It’s not to suggest that the housing situation in Britain is all roses to question a few of the things they think are essential to living well. 

Most of the 'essential attributes' are indeed pretty bog-standard – a house should have a toilet and a shower or a bath, should have plug sockets and not be easy to break into, etc. But some are dubious. 

"There is enough space for all members of the household to comfortably spend time together in the same room" is important for families but not for co-habiting young people. I know lots of people who’ve had the option of a flat with a sitting room but have chosen one without, because the rent is cheaper and/or the bedrooms are bigger for the same price.

"The household has enough control over how long they can live in the home" – does this preclude assured shorthold tenancies of 12 months? I don’t know – the data is not available without emailing Shelter to ask (more on that below) – but if so pretty much every flat I’ve lived in since leaving university, even the decent ones, fails the test.

"There is enough space to allow all members of the household to have privacy, for example when they wish to be alone" – I shared a bedroom with my brother growing up, so I guess none of my childhood homes meet this standard. Well, OK, I thought they were fine. (These criteria are sometimes contradictory, because another point suggests that it’s OK for kids to share rooms.)

In many respects rental properties used by young professionals cannot hope to win. For example, to qualify as ‘acceptable’ one of these three must be satisfied: being allowed to redecorate the home (repainting the walls, etc), being allowed to have a pet, or being assured of being there for long enough to 'participate in the local community'. None of those three apply to my current flat, which I quite like and certainly do not think is an unacceptable place to live.

Remember: failing any one of these criteria would make a home fail the 'Living Home Standard'. And there are places that could fail or pass on the sole question of whether you're allowed to keep a pet hamster in your bedroom.

If I was raising a family then I would feel differently about many of these, but the point is that lots of people are not raising families. If four out of ten flats are ‘unacceptable’ by these criteria but most of those are inhabited by people who have no need for pets or redecoration, or even long-term security in that flat, then the problem is less than is suggested.

I don't need space for a dog, I don't want to redecorate, I don't care about making friends with my community. But because my flat doesn't allow me to do these things, it fails the Shelter test. How many other people are living in flats that have failed and don't care either?

I’m also a little bit annoyed because the actual data, the polling evidence that tells us how many homes are ‘unacceptable’ by Shelter’s standards, isn’t available except if you email Shelter’s public affairs team to ask.

That’s not how it should work: as I’ve written before, we cannot trust journalists to scrutinise academic or think tank research properly, and if we can’t do that ourselves conveniently we shouldn’t trust the work at all. It’s extremely bad form of the BBC to report on unpublished data like this, and bad form of Shelter and Ipsos MORI not to publish it so that ordinary Joes like me can read it without asking for permission.

I could of course make the argument that the real problem is people being on low incomes, and the solution is not to pass regulations that, in effect, force them to spend more money on housing that Shelter approves of, but to make them richer by cutting their taxes, by growing the economy, by giving them cash transfers, by cutting the costs of other expenditures like energy and childcare, or by relaxing planning laws so that land is cheaper. All of this is true but almost beside the point if Shelter's unacceptable homes include places that people are perfectly happy with regardless of their income.

To which you might say, why question this? We know the planning system makes things worse. But we don’t need to make flimsy arguments based on secret data to make this case, and doing so makes us all look bad. 

Cities as markets—markets as cities

Over at Market Urbanism (one of my favourite sites) economist Sandy Ikeda has a post on the links between markets and cities. In it he references a bunch of recent writing on the links between markets and cities: "Cities aren’t merely convenient locations for markets; a living city (which I’ll define in a moment) is a market, and the first cities probably originated as markets."

He points to Jane Jacobs' view that cities' strength is in their diversity: both in terms of land use—Le Corbusier look away—and in terms of their inhabitants. With different tastes, opinions, skills, abilities, and so on individuals can satisfy each other's demands and preferences. But it goes further:

Now, standard economics teaches us that the differences among economic actors allow them to specialize and trade for mutual gain. This principle is called “comparative advantage,” which is the idea that people should choose those lines of production in which they are the most efficient. That’s fine as far as it goes.
But more importantly Jacobs, and indeed most Austrian economists, see the essence of markets as not merely places that promote efficiency, but as places in which entrepreneurial competition spurs the discovery of new things. That discovery process entails fundamental changes in culture as well as in economic development. Joseph Schumpeter’s phrase “gales of creative destruction” better captures the essence both of living cities and of markets than the standard economic notions of efficiency, comparative advantage, and low-cost production, as important as those are in their limited context.
Living cites and successful markets bring intellectually and culturally diverse people together to their mutual advantage, but they also create conditions in which vast amounts of novel information—about science, technology, religion, music, the arts, and lifestyles—get dispersed very rapidly. That in turn allows all kinds of people, the ordinary and the extraordinary, to experiment and to make new connections among all that information, generating even more diversity and attracting even more people. In this way, cities become “incubators of ideas” and economic growth. The process is highly dynamic, but also very messy and, yes, in a sense inefficient. Most experiments fail. But someone who fails in a city, unlike her counterpart in less-urbanized cultures, need not starve as a result, and there is more likely to be some new opportunity just around the corner.  We see the successes that drive innovation, but the failures are important, too.

Read the whole thing!

Obama right and wrong

In the November issue of Wired, the Frontiers Issue, President Barack Obama contributes an editorial that shows him much more in tune with our outlook and our world view than we had supposed. 

Firstly, he is optimistic about the present and the future. "The truth is," he says, "if you had to choose any time in the course of human history to be alive, you’d choose this one."  Agreed.  The world is better than it has been.  "A smaller share of humans know chronic hunger or live in extreme poverty."  Yes, indeed, and the future will be better still because we will make it so by doing more of what it took to achieve that. 

"Humans—through our ingenuity, our commitment to fact and reason, and ultimately our faith in each other—can science the heck out of just about any problem."  Well said.  Human creativity can devise solutions to overcome challenges and improve the world.  Technology can solve problems better, we think, than wishful thinking or pious resolutions.  It can enhance and enrich the lives that future people will live.

Where we part company with him is on the methodology that can bring this about.  He clearly thinks in terms of political action to solve pressing problems. "To clear these hurdles we’re going to need everyone—policy makers and community leaders, teachers and workers and grassroots activists."  Actually some of the groups he mentions are going to be opposing the innovations that can solve problems, a brake on progress rather than a spur to it.  What it is going to need is space for human creativity and ingenuity to develop and flourish.  It is going to need entrepreneurs, and conditions that favour their talents. 

Instead of big projects developed and orchestrated by governments, it is going to need a large measure of the personal liberty that allows people to break out from the norm and seek new things and new ways.  It is going to need property rights, low taxes and regulations to foster growth and innovation.  It is going to need a culture that esteems and rewards innovative problem-solving. 

Governments have a role to play, of course.  But it will not be one of restricting and confining the lives people live and of limiting their choices and their chances.  It will be one of embracing new technologies and allowing those who discover and develop them to be rewarded for doing so.  It will be one that flows with the tide of an unbounded and spontaneous future rather than one that seeks to confine it to preconceived and pre-planned channels.

Marks for attitude, Mr President, but not for methodology.

See the full Wired article here.