The Adam Smith Institute’s latest paper, by economics professor Dr Arthur M. Diamond, Jr, makes the case that the state lacks the entrepreneurialism and innovation provided by the private sector — and both struggled to respond to the Covid-19 pandemic and should not get more involved in issues such as climate change, semiconductors, infrastructure, and jobs:
As the pandemic grinds to an end, there is significant clamor for a bigger government to solve alleged crises in healthcare, climate change, semiconductors, infrastructure, and jobs.
Many believe that China’s state-centric policies are better suited than the West’s to solve these crises. But central planning consistently fails and Chinese Communist Party (CCP) efforts to increase the role of the state will hold back their economy.
Life has improved as a result of innovation, which occurs through the efforts of inventors and innovative entrepreneurs. Workers, on balance, benefit from a system of innovative dynamism. Policies can be crafted to encourage further entrepreneurship and innovation.
Innovative entrepreneurs use serendipity, slow hunches, and trial and error experiments to end crises and create a flourishing economy. The path toward innovative solutions cannot be known in advance by central planners and regulators, and only can be created by the improvisation of entrepreneurs.
The track record of centrally planned projects, whether the explosion of the R101 government-built dirigible in Britain, or the bankruptcy of the government-subsidized Solyndra in the US, does not suggest that government central planning is better than entrepreneurial innovative dynamism.
In the recent Covid-19 pandemic, central planners in China covered up the emergence of the virus and were slow to warn their own citizens, and the citizens of the world, of its virulence and fast spread. They may also be responsible for accidently leaking the virus from a laboratory.
The World Health Organization (WHO), the Centers for Disease Control (CDC) in the US, and Public Health England in the UK, for months ignored evidence that the virus could spread asymptomatically and through aerosols and that it only very rarely could spread through infected surfaces. As a result, those who acted on the information from these authorities took measures that were of limited use (temperature checks and frequent surface disinfection) and failed to take measures that could have mattered more (earlier, quicker, targeted testing and better ventilation). Perhaps even worse, central planning organizations discouraged or banned the kind of nimble trial and error experiments that could have provided more useful therapies until vaccines could be developed.
In respect to climate change, semiconductors, infrastructure, and jobs, a system of entrepreneurial innovative dynamism has resulted, and will continue to result, in faster and greater progress.
To sustain the innovative dynamism that allows us to flourish, we must make sure that:
We do not interfere with the process that allows entrepreneurs to innovate;
We do not tax would-be entrepreneurs so much that they do not have the funds to pursue their hunches and conduct their nimble trial and error experiments;
We do not regulate or centrally plan the path forward.