Spouting tosh about innovation

Second, government has also increasingly accepted that it funds the risks, while the private sector reaps the rewards. What is emerging, then, is not a truly symbiotic ecosystem of innovation, but a parasitic one, in which the most lossmaking elements are socialised, while the profitmaking ones are largely privatised.

Dear God that\’s a stupid fucking argument.

When government sucks 50% of all economic activity in the economy into its gaping maw as taxation in what fucking manner can we be said to be \”privatising profits\”?

For fucks sake, get a grip people!

27 thoughts on “Spouting tosh about innovation”

  1. you really need to slow down on slinging insults around.

    here’s a simple example.

    economy consists of 10 workers and one capitalist / entrepreneur, government taxation amounts to 50% of GDP.

    Government funds risky research and development, entrepreneur utilizes successes and gets stinking rich.

    that’s crudely that set up being described as “privatising profits” and includes your point about taxation levels.

    Now, if the government taxed back the gains made by the entrepreneur to a sufficient extent to fund all its R&D spending and cover the unsuccessful projects, then it would be a wash.

    If the government doesn’t tax successful entrepreneurs enough, then the gains are privatised by the few and losses socialised, in the form of taxation of the 10 workers.

    We cannot tell which situation we are in by looking at total taxation as a proportion of aggregate GDP.

  2. This bollocks is being written up as The Entrepeneurial State.
    There is, however, one sense in which I agree. The post-Katrina insurance costs in the US were enough to wipe out much of the US insurance industry. So the gov’t stepped in, had to. This mirrors much of what happened here with the banks in 2008 & 2009. It reached the point where the private equity investors in Northern Rock were ‘demanding justice’…because they’d lost money – but then the Chancellor had changed CGT rates because their ‘predatory’ profits were just disgusting. So we end up at this messy point: Gov’t on the one hand, even nominally Conservative ones, think profit is dirty and so it is entoitled to hoover up those profits. ‘Risk-takers’ on the other hand are offended not to be baled out when their risk proves to be, well, risky.

  3. sorry, it wouldn’t be a wash even if losses were covered. Taxes would also have to recoup sufficient return on successes, to compensate citizens for their investment in R&D via taxation.

  4. There is no reason a government should be held liable for so-called ‘acts of God’ such as hurricane damage. All a government has to do is maintain order and defend/protect the people from attack. I don’t like the idea of being able to buy something as a private individual without being expected to bear the risk. If a homeowner chooses not to buy insurance against storm damage, why is the government liable in the event his home is destroyed by a storm? If he chooses to buy insurance but the insurer isn’t adequately underwritten when the storm hits, again that’s his own business. People are beginning to expect the safety net of government in private life as well as in risky business ventures. That’s the real problem, as well as the reason for the massive amount in taxation scooped up to pay the interest on past debts incurred every year.

  5. I’m not certain exactly what expenditure/investment it is our entrepeneur governmet is incurring that entitles it to claim the fruits of the success. Could you help us here.

    I would also note – and no, I’m not accusing you of being a Ritchie accolyte – that the very ‘entrepeneurial’ activity he is praising on his blog today are the same ‘unecessary’ reliefs he has expressly argued should be withdrawn, formed the basis of the TUC’s budget response in fact.

  6. Luis

    Sorry, I simply don’t understand what you are saying. If your hypothetical state funded the innovation with (say) 0.5% of GDP, and so the entrepreneur makes a fortune but secures x number of jobs and so tax revenue, where is the problem?

    Frankly, I would prefer to see my taxes going into £-for-£ matching schemes for innovation than almost any dingbat form of redistribution advocated by Polly Toynbee et al.

  7. “Hmm, this reads suspiciously like Mariana Mazzucato!”

    Not entirely surprised to have that suspicion confirmed. I am surprised, however, that she hasn’t yet been co-opted by the Murphmeister.

  8. Complete load of bollocks anyway.
    Initial research costs to an innovation are usually trivial. Few man years of a bunch of boffins in a lab somewhere. Not even in the tens of millions. it’s getting from concept to product, costs the money.

  9. BiS,

    Exactly. Bright ideas are easy, getting them to market and a commercial success is a monster.

    Quite a few people will point out how Apple never ‘created’ the touch screen or the hard drive music player and therefor are not entitle to the success they have had, completely missing the point that it was Apple that actually made them a success.

  10. Alexander Graham Bell

    Bright ideas are easy? So they won’t be scarce then? And you’ll be able to pick up the patents for next to nothing? No?

    Moron.

  11. The patent price will usually involve money spent on ideas that never came to that level too, yes?. Plus of course some element of profit. How much is the cost of say getting a new cancer drug to being sold to health organisations? The idea is one thing, the finished product another much more expensive thing.

  12. I do wish that in all of these arguments, people would understand where government gets its money from.

    What came first? The trader or the taxman?

    That’s right: the trader.

    Every penny the govt has to “invest” had to first come from a trader.

    The trader, by creating wealth, had already proven that he knew what he was doing – the govt merely highjacked his ability, taxed him and then called it their own.

    If capital was left with the businesses then all of this R&D would still be undertaken, the govt add nothing.

    It is also very easy to invest with other people’s money – when you know that it doesn’t really matter whether your investment fails or succeeds because you know another batch of money will be arriving come the new tax year.

    I hate all this talk of the govt being “productive”, it simply isn’t true.

    Govt destroys wealth, they destroy the motivation to create wealth, they destroy the source of wealth.

  13. “Apple put this together, brilliantly. But it was gathering the fruit of seven decades of state-supported innovation. But it was gathering the fruit of seven decades of state-supported innovation.”

    Complete and utter bollocks. There some tiny amounts thrown at some tiny projects, like early grants to develop something like Siri early on. IP v4 was completed 3 decades ago. Government stopped putting money into touchscreens decades ago.

    And what of OSX, the operating system? Or Safari? Or WPA-PSK? Or GSM? Or media compression? Or the RSA algorithm that means that app stores and secure web access are possible? Or the CCD device in the camera.

    I suspect that a lot of the stuff that the government spent some grant money on would have happened anyway. It’s not like TCP/IP was some sort of magic. A lot of it was based on work at Xerox PARC.

  14. Alexander Graham Bell was a strange choice of monika for a comment like that. The invention of the telephone cost what? Couple hundred bucks for some wire & bits & pieces & most of the ‘innovation’ was other people’s. And was a totally useless device. As one single telephone inevitably is.
    The revolution was wiring the country with telephone cable.

  15. Anthem: your model is obviously ridiculous.

    If I own a steelworks, and I borrow money to invest in improving my steelworks, and create exciting new industrial processes that make everyone better off, that’s awesome.

    Now, if exactly the same thing happens but with the shareholder and lender being the government instead of being me and a bank, then it’s still awesome.

    You can argue that over time, *as a tendency*, private enterprises will tend to be more efficient than government ones; in many areas there is empirical evidence that this is true. But that doesn’t alter the fact that government activity can and does generate innovation and production.

  16. Theophrastus

    what makes you think innovators increase the quantity of jobs and tax revenues? as opposed to merely replacing existing jobs and tax revenues.

    it’s quite simple, and not special to government. A private firm could undertake risky investment projects, bear the costs of the losers and fail to monetize the winners. If we’re talking about a government doing the same sort of thing, then bearing the cost of the losers may be spread across taxpayers (i.e. socialized) and if the returns from the winners are not captured via taxation, then the returns are privatized (the implication here being by a few individuals). It’s quite reasonable to think that certain private individuals have enjoyed the returns from state funded innovations, you just have to look at how fabulously wealthy some have become and conjecture that not all of that reflects returns on their contributions alone. It is not fucking stupid, as our host would have it.

    What is fucking stupid is thinking that opportunity cost arguments only apply to the government, or that the government cannot be productive.

  17. Surely, when Government sponsors “innovation” it is actually financing the development of a new Death Ray or fighter jet. Eventually the technology finds its way into mobile phones or car engines. The defence contractor makes money out of selling the product and licences and the armed services get a shiny new WMD.
    If Government really understood the relationship between innovation and risk we’d have had a space programme in the 1960s instead of British Leyland.

  18. geneticallymodified

    Nice to see you dismiss a book on the basis of one man’s review tim. Very considered. ..

    A lot of ignorant posters on this thread. I love the naivety of some of you who think that in the absence of government, businesses would chuck money at the kind of basic and applied science that is behind current technological progress.

    I mean really. The kind of research that enabled things like the Internet took decades before even a hint of commercial benefit could be identified. Are you really so native to think that there are private entities who would put hundreds of millions, billions even into scientists doing Blue sky research where the return on investment might be 3 or 4 decades away.

    are you really that stupid? Most venture capitalists even in new tech look to exit and make an ROI in less than 5 years.

    If you think there are companies who would full the gap then please name them! (Laughs)

    Take big pharma. Most big pharma are actually closing down their own labs or reducing their foot prints. They only spend a third of profits on r&d anyway and more than twice as much on advertising and marketing. What a waste.

    Secondly studies show that 75% of the r and d that big pharma does is in “me too” copy cat drugs for conditions that we have already cured. I.e another version of viagra. What a waste given we already have a cure for this.

    75% of genuinely new drugs are researched in government funded labs.

  19. geneticallymodified

    @bloke in spain and Tim Almond.
    So apple did it all by themselves did they? Did you know that the us government effectively bailed apple out a few decades ago because they were failing to innovate.

    Did Apple invent the transistor? Did the private sector invent the Internet?

    Its laughable to think that these companies made it all by themselves.

    Equally is laughable to think that without the brilliant and innovative commercialisation of companies like Apple in putting together the fruits of decades of government research into highly desirable life changing products that we also wouldn’t have had such an economic technological boon.

    Your simplistic private good public sector bad is child like and does not reflect reality. If we are to stay ahead in this globalised race as a knowledge economy this requires a strong partnership between a risk taking government investing in basic research and a different risk taking private sector turning this basic research into commercially viable products and the next technological and economic revolution.

    The problem with blind ideologues like yourselves is that you are so hateful of government that you are guilty of cutting off yours (and everyone else’s) nose to spite your face.

    Such short sightedness will mean that it will be the chinese for example that will reap the benefits of the green revolution and good old uk will be consigned to just financial sector innovations – ie finding new ways to extract value from the productive ‘real’ economy.

    Stop trying to drag us and this country down with you…

  20. Murphy? Is that you? You sound just like the synopsis to Mariana’s book.

    “Did Apple invent the transistor?”

    No, that was AT&T. But the more significant work that is relevant to Apple’s lineage was that done by a little outfit called Fairchild.

    We can pretend that nobody would do basic research if it wasn’t for “the courageous state”, but why would anybody take to the trouble of doing the work twice? To say that the state takes on risk in doing this work is to equivocate the same consequences experienced by those who take risks individually or collaboratively – it obviously doesn’t experience risk in the same way, nor do those who wield power over the capital involved.

  21. The writer mistakes research with innovation. Sure, much primary research is carried out by tax-payers money, eg SERN or space exploration, but it is the use of the research results which brings growth. Entirely different things.

    If patents are sold too cheaply, then that is the government’s fault. Or it might be deilberate policy, to foster innovation and growth.

    But as Tim implies, even if government is responsible, in some degree, for the development, it gets at least 20% of the porfits, in perpetuity, without doing anything more.

  22. “Bright ideas are easy? So they won’t be scarce then? And you’ll be able to pick up the patents for next to nothing? No?”

    How many patents are generated every year? A million or more? 100 for every hour of every day of every week of every month.

    Do you think that’s scarcity?

  23. Actually in the UK about 3000 patents are granted each year. Not a lot per UK working hour on R&D.

    Expect that number to go up as people start filing more to benefit from the patent box regime.

  24. Are you sure about that? That’s less than are granted in New Zealand, almost half in fact (around 5000 last year).

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