Innovation And Free Markets In America

Editor’s Note: EarthTechling is proud to repost this article courtesy of Natural Resources Defense Council. Author credit goes to David Goldstein.

The Washington Post reported recently that “Entrepreneurs Run Into Roadblocks” in France that prevent them from bringing innovations into the market. The article contrasted this problem to the situation in America, where entrepreneurs are more likely to succeed.

Promoting innovation is one of the areas of strong American leadership. America is the best place in the world to start a new company, whether a profit-seeking company or a nonprofit. America is the leader in entrepreneurialism both as a result of government policies that make it easy to incorporate and business policies or cultures that make raising capital and hiring workers easier than in most other countries. Just consider how the global Internet speaks American English as its primary language due to the dominance of American-based companies, or how the social media developed first in America, or how American retailers such as Amazon or Wal-Mart are expanding globally.

Wind Farm Job

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I have seen this strength first hand, as I have started or co-founded three nonprofit corporations that have grown to employ over 50 people.

Having an innovation-friendly economy is one of America’s undersung strengths, since innovation and new technology are the basis for economic development in the 21st Century. But America cannot simply rest on our laurels in this race; it must also develop policies that actively encourage innovation. These policies are not limited to removing bureaucratic barriers to new companies and new products, as the Post says the French need to do.  They should also include policies aimed at correcting market failures that stifle innovation.

America may be #1 at promoting innovation, but we need to work hard to maintain our leadership. Both the private sector and the government must strengthen market forces and make markets work better.

Clean energy is an area where market failures stand in the way of innovations being accepted in the marketplace. For clean energy technologies, it simply is not true that if you build a better mousetrap, the world will beat a path to your door. For many new technologies, economics says that markets will only work when a dozen or more assumptions are made, and for green products and services, the assumptions are false.

One of more than a dozen of these is the hidden assumption that consumers can act on their economic preferences. For example, suppose I want to reduce the energy consumption of my set top box for my TV. I can’t do that because the cable company owns the box, not me. And they don’t pay the electric bill—I do—so they don’t care how much energy the box uses.

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