Creative destruction: Discworld style
Ok, so I am a geek. That should come as no surprise to anyone. One of my favourite book series is Discworld by by Terry Pratchett.
The latest book, Raising Steam, has a nice description of creative destruction:
‘Some people will lose out and others will benefit, but hasn’t that been happening since the dawn of time?’ he said out aloud. ‘After all, at the beginning there was the man who could make stone tools, and then along came the man who made bronze and so the first man had either learn to make bronze too, or get into a different line of work completely. And the man who could work bronze would be put out of work by the man who could work iron. And just as the man who made steel. Its like a sort of dance, where no one dares stop because if you did stop you’d be left behind. But isn’t that just the world in a nutshell?’
Enrico Moretti in The New Geography of Jobs (page 148) describes:
Products that are cutting edge today will soon become commodified and easy to make. Later relics of the past. […] creative destruction, greatest strength and engine of growth.
The lesson for New Zealand and policy makes is, the secret of success if adaptation. Holding on to the past is not a defensible proposition.
Don’t disagree with any of that Shamubeel, except that I don’t think being a fan of Terry Pratchett makes you a geek. But in what way do you think New Zealand and policy makers are holding on to the past?
Are you sure reading Pratchett doesn’t make you a geek? Maybe reverse causality 😉
At a broad sense, I see policy making as being reactive to changes that have already happened. Policy making by the rear vision mirror if you like.
We have more policy level discussions on manufacturing jobs losses than training software engineers. We spend more time preserving the ‘character’ of suburbs through zoning policies than balancing it with other needs/desires. We will create special legislation for a $400m convention centre, but have a Venture Capital fund that has $200m under management…
I wonder whether part of this can be explained by our fear of the unknown. Our information about the future is so limited that it is psychologically easier to simply opt for “the devil you know”.
Indeed. This is part of the justification for why so many of us would love social science to be history independent – as then we could more easily describe rules. However, it is not which makes all these issues far too confusing 😉
I think you have hit the nail on the head here. I am currently reading “Thinking, Fast and Slow”. Our decision making can be impaired and we don’t even know it. In a fast changing environment, being aware of change is probably the best we can do and policies can be helpful if designed to create flexibility in the economy and create the necessary safety nets (welfare) and transitioning tools (education, training) to reduce the costs of such change.
So you truly are saying that policy makers ought to regulate in anticipation of changes that are going to happen in the future?
I suspect that Shamubeel is more just pointing out that things change, and part of this change is a response to changes in fundamentals and is thereby individuals revealing their own preferences/choices. Our policy counterfactual is not the past, but should instead be based on a view of the trade-offs associated with policy.
Given this, he isn’t saying policy makers should anticipate and regulate the future – just that they should not view all change as something that needs to be regulated. Instead he just noting that policy and institutions need to both accept and be responsive to change – rather than suffering from a status quo bias that assumes some historic average determines what is “good” and what maximising wellbeing 🙂 .
I’d also note that I don’t think he was so much saying that this is what policy makers do – just that it is an understandable temptation if we don’t make ourselves aware of it.
Of course I could be putting words in his mouth, but not to worry 😛
I don’t think it has been established though that policymakers view all change as someting that needs to be regulated – indeed, Shamubeel seems to be saying the problem is the opposite. For example, he says we don’t have much policy discussion about training software engineers – what then does he want the Government to do about it? Shouldn’t he instead be applauding the Government for allowing the emergence of this new profession without seeking to impose policy on it?
Certainly, change happens. Not all of it is good, and very rarely is it to the benefit of absolutely everybody. Those who don’t benefit will tend to shout more loudly than those who do. Government can ignore the losers, or it can try to help them adjust to the change, or it can try to prevent the change altogether. The fact that “there is policy discussion about manufacturing job losses” is evidence that the Government isn’t folloing the first course, and nor should they – welfare reductions shouldn’t be ignored just because they happen to a minority. As to whether they should follow the second or the third course, well that depends on the nature and causes of the change
Indeedy, there is nothing I disagree with there. As I note towards the end of my comment – I see what Shamubeel wrote more as a warning of the way policy may be used, or viewed, by some groups rather than pointing at anything directly in current NZ policy making circles.
Perhaps constantly hearing politicians talk about the number of manufacturing jobs, and what to do about the jobs, and how to get the jobs, may have been part of what he meant by policy circles – the response of politicians to change, rather than just the independent policy analyst 🙂
Sorry, been offline at home. I agree with both of you. The government should help to transition those facing changes (welfare, training, etc), but not necessarily by trying to pick winners (convention centre) or trying to stem the tide (protecting manufacturing jobs). In my mind, its more about getting the broad parameters right, rather than government trying to pick winners based on historical experience, because they are not necessarily a good indicator of the future.
“We spend more time preserving the ‘character’ of suburbs through zoning policies than balancing it with other needs/desires”
It neatly ties in with the wider issue of Auckland being dragged kicking and screaming from an overgrown country town of 1.4m people to a global city of 1.4m people. Case in point: the suburbanist misconceptions about the Unitary Plan causing child obesity because kids living in apartments “have no backyard to play in”. Or the suburbanist misconception that anything taller than 3 levels belongs in Detroit or the Bronx. Such attitudes are not unlike that of anti-competitive practices by cartels.
And also the importance of expectations, culture, etc and the tie in with politics to inform and gauge the mood of the public. In a functioning democracy, you get kicked out of power if making too many decisions/policies against public expectations/demands…
Sounds remarkably like the asset sales process. Or in Britain, the Community Charge.
“We will create special legislation for a $400m convention centre, but
have a Venture Capital fund that has $200m under management…”
Not to mention similar kind of queue-jumping treatment for a mining company that owns a smelter in the deep south, a company town that thinks it’s a Hollywood studio, a struggling TV & radio conglomerate, and a company with a natural monopoly on copper wires. Your thoughts?
We’re constantly berated that the cupboard is empty, so why is it that those who happen to drive expensive luxury cars and wear Dolce & Gabbana can ask for as much taxpayer money as they like? It’s certainly not about the ‘job creation’. “People of the same trade seldom meet” comes to mind.
I think politics and economics are not the same. So, some decisions are made for reasons other than what a dry economist would make…
Not so sure about that. Politics and economics have always seemed to be a match made in heaven. The American, French & Russian Revolutions combined the two very explosively.
The MPAA & RIAA (or should that be MAFIAA?) seeing the Internet as a threat instead of an opportunity also comes to mind – the Kim Dotcom affair is just the tip of the iceberg.