Forum Post: Capitalism and innovation.

A common trope of capitalism is that it drives innovation. This is an egregious fallacy.

Innovation is inherent in human nature and does not require ANY economic system. It is this drive for creation that has brought us from hunter gathering to a brilliant technological society.

What capitalism DOES do is shape the DIRECTION of innovation. Innovation that generates profit is valued more than other forms of innovation. This creates a feedback loop that furthers the investigation and creation of other profit making innovation. Any innovation that does not maximize profit is automatically discounted and even abandoned.

The assumption of capitalism is that this feedback loop results in a better world. But we can see the results of this false conclusion in the financial debacle of 2008. The financial products driving the generation of profits were synthetic inventions (innovations) - that had no grounding in anything other than the continuance and acceleration of profit generation. The world was improved neither during the generation of these profits not during the subsequent near collapse of the entire system.

A truly important question is how do we inspire innovation with out excessively weighting our choices with profit motivations? How do we shape the direction of innovation outside of the accelerating profit generating feedback loops that result in bubbles and crashes?

Note that I am not suggesting that profit be eliminate from the system. Only that it be demoted to something that carries lower weight in our decision making processes.