Does government intervention in the market place guarantee decreased innovation?

“Soon, all mobile phones could use the same type of charger. In June 2009, 14 of the most prominent mobile phone manufacturers agreed to use a single standard. Although the agreement was made, there’s still a lot of background work to be done before consumers enjoy the full benefits of this agreement. Recently, the European Commission sent out details for the standard in preparation for the switch.

The technical specifications for the connection are based on the microUSB connector that many mobile phone manufacturers are already using. You’ll find many of your favorite phone brands among the list of manufacturers that have agreed to adopt the standard, including Samsung, Apple, Nokia, and Research in Motion.”

Source is here

It sounds like the companies involved are down and are not complaining. Seems like it has more to do with something like IEEE specifications at play.

Feel free to find a way to blame Obama.

Innovation did not die with the charging standard. Rather than wasting engineering design time reinventing the “connector configuration wheel,” companies can improve the efficiency of the wall warts, the filtering and cleanliness of the output, the resistance to static discharge, the reliability of the wiring.

There are building standards for your home. Would you prefer there were no standards and engineers had to figure out all the equations every time they built a house? The costs would be prohibitive and occasionally there would be errors. And who would pay for the testing.

The US TV system was archaic until the recent upgrade. Why? Because US was the first and never updated. I’m pretty sure NTSC was used by Neanderthals. Now that government mandated the new format things are changing for the better. We can see all of hairs on Nancy Grace’s face.

Government also has standards for cars. Emissions are reduced, performance and fuel economy is improved. Engineers can spend time innovating the important things.

Everyone knows it’s not Obama’s fault and it’s not Bush’s fault. It’s Cheney’s.

The charger example is a bad one. Companies used different ones so they could charge you 40–50 dollars for a 2 dollar cord that they made specific to your phone. Thats an example of GOVERNMENT WORKING.

No.

It certainly can, and it certainly does at times. But a limitation by all accounts stimulates innovation as much as it decreases it, as regulation requires industry to invent new and efficient ways to do business and meet required standards.

Further, government intervention in business can be for the express purpose of making certain that innovation continues. The initial TARP bailouts were meant, in a great part, to melt the credit freeze brought about because of the insolvency in the financial sector caused during the current crisis. I won’t argue the success of it, but the clear purpose of balancing the asset/liability sheets of lenders to return them to solvency allows them to start lending again, especially in areas that might be considered risky – which includes innovative ventures by large and small businesses. Without credit, most businesses aren’t going to get off the ground. And when there’s no credit available, you essentially guarantee that most industries are going to go into damage control mode, protecting rather than risking and innovating.

Finally, government intervention in monopoly situations can (read can, not will) ensure that business itself remains competitive and therefore efficient. When one company gains control of a particular area, it can horizontally and vertically expand that control so that the market no longer influences supply and demand, but the industry itself sets both the supply and demand itself. Therefore, you get both an inefficient pricing structure (as there is no force acting upon pricing, and therefore prices are set at a point that guarantees maximum profit to the company) and potentially insurmountable barriers to entry for new competition.

In the end, government intervention is about the balance of public interest and business growth and innovation. It often fails to properly balance those two competing factors, but the current crisis, as well as the crash in 1929, were the result of too little intervention allowing the market to irrationally inflate value based on beliefs not based in reality, the creation of a bubble market, and the bursting of that bubble rippling through all sectors of the economy, was a market-based lockdown. Neither business nor government is infallible…the trick is to find the right balance.

I don’t agree that it will not improve. All developers can use the new standard to develop. Right now there are charging plates for multiple devices coming onto the market.

Not really. Standardization of common functions like charging won’t affect the development of applications and features. If anything, I wish there were more, not fewer, standards for things that every device of a particular type uses or does. Why do we have to have a unique battery for every model of handset, for instance using your cellphone example. We could get by with a few standardized types and sizes just as we do with disposable batteries.

At any given point in time you could find a lot of things to standardize. The problem typically comes in as technology advances and the standard needs to change. The RS-232 standard survived for decades as the standard for all data communications. But it became a hindrance to lowering cost and innovation. The connectors were too big and the general purpose nature required way too many pins. Things like the modular jacks were just cheaper and easier. The USB connector was an attempt to solve the standardization but the mini connector used on cell phones took it to another level. Will future technology require more or less pins, will it become even smaller. The connector used for charging handles more than just charging the phone. Will the connector on you phone be the same in 10 or 20 years, unlikely. Will government involvement help or hinder the advancing technology? As the cell phone becomes just an ear plug will it require this same connector hanging out of your ear? Standards can be good or bad but they do need to change. Whether government involvement helps or hinders that process depends on your point of view.

If there were not standards, there would be a plethora of products, sure… until the word got out that one was cheaper and/or better than the others, and that one would win. The government didn’t standardize VCRs back in the day – and Betamax and VHS duked it out for a while until the people decided to buy (cheaper) VHS more often. Betamax, arguably a better product, disappeared. Does the Free Market stifle innovation?

What might actually stifle innovation is the cutting of research budgets, but I digress…

@laureth – I don’t think you digress at all. I’ve heard arguments that one of the first things that should be cut, looking at our budget, are research and education grants. I think, if we focus on government intervention as being innovation producing, that’s the last area you cut.

@Jaxk – I agree that whether government involvement in setting standards will help or hurt innovation is a matter of perspective. But I think that the problem is that in setting standards, the government acts too slowly to react to market changes, and the market is not nearly transparent enough to the consumer to ensure that consumer’s are reacting smartly to the changes that might be held back by the industry in the interests of profit protection.

One of the main ideals of the tea party movement that I find incredibly attractive in perhaps breaking this cycle is the desire for bill clarity – essentially, laws are passed in a comprehensive but singular manner. A bill should be about one thing – and if a bill is about one thing, and if it’s about standardization, it becomes easy to amend as the market and population indicate that it’s stifling innovation.

@iamthemob

Excellent point. I admit I hadn’t tied those pieces together but it is an interesting point. There have been standards for quite some time but it seems that some areas get attention while others do not. The RS-232 standard I spoke of was an industry standard rather than a regulatory standard. Consequently it was easy for the industry to move on. A regulatory standard that is a part of a massive communications bill will have implications all over the place. Making it much more difficult to change. Simplify, simplify.

@Jaxk

I agree. I get a little twitchy when people talk about deregulation, as I prefer to frame it as regulatory reform. I think that in the initial stages it should result in determining where regulation wasn’t necessary or was overreaching, and where it should be consolidated. so I do think that initially it would result in actual deregulation.

But removing without reviewing, and considering the tangential effects on industries/whatever that are not directly covered by the regulation, scares me.

Government efforts focused on innovation can be positive or negative. There can be no question that NASA and the moon shot gave us a tremendous burst of technological development that spilled over into areas we never could have predicted. None of this would have happened had it been left to industry to explore the moon and beyond. A moon shot sort of effort is probably needed now focused on sustainable living and sustainable energy.

@iamthemob

Deregulation is just a tricky as regulation. There’s little doubt that the gutting of Glass-Steagal played a role in the financial meltdown. Nor is there much doubt that regulation such as Sarbanes-Oxley carry tremendous costs. The trick is always regulation that works but doesn’t cripple the economy.

Currently we have 532 congress people and an enormous number of agencies all chartered to create regulations. So can see a list of them here . And that’s just federal (if anyone takes the time to count them I would be interested). Virtually no one is chartered to get rid of the old. It just keeps piling on. Truth is, I can’t think of any industry that’s not covered by regulation. It’s only a matter of degree.

@Jaxk A committee with the charter to review, consolidate or eliminate regulations that conflict or have outlived their usefulness is a great idea. It is one that would almost certainly actually pay for itself. Even the best intended regulations often run afoul of the law of unintended consequences.