According to Michael Mandel, the current outlook of economic growth does not reflect cutbacks in R&D spending. "That's because the official statistics are not designed to pick up cutbacks in "intangible investments" such as business spending on research and development, product design, and worker training. There's ample evidence to suggest that companies, to reduce costs and boost short-term profits, are slashing this kind of spending, which is essential for innovation."
In Peter Boettke's analogy, the success of capitalism (whereby the ultimate goal of business is to meet consumer demands) is an ongoing race. If the innovation of Schumpeter and the free-trade of Adam Smith can outpace government policies that stifle innovation, economic growth will occur.
If one believes the predictions of Back to the Future 2 (1989), Americans could possibly be enjoying the fruits of capitalist innovation of hover-board technology by 2015. Innovative consumer successes such as the Tony Hawk Ride, while amazing accomplishments, are suggestive of the illusive counter-factual -- what level of wealth and prosperity could people enjoy if the government were not allowed to participate in the race? What types of technologies are resources being diverted away from with government bailouts, stimulus, and inflation?
If the hover-board example seems trivial, consider the new Cato policy analysis by Glen Whitman and Raymond Raad. They note that
"health care issues commonly considered most important today — controlling costs and covering the uninsured — arguably should be regarded as secondary to innovation, inasmuch as a medical treatment must first be invented before its costs can be reduced and its use extended to everyone."As Kenneth Rogoff has stated,
"[I]f all countries squeezed profits in the health sector the way Europe and Canada do, there would be much less global innovation in medical technology. Today, the whole world benefits freely from advances in health technology that are driven largely by the allure of the profitable U.S. market. If the United States joins other nations in having more socialized medicine, the current pace of technology improvements might well grind to a halt."The hover-board example works to illustrate how policy today can prevent product development tomorrow because people can envision that which may be forgone by stifling innovation. In health and medicine, innovations and developments are less visible to the public and hence possibly more susceptible to the whims of democratic interest group politics. By 2015, there may be many more significant invisible losses than the lack of a hover-board technology.