Effects of Government Involvement on Creativity and Innovation - Essay Sample

Introduction

Governments often enact barriers when the perceived performance of a particular technological innovation is moderate and the cost of actualizing the lobbying process is relatively low. The barriers slow down the adoption of new technologies. For example in the 20th century when automobiles services did not meet the required performance standards, the governments would stop the transport option, particularly if it did not meet the financial expectations or threatened the road or the rail systems (traditional transport network systems). The same system is still in use currently. It is worth noting that new innovation in the transport sector threaten the profitability of incumbent firms that then resort to lobbying the government to bar the new entrants (Holguin-Veras, Paaswell & Perl, 2008). The government intervenes by imposing retrogressive regulations that prevent new firms from adopting new technologies thereby reducing the levels of competition in the transport market subsequently harming the consumers.

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Government policies and institutions can either hinder or facilitate the creation of an environment that enables innovation, economic progress, or efficiency for a given sector such as transportation. Empirical studies and historical occurrences prove that governments often pick winners while ignoring the losers. The obvious justification form government is that the market competition is often the cause of the regulations and policies that it enacts. The regulations are counterproductive, especially in a case when the rules restrict entry of new firms or innovation into the sector. Common characteristics of the restrictions include a huge underground economy. The consumers stand to gain nothing. The entry regulations only benefit the existing firms, bureaucrats, and politicians. Essentially, the difference in the levels of income in the transport results from domestic an international barriers imposed by the government, and not the differences in human capital (Bento, Kaffine, Roth & Zaragoza-Watkins, 2014). The government imposition of policies that restrict entry slows productivity growth and innovation that are the cornerstones of economic progress.

The methods employed by the government in the past to restrict innovation are still at work even today. For example, in the 20th century, the government did not take kindly to the introduction of jitneys. In the stated time, railways were the most prevalent, dominant form of transportation. In the 1900s, the city railroads accounted for more than 90% of the population's transport needs. The franchise during the time led to monopoly of the transportation network within the cities. The monopoly franchise meant that the government would then have the opportunity for total control of fares. The fares were quite expensive, particularly for the passengers who took short distance trips. The emergence of the Ford Model T provided alternative transportation that was relatively cheaper when compared to the conventional railroads transportation. Jitneys were the names of the cars that provided alternative transportation. In addition to the cheap fares, the jitneys were faster, more flexible, and provided far superior services.

The railroads then sought government protection in 1915 since they were leading payers of tax that maintained the roads and the city lighting system. In other words, they sought the government protection to ensure that they monopolized the transportation system. The unions, the railroads, and the government then initiated a strategy to discredit the jitneys with the objective being to continue with the status quo. The selling point was that jitneys increased crime and accidents. The efforts paid off since the government managed to enact legislations that restricted jitneys' operations. The laws shielded railroads from competition from other quotas. The laws passed were quite draconian since it required the jitneys to have operational licenses and to provide services that were similar to the railroads. Prima facie, it looked like the regulations advocated for equality while the main intention was to drive the jitney out of business by giving undue advantage to the railroads. The case indicates the restriction of creativity and innovation by government that then leads to the suffering of the consumers and the industry in general.

At present, government regulations will certainly restrict the revolutionary developments intended for the transportation sector that will provide cheaper and more reliable modes of transportation. Uber, which is a taxi company that utilizes advanced communication networks, currently faces complaints from taxicab companies. The companies feel that Uber has taken up a formidable fraction of their clients. They want the government to step in and regulate the industry, meaning they want restriction on the communication technology used by the company to attract more customers (Cohen & Malloy, 2016). Data, both from the United States and abroad, suggests that Uber provides quality services at competitive prices. Just like in the case of the jitney and railroad companies, the taxicab companies intend to use legislation to control the application of new technology. For example, in 2014, Virginia even went ahead to ban Uber form providing services within its territory. Evidently, government can enact laws and regulations that either promote or hinder innovation. It is unfortunate that they normally choose the latter option, which is detrimental to the economy. The best option is to deregulate the industry instead of imposing restrictions.

References

Bento, A., Kaffine, D., Roth, K., & Zaragoza-Watkins, M. (2014). The effects of regulation in the presence of multiple unpriced externalities: Evidence from the transportation sector. American Economic Journal: Economic Policy, 6(3), 1-29.

Cohen, L., & Malloy, C. J. (2016). Mini West Virginias: Corporations as government dependents. Available at SSRN 2758835.

Holguin-Veras, J., Paaswell, R., & Perl, A. (2008). The role of government in fostering intermodal transport innovations: perceived lessons and obstacles in the United States. The future of Intermodal Freight Transport, 302-324.