The bad, the good, and the ugly

The bad news is that United States has a global comparative advantage in producing bullshit. The good news is that we may actually be able to till it into fertilizer for the Innovation economy.

America’s financial crisis was caused by money created from money which was in turn a derivative of wild-eyed speculation in assorted proxies for real productivity, including real estate.  Stock prices were supported by imperfect information in a Tickle-Me-Elmo culture while broker fees are embedded in every conceivable transaction.

America has become a world leader in hype, marketing, lawsuits, and fantasy. None of these industries actually produce anything yet nobody can say they are not immensely creative, induce sweeping social movements, and their propagation demands extraordinary intellectual resources, flexibility, and adaptability.

The Theory of Comparative Advantage

It is not efficient for, say, Ghana to produce rice and Vietnam to produce cocoa. If they each produce their natural endowments and then trade the differences, fewer resources are expended to produce more goods.  This theory is the basis of global free trade and the efficiencies are irrefutable so globalization is here to stay.

Meanwhile, the literature on the subject of innovation agrees that innovation is maximized as a function of endowments in social capital, creative capital and intellectual capital.  Silicon Valley is widely held as the poster child for emerging from the deep social movements of the 1960’s attracting an inflow of diverse people where high tolerance, creative art and music were abundant in close proximity to intellectual centers of Stanford and Berkeley.

Comparative Advantage for Innovation:

By the theory of comparative advantage, if a country does not possess a comparative advantage in intellectual capital, creative capital, and social capital, they would not hold a comparative advantage in an innovation economy.

For example; China has a huge endowment of intellectual capital and throughout history they have been an inspired creative force.  However, the current government thwarts social capital.  Therefore, whereas China has a comparative advantage in a manufacturing economy, they would not necessarily have a comparative advantage in an innovation economy.

Many other countries have endowments of intellectual capital as well as democratic governments, but cultural norms may still constrain diversity related to gender roles, social classes, lifestyle tolerance, or the acceptance of “outsiders”.  As such, they may have comparative advantage in a knowledge economy, but the relative deficiency in creative capital would inhibit a comparative advantage in an innovation economy just as quickly.

The Fertilizer Economy:

That said, the United States has a vast abundance and tremendous economies of scale in social capital, intellectual capital, and creative capital in comparison to any other country in the world.  The problem is that these assets are sequestered behind the corporate veil, suppressed from true wealth creation by the priorities of a financial system built to produce nothing except analyst expectations.  Like sugar calories, lots of energy is delivered, but sustainable health is not.

The harvest in the wind

The brokers, speculators, and marketers are not bad people – in fact, they are brilliant.  They are simply stuck with the wrong set of incentives.  The Ingenesist Project dramatically changes the incentives and promises a far better allocation of intellectual capital, social capital, and creative capital.  By making such assets tangible outside the construct of the Wall Street, the comparative advantage of the United States in an innovation economy will be astonishing.

Where there is fertilizer in the wind, Wall Street will lead. Where there is a harvest in the wind, Wall Street will follow.

Share this: