New business models and new technologies spur new investment, which creates new jobs and grows our economy. This virtuous cycle of invention, investment, and growth is sustained by new ideas. Studies have estimated that innovation accounts for as much as 80% of economy-wide growth in productivity, which in turn accounts for 80% of gross domestic product (GDP) growth. America’s creativity is the primary reason we are the world’s largest economy today.
The liberty inherent in free markets drives innovation. When entrepreneurs and inventors compete on a level playing field, they win with the strength of their ideas. When the government tilts the playing field, bureaucrats decide who wins. Government regulations that mandate a particular business model or outcome, or favor a particular competitor, set boundaries on our ability to innovate. When entrepreneurs limit their ideas to regulatory demands, innovation gives way to regulatory compliance. Compliance is where new ideas go to die.
Free markets permit experimentation, which empowers the imagination of our entrepreneurs and encourages innovation and investment. Regulations designed to preserve the status quo, however, put our ability to innovate at risk. Innovation produces growth through creative destruction, a dynamic process in which new ideas and industries destroy older business models. It is the natural result of innovation and is essential to economic prosperity.
Innovation through creative destruction is a threat to those who prefer predictable markets to the growth achieved through disruptive ideas. They seek to control market behavior and direct its evolution through detailed regulatory decrees that dictate business models and outcomes in advance. They support prescriptive regulations that limit choice, prohibit experimentation, and squander American creativity. The reliable result is economic stagnation.
America needs a 21st Century approach to communications and Internet policy that promotes boundless innovation.