Megan McArdle: Animal Farm For the True Believer

 "A greater gap of incomes between successful and unsuccessful entrepreneurs (thus greater inequality) increases entrepreneurial effort and hence a country’s contribution to the world technology frontier. We show that, under plausible assumptions, the world equilibrium is asymmetric: some countries will opt for a type of “cutthroat” capitalism that generates greater inequality and more innovation and will become the technology leaders, while others will free-ride on the cutthroat incentives of the leaders and choose a more cuddly form of capitalism."

Paper cited by Megan McArdle in The Daily Beast by Acemoglu, Robinson, Verdies (Italics mine)

Here you have, in pretty undiluted form, the underlying assumptions, I would say "myth" of an economic theory which forms the core of true belief of Mitt Romney, Paul Ryan, Rush Limbaugh and the entire cast of one percenters.

Boiled down, centrifuged to a nubbin at the bottom of the tube, it says that without the incentive of huge economic benefit, innovations in science, engineering, physics, all the things which drive economies, which allow nations to progress from the stone age to the iron age to industrial revolution to the information age, cannot happen.  Innovation only happens when the risk takers, the heart breakers, the entrepreneurs are motivated by the prospect of huge cash rewards are allowed to succeed and to bury all those 99% left behind them.

This is the corollary to Animal Farm: Without individual motivation, you get freeloaders  who do no work, (the pigs, the welfare queens, the 47% of Mitt Romney)-- those depend on the work of others to support them. And you have the foolish work horses like Boxer, who ultimately use themselves up and get carted off to the glue factory.

In fact, when you look at innovations which have changed economies, and the lives of the great mass of people, they came from men who were working not for fortunes, but for glory, for the intellectual thrill of solving a problem, for the thrill of being able to present their crowning achievements to their colleagues, who had tried and failed to solve the same problems, who know what they are applauding.

Consider:  1. The development of insulin by three salaried doctors at the University of Toronto in 1921. No fortunes for them. Eventually, fortunes for Eli Lilly, to whom they turned over their work, for only modest financial reward.  2. The development of vaccines for polio, the Plague, influenza, which have saved more lives than any single innovation by pharmaceutical companies in search of the almighty dollar. All developed with either government money by academics on government grants, or by individuals who gained no financial reward, just satisfaction (Alexandre Yersin, plague vaccine.) 3. Radar:  developed by British government scientists.  4. The CT scan: developed by British salaried government scientists working in academia and a National Health System.  5. The Internet: developed by government scientists   6. Rocket and satellite science: more salaried government workers, first German, then Soviet and finally American.  Entrepreneurs?  Johnny come lately to all this because the bottom line was not evident until after the governments put those satellites up there in space.  

So societies where wealth is very unevenly divided are not the drivers of innovation and progress from which welfare states feed.   The innovation which really mattered most emanating from these societies did not come from the profit chasers but from the salaried, usually government or academic (sponsored by government) scientists and engineers.

The wonder is a society like America, where private industry is celebrated, can manage to carve out enough public dollars to do the things through their salaried, much reviled government workers, which allow the rapacious entrepreneurs to feed.  So our humble public servants build the roads, the bridges and develop the frontiers in space, satellite technology, medicine and basic science which the private guys use to get rich. 

Where would Henry Ford have been without roads?  Where would GM have been without Obama?   Where are all those farmers and manufacturers now with a bridge between Ohio and Kentucky which is clogged and deteriorating and backing up the flow of Midwestern goods down south, because John Boehner and Mitch McConnell are in a snit and don't care if the Midwest suffers as long as the sufferers get mad enough to vote Mr. Obama out of office?

You can hate government. You can slam the door to "your" room and stomp around and curse your parents for not letting you take "the" car (their car) so you can go out and party. But you are still a brat.