Innovation’s Inherent Uncertainty

Mar 08-2019   

Industrial policies are formulated on the unfounded hypothesis that innovation is predictable, lamented NSD Prof. Zhang Weiying during a recent economic salon. Technological advancement and innovation face enormous uncertainties in four aspects: feasibility of technology, commercial value, complementary and competitive technologies, as well as the attitude of systems and cultures, said Prof. Zhang. If a new technology or innovation is capable of building a consensus, then there’s no need for industrial policies because many profit-driven people will work on it anyway. That means developing countries should not bother to initiate industrial policies with regard to mature technologies and innovations in developed countries. Entrepreneurs can see the opportunities more clearly than government officials. He admonished against ‘self-justification’ of industrial policies, i.e. the practice of making irrationally high investment and implementing favorable policies just to ensure the seeming success of industrial policies. To truly promote innovation, the best policy is to allow entrepreneurs to get their talents and capabilities into full play, and use the market to reward winning technology and products. Any policy that hampers the freedom of choice of entrepreneurs and misguide their judgment is detrimental to innovation, he said.