Nancy Pelosi has once again made the claim that it wasn't really Steve Jobs or
Here's Pelosi making the claim:
Here's some of the transcript:
Anybody here have a smartphone? In this smartphone, almost everything came from federal investments and research. GPS, created by the military, flatscreens, LLD [sic], digital camera, wireless data compression, research into metal alloys for strength and lightweight, voice recognition — the list goes on and on…. They say Steve Jobs did a good idea designing it and putting it together. Federal research invented it.
The distinction being that we agree that Federal research aided in some of the components but not in the invention of this "it".
The go-to economist here is William Baumol. It is he who makes the distinction between invention and innovation. Invention is the process (in his definition) of, well, inventing something. Creating a new thing. The military desire to know where they heck they are combined with satellite technology leads to GPS. Sure, no doubt about that. They then allow that to be open to anyone to use (and at a lower accuracy than the military get).
Further, innovation is what entrepreneurs do: look around the society, see what technologies are available, piece them together with available resources and see whether it flies. That is what Apple and Jobs did. And that's innovation and that's also something that governments don't do very well.
As Baumol points out, governments and markets can both invent. His own example is that the Soviets did indeed come up with Sputnik. Innovation was not something that the Soviets did well: they hardly managed it at all in fact. My own example of that is that I once owned a Soviet washing machine. It was hardly a machine and it barely washed: it was more like a handcrank in a plastic bucket. But the Soviets had all of the basic technologies to make a decent washing machine. You need ball bearings, that's the central technology, for the drum to rotate. If you can make tank wheels then you've got ball bearings. The Soviets could definitely make tank wheels. Other than that you need some steel, an electric motor and some concrete: the Soviets definitively had concrete and steel even if electric motors weren't all that good. So, a washing machine was a possible innovation for them: but they didn't manage it.
Invention and innovation are different things to the economic mind. And governments can do invention about as well as market systems and they cannot do innovation. The iPhone was the plugging together of extant technologies to see whether it met a human need or desire. That's innovation: the thing governments don't do. One useful proof of this is that there are no government designed or manufactured smartphones out there. Well, OK, North Korea has tried if you insist but really....
Now, the iPhone is going through an existential crisis as the Democratic Leader of the US House of Representatives for the 114th Congress Nancy Pelosi has gone on to say that Apple (and Steve Jobs) don’t deserve much credit for the iPhone because most of its features are based on federal investment, research and breakthroughs.
The point being that anyone and everyone could have combined those features and they didn't. Apple and Steve Jobs did: thus they deserve the credit for the combination.
There is another economic approach we can take here, that of public goods. A public good is not something the public wants, nor something that is good for the public. It has a specific definition: it is non-rivalrous and non-excludable. Once the thing exists then we can't stop someone else from using it and their using it doesn't diminish the amount that can be used by other people. Ideas and intellectual property are a prime example: my using Newton's Equations to plot a course to the Moon does not limit the amount of Newton's Equations that you can use to calculate the movements of Kim Kardashian as she undulates down the street. You might be having more fun but I can't stop you doing so either.
So it is with these various technologies that went into the iPhone. How long did it take Samsung to get there after the innovation had been shown to work? 18 months, 2 years? Thus these basic technolgies are public goods.
Which brings us to the economics of public goods: they're difficult for people to make money out of creating them. Because you spend all that money trying to work out how to do GPS and once you have anyone can do it. Thus we think that governments should support the creation of public goods. This is an absolutely standard analysis. Private market actors won't create "enough" public goods but we like to have lots of public goods. Thus we should all chip in a bit of tax money so that government can subsidise the creation of public goods.
Hey, great! But note what this means: the Feds aren't being really generous here by inventing these things, by supporting that research. The Feds here are just doing their job. This is one of the reasons we have government in the first place: to get the public goods that the market unadorned won't provide. To then want praise for having done so: it's like the dog insisting on a treat because he's finished his bowl of tripe. That's one of the things government is for: well done, you've done it but we've already paid you to do it now go away.
Finally there's the somewhat more cynical point we can make. Government at all levels takes something between 25% and 30% of everything each year. We might even think that we've a right to get something back for that sweat stolen from our brows, perhaps something more than just government and a bevvy of diversity advisers. You know, like electronic tchotchke perhaps?
The economics of all these are therefore really rather simple. One of the things we institute government for is to get the public goods that the absence of such collective effort and contribution will deny us. That government then provides public goods is worthy of a Hurrah! or two but their doing one of their basic jobs is only remarkable because they are actually doing one of their basic jobs. The iPhone itself really was the creation of Steve Jobs and Apple: they were the first to innovate those available technologies into something which sated a human desire. And it's precisely that innovation which government is not good at.
The end result of all of this is that neither we nor Apple owe any more to the Federal government just because there's the rare occasion that the Feds actually do the job they've already been paid to do. Because of course we all know where Pelosi's argument is going: if the Feds created the iPhone then shouldn't taxes be higher?
No Ma'm, no, they shouldn't be.
