From Socialism and Innovation by David Kotz (2002):

“The basic institutions of Democratic Planned Participatory Socialism (DPPS) would not necessarily provide sufficient opportunities for creative individuals to work out new economically relevant ideas. More generally, there would be a danger that the decision-making boards of DPPS [composed of interest-group representatives] would tend to represent existing ways of doing things and offer resistance to innovation.

The citizens of a DPPS society could solve this problem by establishing an Innovation Facilitation Board (IFB), dedicated to the promotion of innovation throughout the economy. The IFB would be given substantial financing from the central treasury. It would take applications from enterprises, informal groups, or individuals that wanted to work on inventing a new product or process or to engage in the development stage of an innovation. It would be able to make grants covering a long enough time period to provide a chance of success.

However, the decision to implement an innovation should have to pass the test of the system’s core process of evaluation by, and compromise among, all affected constituencies. This calls for a second institution, an Innovation Approval Board (IAB). It would be constituted in the usual way, with representation of all relevant interests. Its role would be to determine whether a proposed new product or process, which emerged from a grant from the IFB, should be given the green light for production/introduction.”

In the above participatory system, the boards and committees approving innovation R&D, production and distributions would be composed of individuals representing workers, consumers, suppliers, the local community, and “cause” groups such as environmentalists, job safety activists, feminists, etc. The Democratic Socialists of America (of which I am a former member) advocate for just this sort of participatory socialism.

Now consider:

The US Patent Office has issued more than 10 million patents. That’s a lot of paperwork

Only about 10% of important inventions are patented. Reassessing patent propensity: evidence from a data-set of R&D awards 1977-2004

“To create the future, you can’t do it through focus groups…The customers today don’t always know what they want, especially if it’s something they’ve never seen, heard, or touched before.” The Top Ten Lessons Steve Jobs Taught Us

“…it was not until the 1920s, four decades after Thomas Edison’s first power station, that manufacturers embraced [his] killer app for electricity, designing factories to accommodate dynamo-powered assembly lines…. Genuine innovations are inherently difficult to spot in advance. So the game is more about creating the right conditions for companies to press ahead and to seize on breakthroughs when they arrive.” Asian-tiger governments are steering their economies with a lighter touch

“The innovation pipeline requires large inputs of R&D spending and highly skilled labor. These investments … often yield benefits only many years later, which can complicate the process of organizing and financing the investments.” Eleven Facts about Innovation and Patents

“Pure democracy can be an invitation to little dictators.” Tom Boothe co-founder of a food cooperative

Predictability and legal certainty are important foundations for developing innovations. Assessing the Impacts of EU Regulatory Barriers on Innovation - Final report

Would industry boards and committees tend to favor the status quo and resist disruptive innovations? Yes.

Would industry boards and committees politicize* the innovation approval process? Yes

Would industry boards and committees be able to handle millions of innovation cases** every year? No

Would industry boards and committees representing diverse interests provide the “predictability and legal certainty” to foster innovation? No.

Do delays, uncertainty, and politicizing the approval process have a chilling effect on the spirit and pace of innovation? Yes***

More questions: How is having representatives of market participants such as investors and consumers more “democratic” than the direct involvement of market participants? Why give these representatives the power to veto or approve innovative processes or products and not the consumers or investors themselves through their purchase or investment decisions?

Few deny the market has to be regulated to protect consumers, workers, the environment, etc. And few deny the government a role in funding and overseeing research and development in select industries, e.g., defense, medical technologies. Obviously there’s room for improvement in how the government regulates or subsidizes activities in the private sector. But that’s a whole different thing than what the Democratic Socialists are proposing.

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* By ‘politicize’, I mean things like protecting the immediate interests of the group one represents at the expense of other groups and the greater good; exchanging favors with other group representatives (i.e., “horse-trading”: I’ll okay your favored innovation applicant if you okay mine); taking a stand for or against an innovation proposal to “make a statement” aligned with rhetorical commitments, etc. Political decisions re innovations are often yes/no (dichotomous variable) and final. Market responses to innovations are more or less favorable/unfavorable (continuous variable) and changeable. The former encourages innovators to focus on cultivating political allies. The latter encourages innovators to continue innovating.

** In Democratic Planned Participatory Socialism, boards and committees would have to approve the same innovation proposal at various stages in its development, creating a huge caseload with all the expense and delay that implies - not that different than how new drugs have to go through successive clinical trials to be approved for public consumption, a process that takes several years.

*** Well-crafted laws and regulations provide the predictability and legal certainty that foster innovation. Powerful people are less predictable than laws and regulations. Especially powerful people in local government in some parts of the country. As a CEO recently said about doing business in San Francisco, “Don’t invest in the long-term. Optimize for the short-term gain.”