Saturday, April 13, 2013

efficiency versus innovation

Matt Yglesias has an interesting post on San Francisco, which despite obvious terrible public policies resulting in awful inefficiencies, is a hotbed for innovation.

I take his point that economists focus too much on promoting efficiency and not enough on promoting innovation. We definitely understand how to do the former much better.

But, they aren't alternatives. And if we don't know very well how to recreate the magic formula that led to the startup culture in San Francisco, we might as well fight to rectify the inefficiencies. The examples of urban density and building regulations he cites in particular, if fixed, would make room for more participants in that innovation culture. If you don't know how to create innovation, might as well expand it by improving efficiency.

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