Is the profit motive essential to innovation?

I am no worshiper of capitalism but I always believed one of its biggest advantages was that it spurred innovation through competition. But recently I have been wondering if the profit motive is the only, or even the best, way of doing that.

When you think back to some of the greatest discoveries from the Renaissance through the 19th century you realize many of them were made by so called “Gentlemen Scientists”. These were men, and some women, who came from privileged backgrounds and were financially independent. Their research was motivated by self edification, the desire to contribute to humanity, and yes, for fame and ego. For the most part they were not motivated by financial profit.

So if people went into a field purely because they were passionate about it instead of for a paycheck, wouldn’t that be just as good for invention and innovation as the profit motive?

 

Some uses of society's limited resources are more valuable than other uses. In order to determine the value of each and every use of society's limited resources...people have to be free to choose where their money goes. Resources can't flow to their most valued uses if people aren't free to reveal how much they value the different uses of society's limited resources.

Maybe financial gain isn't necessary to motivate some people...but it's necessary to learn what society values. It wouldn't be much of a gold rush if you limited how much people could gain from prospecting. If you want people with life threatening injuries to get to the hospital as fast as possible...then it would be counterproductive to remove flashing lights and sirens from ambulances.

We want resources to flow in the right directions...but we can't possibly know which directions are the right directions if we don't know society's true values.

 

Great point, well illustrated.

The Soviet Union experienced periods of rapid technological development without for-profit firms.

Even today, most innovation, technological development & research takes place in, or is funded by the not-for-profit Public Sector.

 

Profit isn't required for innovation! Indeed, it can get in the way: such as the failure of pharmaceuticals to add new antibiotics. Market failure is also highly likely, given the high risks and high fixed costs. See, for example, how developed countries will use mechanisms such as arms production to add to R&D.

Profit, however, is typically required to fully exploit innovation. The entrepreneur's 'tacit knowledge' is key (where their know-how and hunches can ensure new opportunities are discovered). This helps to explain why planned economies, such as the Soviet Union, were doomed to fail.

 

Millions of open source projects demonstrate that profit is not essential .

 

How many people earn a living wage from those millions of open source projects?

 

Doesn't have to be profits, people will innovate for all sorts of reasons. Could be fame, could be respect, could be profit.

Profit isn't the only way to encourage innovation, but it clearly works pretty darn well.

 

The surprising truth about what motivates us:

http://www.youtube.com/watch?v=u6XAPnuFjJc

Money only goes so far, and (providing there is enough income) can actually interfere with creativity.

 

Yup, not sure what else to say. People are unique and motivated by all kinds of things.

Does money motivate some people? Without a doubt. Do LOTS of other things motivate people? Most certainly.

Generally speaking though, and to the point of the OP, incentives matter whether those incentives are monetary or something else.

 

Salk created the cure for Polio then selfishly gave it away so humanity could end the horrors of the disease.

In reverse the lack of profit in coming up with new antibiotics virtually killed this line of work by US companies who traditionally were the most capable in coming up with these drugs which I see as a huge issue, with resistance and new threats needing a new class of drugs.

 

How much money do you think it would cost to get Salk through drug trials in the US today?

 

And your point is for a drug that important the government usually would fast track it and if the US wouldn't other nations would you think China would prevent a drug for a huge illness to be stalled or many EU nations?

Antibiotics in the US require a BILLION DOLLARS for drugs largely vital since many fatal bacterial infections are becoming resistant fast, there is no time for such measures.

I for one never agreed with doing more than proving a drug or device won't so more harm than good, if a drug is not hurting anyone or the harm is clearly outweighed by a positive likely outcome then let it be produced if it doesn't work deal with it later.

 

My point is that that the federal monolith has forced drug innovation to be corporate in nature, and corporations want profits because their investors demand it of them for use of their money. Add onto that things like Apple successfully being able to claim IP rights over the silliest things like screen appearance on hand-helds, it it pretty quickly becomes it will either be owned by a corporation to get there, or it will be killed by a corporation and never get there.

 

Sure. I believe a federal research university system could merely be tasked with solving our social dilemmas through the discovery of more perfect knowledge.

Our Space Race was accomplished through socialism, not capitalism.

 

You can send an email to Linus Torvalds and ask him.
Innovation is not something you do in office but in your free time at home or into a lab owned with friends, the purpose is not making money but having fun and contribute to community .

 

There is nothing that prevents innovation for fun at the office, I do it all the time. My reward is a paycheck, the appreciation of those around me, and the stunned look at the competitor I beat out (don't worry, they will win next time, and I'll look stunned, and we will both appreciate each others capabilities).

Innovation for fun doesn't need to contribute to a community.

Innovation for fun, only occurs after you earn enough to meet you needs, and your wants.

 

Pride only serves the lowest of our humanity but you have my congratulations , you served your capitalist master well , now fetch !

 

According to you, I can enjoy innovation when I do it for free, but when I enjoy innovation, and get a paycheck for my efforts, I am some sort of lap dog.

Which of us is being a bit arrogant? Which of us is being a bit bitter?

This isn't a slam against religion (not just Christianity), but stating the obvious, no matter how pure to motives sound in religion, or the "new" religion of Socialism. Those that worship at the alter will feel smug, the leaders will get rich, and the poor will see little improvement.

That is human nature.

 

Innovation for fun, and profit......

 

The Linux foundation is a non profit org and they get their founding through sponsors , they are not selling anything but rather supported to innovate.

 

And, it only takes $10M a year to "motivate" Linus to innovate?

What is the difference between working for a for profit, and a non-profit? Do non-profits pay less? Have you looked at the annual pay for the executives of many non-profits? BBB publishes that if you are interested.....

 

When your incentive is profit you don't go into open source development , he could as well create a commercial O/S .
If you are a gamer you would know that moders provide content for free but you can donate , good mods always take donations but nobody quits his morning job for them.
Question here is why you started it and how , those who start open source do not have getting rich in mind ,

 

It does take money for R&D. And lot's of it. But not all inventors work for profit only. There are two types of rewards; Extrinsic and Intrinsic. One is the reward that comes from a physical asset. The other comes from within a person. The personal reward that comes from achieving something great.

 

Of course! That profit motive is the essence of a free society where you can income mobility. There's a reason why almost all of the great innovations of the 20th century came out of the USA, not the USSR, and this is it.

I'll be frank: It's against human nature to do thing solely for the sake of helping others. This is a society needs the motivation of a higher quality of life.

 

This is an interesting claim. Please defend it.