For a growing and productive Australian economy, we need to embrace innovation in all forms without onerous regulatory obstacles.
Prime Minister Malcolm Turnbull has indicated, in no uncertain terms, that he is a man with a plan, and that plan is for a more innovative Australia.
In his first statement as Prime Minister, Turnbull implored Australians "to recognise that the disruption that we see driven by technology, the volatility in change, is our friend".
When he later announced his ministry the Prime Minister boldly stated: "We must be more innovative. We have to work more agilely, more innovatively, we have to be more nimble in the way we seize the enormous opportunities that are presented to us."
Since then, Turnbull gathered up representatives from venture start-ups, technology firms, universities, and government bureaucrats to talk at a roundtable forum about innovation issues, in preparation for a formal innovation statement later this year.
Doing his leader's bidding, Assistant Innovation Minister Wyatt Roy recently organised what has been described as a "policy hackathon", in which various interest groups were brought together over a weekend to hash out ideas for boosting innovative activity, such as business entrepreneurship.
Since theoretical developments from the 1980s identifying the likes of innovation spending and investment in human capital as bolstering the growth rate of an economy, most politicians have latched onto the notion of more subsidies and tax breaks for research and development, for schooling, and for selective industries.
For many years there have been advocates for governments to always do more to encourage innovation, pointing to statistics suggesting Australia's expenditure on research and development lags behind numerous other OECD countries.
According to a set of innovation indicators compiled by the federal Department of Industry, Australian gross R&D expenditure of 2.1 per cent in 2012 was eclipsed by the OECD average of 2.4 per cent, with R&D spending by the business sector exhibiting the same general pattern.
An obsession with international discrepancies in R&D expenditures has long animated the innovation policy discourse in this country, but is perhaps inappropriate given the vastly different industry structures and resources endowments for each OECD member.
In any case, innovation is far more than the R&D often stereotyped as learned people donning lab coats and toying with petri dishes, syringes, and machines until something miraculous happens.
Joseph Schumpeter, of "creative destruction" fame, put it well when depicting economic evolution being represented in things such as new consumers' goods, the new methods of production or transportation, the new markets, the new forms of industrial organisation that capitalist enterprise creates.
The key message here is that innovation is conceivably every worthwhile economic activity we do to produce goods and services which please our customers.
Taking this insight even further, irrespective of whether we produce, sell, or buy a product — be it a chocolate bar to satisfy a sugar craving; financial advice to a client about to retire; or a hydraulic excavator for a new mine — it carries bits of economic knowledge embodying past innovative efforts.
Conceiving innovation to be embodied in everything of economic value, one might say the total value of innovation generated by the private sector of the Australian economy in 2012 was certainly substantially greater than the $18.3 billion spent by business on R&D.
It was more like the $1.5 trillion of the final value of output produced by the private sector in that year, which is taken from the national accounts and excludes the costs of public sector consumption and investment expenditures.
This figure also includes the value of purchased imports, because innovative, valuable knowledge is also embodied in the goods and services that Australians buy from suppliers located in other parts of the world.
This broad conception of innovation underlines the fact that government statutory bodies, and entities primarily funded by the public sector such as universities, are not anywhere close to being the prime drivers of innovative outcomes in an economy.
Putting it bluntly, when the writer Mariana Mazzucato argues in her book The Entrepreneurial State that government is responsible for the innovative achievements of the IT sector, she is simply mistaken.
The amazing innovations during the Industrial Revolution required no government support to bloom, whereas the academic and military originators of the internet lacked the wherewithal to commercialise it into the gloriously equalising tool for economic and social connections the world over.
And the hostile regulatory attitudes displayed by various governments in Australia, and around the world, toward the sharing economy of Uber, Airbnb and other platforms clearly demonstrate that the public sector is by no means an innovation leader.
If Prime Minister Turnbull and his eager cabinet colleagues wish for a more innovative Australia that is readily embraced by every resident, better for them not to game the market process by forcing us to accept bundles of new economic knowledge we would prefer not to produce and buy ourselves.
The best innovation policy, in other words, is one which frees up the economy in every way imaginable so that innovation is generated by entrepreneurs in the marketplace.
As part of this, to hedge against the prospect of local entrepreneurs failing to come up with good ideas we should simultaneously accept innovation values wrapped up in the form of inflowing foreign capital, goods, and people.
We shouldn't forget, either, that once existing goods and services are available then inventors and consumers should be free to tinker with them, further improving the stocks of innovative practices known to humankind.
One of the better treatments of this concept in modern times has been covered by American technologist Adam Thierer, whose principle of "permissionless innovation" states that fiscal and regulatory obstacles should be removed from anyone who is prepared to assume risk and intends to innovate.
According to Thierer, "unless a compelling case can be made that a new invention or business model will bring serious harm to individuals, innovation should be allowed to continue unabated and problems, if they develop at all, can be addressed later".
In the final analysis, we should want to encourage market-based economic activities because growth and productivity is sourced from innovation.
But when we also appreciate that innovation is embodied in everything valuable we do economically, making and selling mundane and technical products alike, it becomes clear the best strategy for the Turnbull government is a "hands-off" approach in this key policy area.
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