There is talk new Prime Minister Malcolm Turnbull will do good for innovation, start-ups and entrepreneurs.
Good innovation policy is about entrepreneurship. And entrepreneurs need economic freedom.
The new PM is right to point out the importance of collaboration with universities, that disruption is our friend, and creating a nation “that is agile, that is innovative, that is creative“.
But what entrepreneurs really want is economic freedom — lower taxes, strong rule of law, and limited government.
Innovation policy is too often captivated by doing things, rather than not doing things. We can only hope that Turnbull does not create an innovation policy full of subsidies (like most before him have.).
The role of the state in is setting a stable, broad, and consistent set of underlying laws.
Entrepreneurs do the rest — replacing the old with the new.
Before crafting the specifics of innovation policy we must define the underlying economic institutions (i.e. the ‘rules of the game’) in which entrepreneurs play.
At this point, those rules are a maze of red tape: especially high taxes, highly regulated labour markets, and a precautionary principle.
The latest results should worry the Australian government — while in 2010 we took out 5th place, now we’ve dropped to 11th.
If Malcolm Turnbull is to live up to his innovation policy hype he would be best to focus directly on providing our entrepreneurs with more economic freedom. As the following Fraser Institute video points out, economic freedom is central to economic growth and prosperity:
Adaptability to new business models (like Uber) signals to entrepreneurs the ability to test, experiment and tinker with new business models.
Lower taxes keeps and attracts internationally competitive entrepreneurs.
A strong rule of law brings investment stability by reducing uncertainty.
Deregulating labour markets enable small businesses to voluntarily hire young interested talent.
Any ‘innovation policy’ must first be based on a strong foundation of economic freedom.