New Technology: Can the Government Really Pick Winners?

by | Aug 21, 2012 | Technology

Innovations do not always occur at the speed or in the direction that government officials would like.

It is often claimed that new technologies would not be developed without massive government expenditures. Advocates of this view point to NASA, the Internet, and the interstate highway system as examples. Thus, they claim, government should invest in “green energy.”

While it is true that NASA, the Internet, and the interstate highway system have contributed to improving our lives, this is not evidence that such improvements would not have occurred in the absence of government involvement. Further, we have abundant evidence that private businesses can and do develop a wide variety of life-enhancing values without government involvement.

For example: the steam engine, the telegraph, the telephone, the automobile, the airplane, the phonograph, photography, moving pictures, refrigerated railroad cars, and much, much more. At the time of their invention, these were life-changing innovations that dramatically improved the lives of individuals. Even today, innovations like smart phones and flat screen televisions are the result of private individuals, not government “investment.”

But innovations do not always occur at the speed or in the direction that government officials would like. They believe that they can accelerate the process by stealing money from millions of taxpayers, pooling it, and then doling out that money to those who will engage in the activities that Congress finds desirable. And this is nothing new.

In 1862, Congress passed the Pacific Railway Act to facilitate the construction of a transcontinental railroad line. The act awarded railroads land for a right-of-way to construct the rail lines, as well as land adjacent to completed lines. The adjacent land was to be sold to settlers as a source of revenue. The act also authorized the federal government to purchase 30-year bonds from the railroads with an interest rate of 6 percent. Every company that was supported by these government subsidies eventually went bankrupt.

The reason is simple: the government attempted to provide a service that was not needed. In the 1860s, there was no market for a transcontinental railroad. That is why the private companies did not build one. The government intervened, and the results were destructive.

Today, private companies do not invest in “green energy” for the same reason—there is no market. Yet, the government insists otherwise, and it is pouring billions of dollars down the same sewer that was once the transcontinental railroad.

Those who do not learn from history are doomed to repeat it. And so are those who reject principles.

Brian Phillips is the founder of the Texas Institute for Property Rights. Brian has been defending property rights for nearly thirty years. He played a key role in defeating zoning in Houston, Texas, and in Hobbs, New Mexico. He is the author of three books: Individual Rights and Government Wrongs, The Innovator Versus the Collective, and Principles and Property Rights. Visit his website at

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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