Is Innovation an Inconvenience?


Kurt Bouwhuis, Mackinac Center Intern

My business, XYZ Corp, produces cassette tapes.  In the past, my business has been a success.  It had the capability of taking $2.00 worth of raw materials and $6.00 worth of labor to create a cassette tape.  The market value for a cassette tape was $12.00, generating an average of $4.00 in profit per tape.

In recent years, there have been all sorts of innovations in production as well as new technologies like CDs, DVDs, MP3 players, and blue ray disks.  These new technologies are complicated, so I focused on producing cassette tapes.  Because of the fierce competition and innovation, the market value of a cassette tape has dropped to $3.00 per tape.  Due to high gas prices and minimum wage increases, it now cost XYZ Corp $14.00 per tape.

XYZ Corp is now close to bankruptcy because it now takes $14.00 worth of raw materials and labor and converts it into a finished good worth $3.00.  This is a net lose of $11.00 per tape produced.  This is a bad situation because there are still people out there that listen to tapes.  Additionally, XYZ employs 5000 people, and it would be a shame to see all these people become unemployed. 

If only there was a way to force people to pay my expenses despite the lack of demand for my product… I don’t want to steal the money from people, as it would be immoral.  I could, however, have the government subsidize my business by forcing taxpayers to pay my expenses.  Besides, subsidizing is much different from stealing. 

If the government subsidized my business $15.00 per tape, it would bring much benefit to society.  It would ensure that all 5000 of my employees will continue to convert $14.00 of raw materials and labor into a tape valued at $3.00 in the market. Not only that, but each time a tape is produced, $15.00 of your tax money will be used to keep this process going!  Besides, consumers are too dumb to choose the best technology for listening to music.  It is obvious to see that the government is much better at making decisions than consumers, just look at social security.  To help the consumers make better decisions, we should also impose a tax on my competitors to drive up their cost and force them to increase their prices. 

This whole complicated process could be avoided if a law were passed that eliminated innovation.  Think about it, all businesses could continue to produce what they are producing now.  Businesses It would eliminate the senseless notion of having machines and technology stealing all of our jobs and ruining our lives.  As a worker, you could always work for the same company, who will always be producing the same good or service.  Your job would be secured, and you wouldn’t have to be hindered by all the new choices and changes of innovation.

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