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Creative Incentives

May 15, 2011 • Businesses, Demand, Supply, and Markets, Innovation • 104 Views    No Comments

In his New Yorker Magazine article on creativity, Malcolm Gladwell describes Mick Jagger, the musician, and Gary Starkweather, an optical engineer, as gentlemen who pour out countless ideas and develop an endless stream of products. For Jagger, the product is his music while one of Starkweather’s ideas became the laser printer.

Gladwell points out, though, that for creativity to work, it also needs discipline. He suggests that for Jagger, Keith Richards provided the discipline. For Starkweather, Xerox was a source of constraint. 

Gladwell’s insight? As demonstrated by this slideshow about the mouse, sometimes a good idea has to unfold through many years, multiple places and different people to evolve into something useful and affordable.

The Economic Lesson

Americans tend to be risky consumers. We used electric power in our homes before it was entirely safe, we bought the first computers, we drove millions of cars before they were perfected. Explained by James Surowiecki in the New Yorker, because we are willing to buy new products, businesses have the incentive to be creative.

In our economic tool kit, incentives belong at the top.

An Economic Question: Remembering that profits are an important incentive for business firms, why might they have the incentive to control and encourage creativity?

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