Friday, January 18, 2013

“Too big to” syndrome

Recent announcement by the computer behemoths that they will not pursue exascale computing without government backing is symptomatic of the “too big to” syndrome. The current crop of policy makers, engineers and financiers are all suffering from the same basic disease. They will pursue profits at tremendous risk only if they know the government will bail them out if they fail.

If private enterprises with excess cash will not pursue technologies that could fundamentally change the productivity equation without government backing, it simply means that such technologies are not worth pursuing. The government has no obligation or role to support technology innovation in private companies if the benefits accrue to the shareholders of these firms. This is basic economics. There cannot be any more private profits coupled with social costs. The only difference is that the wily financiers asked for ransom ex-post and somewhat gentler engineers are asking for it, ex-ante.

The “too big to” syndrome is eating into the core of free markets with disastrous consequences for capital allocation across the entire economy.