At the environmental news site Grist, there is a post defending the DOE loans to Fisker Automotive, a start-up manufacturer of luxury electric vehicles that aspires to mass market success. I have nothing to say about the larger claims in the article, which you can evaluate for yourself. I did, however, notice one particular passage:

The Karma is extremely expensive — around $100,000. It is indeed a car for rich people; the very first one off the production line went to Leonardo DiCaprio. Al Gore’s in line for one too. Yes, DiCaprio and Gore; this is a field day for gossipy media.
However, some perspective is in order. A small start-up trying to break into an automotive market dominated by huge, well-established incumbents has to start at the high end. It doesn’t yet have economies of scale or mass production capabilities; it needs to prove that it can create a working, reliable car; and it just needs to attract attention. Tesla did the same thing for the same reason. It’s a way to attract more investment.

This struck me as a very wise observation. But of course it applies to more than small start-ups trying to break into the automotive market. It certainly applies to medical providers that are trying to take on inefficient hospital groups, as Clayton Christensen and colleagues argue in The Innovator’s Prescription.

One way of looking at contemporary political economy is that we’re locked in a race: will innovative business models, which often emerge to serve the affluent, spread fast enough to outrun anxieties rooted in some combination of concern for social justice and envy? Let’s stress that in many cases, the former completely dominates the latter and in others the latter dominates the former. One could absolutely be motivated exclusively by a concern for social justice in some particular domain.

So what do I have in mind? Peter Orszag recently argued that new technologies might exacerbate inequality in healthy lifespan, a subject we addressed in this space. We could see this as a temporary phase: affluent early adopters might seen an increase in healthy lifespan that the less affluent don’t immediately share in, yet there is reason to believe that over time, through a trial-and-error learning process, we’ll see the number of late adopters grow until virtually everyone can and does access a truly useful technology.

Another reaction is that this inequality is unjust and that we should (a) ban the new technologies or (b) subsidize them to put them within the reach of everyone, though of course not everyone will actually use these technologies because they have yet to be convinced of their virtues. Tactic (a) is obviously self-defeating and stupid, though it is a tactic that is nevertheless pursued in at least some areas. Tactic (b) might work in some instances; in many others it is likely to prove futile. Again, it takes time for people to be convinced of the virtues of a new approach. Or even counterproductive, e.g., it might needlessly raise expenditures, which will in turn reduce the amount of disposable income that might otherwise have been devoted to the “venturesome consumption” of other innovative products and services.

My larger anxiety about the rich democracies is that fear is more consistently winning out over business model innovation, particularly as incumbent providers in “the new commanding heights,” e.g., education and health, grow ever more entrenched. (For a particularly egregious example, look to a recent concession made by California’s public universities.)