The Standardization Economy and Innovation

April 4, 2024 | OPINION | By Zoraiz Zafar

Is life simply an endless march through time? While I wholly lack the credentials or insights to answer this question, fortunately for me, this question raises many further sub-questions, such as: How do economic behaviors change with the progression of time, and can we even try to predict these changes? The naysayers may disagree, but I am confident enough in my Colorado College education to at least try to answer this sub-question, which holds a lot of societal importance, and economic value, in the status quo. 

I will take you back to when I was driving through rural and suburban Louisiana last fall as part of a Venture Grant project. Observing a dormant yet glowing economic environment, I conversed with a handful of locals at a popular barbeque joint in Baton Rouge about regional economic affairs. One of them inquired about where I lived. Upon hearing Colorado Springs, he confidently remarked “Well, then you’re in luck, this place is just like the Springs, but 10 years in the past.”

This had me wondering — are economies then bound to resolve into an all-equal, static, egalitarian utopia? Because of something known as innovation, not necessarily. There is empirical research that supports the idea that, in the long run, human capacity to innovate is boundless, as we will never run out of problems to solve. And as long as we continue to solve problems, we will continue to see innovation. Therefore, while those economies on the lower rung of the ladder are simply climbing to catch up, the ladder itself is being propelled further and further upward by innovation.

What does this entail in practical terms, and how might one profit from the opportunities this philosophical theory presents? We can start by looking at the concept of arbitrage, wherein an economic agent seeks to profiteer from market inefficiencies and lags, over a more prolonged period of time. Instead of just looking for menial differences in exchange rate markets, we should look at the differences in geo-economic trends.

For instance, if the city of Baton Rouge is reminiscent of early 2010s Colorado Springs, the next question one should ask is what industries, companies and trends performed the best in Colorado Springs in the early 2010s. It would then not be unwise to presume that those segments of the economy would fare well in Baton Rouge today. Using this same example, Louisiana is currently witnessing a boom in the aerospace, defense and renewable energy industries, not wholly dissimilar to the trends seen in Colorado Springs in the early 2010s. Slowly but surely, the lagging economy plays catch-up to the leading economy, following in the leader’s footsteps, and minimizing the risks of falling off the ladder. 

Meanwhile, the Silicon Valleys and Wall Streets of the world continue to produce cutting-edge innovations that keep propelling the ladder upwards, one patent at a time. Recent advances in technologies like artificial intelligence, while admittedly with their fair share of risks, open a new realm of possibilities, many of which have the potential to revolutionize the fundamental Work-Leisure model upon which modern-day labor economics is founded.

The opportunities are ripe to engage in long-run macroeconomic arbitrage, and one can do so with the confidence that the sky’s the limit to human progress in terms of innovation. While certain obstacles continue to present issues of inequity, the economy does appear to be standardizing across geographies. We just have to always keep looking for problems to solve.

Zoraiz Zafar