Crisis as the Mother of Innovation

There is a very interesting nugget in a paper by Benjamin Hippen about the market for human organs in Iran, which I blogged about not long ago.

Hippen writes that in the earlier days of kidney transplantation, both the U.S. and Iranian governments “paid for dialysis while continuing to develop transplant options.” As more and more patients needed dialysis, the U.S. made it a fully funded Medicare benefit. But Iran didn’t feel it could do the same. Why not?

[T]he expense of dialysis, the economic collapse in Iran following the 1979 revolution, and the expense of the subsequent protracted conflict with Iraq encouraged the Iranian government to pay for transplantation as soon as immunosuppressant drugs made it a viable alternative to dialysis.

So that’s how, and why, Iran began down the road to allowing people to freely buy and sell organs on a regulated market. Without the financial crises, Iran probably wouldn’t have felt pressure to pursue a plan that turned out to be, on some significant dimensions at least, very successful. (Hippen argues that Iran is the one country in the world with no waiting list for kidney recipients.)

This reminds me of another instance where crisis produced innovation: During the 1970’s oil embargo, Brazil was so worried about its energy future that it devoted itself to building a sugar ethanol industry, and it worked. Again, without the crisis, it is likely that Brazil would have continued down the same oil-dependent path as other nations.

What kind of crisis/crises is the U.S. now experiencing, and what will some of the unexpected solutions be? (I am thinking of energy of course, but surely you must be thinking of others as well.)

Prof. S(till trying)

Dear EAL;

Everyone speaks of the crisis in education, but no one talks about the hidden inner crisis of the bored, dispassionate educator whose waiting to retire.


I am not too up-to-date with 'crises' in the US today. But overall, all Western countries seem to be dealing with rising energy prices, growing environmental concern and decreasing competitive advantages compared to upcoming economies.

The influx of creativity in times of crisis is something of all ages. War, for instance, has sparked some of the greatest advances in human development since the very origins of societies. While the Borgia's raged war on what we now call Italy, the likes of Michelangelo and Da Vinci brought forward some of the most innovative ideas and cultural developments the world has ever seen.

In that sense, it might be interesting to see which innovations were influenced or instigated by the War on Terror or the Iraq and Afghanistan wars...


Virtual venues will more fully replace actual venues for meeting places so that people do not have to travel so much for work/shopping/school/medical appointments/fun.
All this moving around is a waste of time and energy.


rayleequooted @47 has an excellent plan. Rather than carrot and stick, I'd call it the "Hulk Smash Things that confuse him" approach.

Gas prices go up. The US starts bombing infrastructure. Chaos ensues, gas prices surge through the roof. Bombing ensues, large parts of global power grid eviscertated, world wide economic collapse.

More likely, however, the Middle East would simply stop selling to the US altogether. Slight dip in profits as capital surges out of America to India, China, Europe, Russia and Brazil. Those economies increase their already strong rate of development, and the US enters a prolonged depression. Despite blustering talk of war, US has no real options. Remaining few allies desert it. World economy grows accustomed to a post-US-hegemony world, in which standards of living for hundreds of millions of people elsewhere are raised, while those of Americans are lowered. Not a bad plan. Unless, of course, you're an American.


Derek Giromini

I hope that the price of fuel will urge businesses of all size to consider allowing employees to work from home one or two days a week, if not more. The cost of commuting, be it in a car, plane, or train will only increase more or less in unison.

Michael Kevane

I'm thinking that the "crisis of there not being a crisis big enough to cause us to innovate" is the most important crisis that we are confronting. Whether that leads us to innovate in the direction of creating a crisis that we will need to respond to, in an "overarching" way, or whether we leap directly to an "arch" crisis-resolution, is difficult to say, with a straight face at least.


According to Craig Venter (Human Genome fame),
within a few years oil could be mass produced by new bacteria from his lab. See his interview in Newsweek at .
It is fascinating.


I live in southern CA and I just saw my first $5.059 gas (granted, it was premium, regular was $4.85.9, medium $4.95.9).

Milk is $4 a gallon. Eggs are $2.69 a dozen.

Housing prices are tanking. The house we bought in an urban "starter house" neighborhood in '99 at X was worth 3X in 2006 and is now worth 2X.

I am interested in seeing what effect the gas and grocery prices and the bursting housing bubble will have on the public school system.

Our district has been on a trend to put boutique magnet programs in urban locations to draw and keep involved/more educated parents in the public school system. Basically, it is bribing people not to go to private school by giving their kids something other kids can't get, and drawing on parents who are involved enough to fill out the paperwork to apply and go to PTA meetings and teacher conferences halfway across town.

This is expensive for the district because the extra programs cost money, plus the district has to provide bus service to all magnet kids. This year they changed from picking kids up on their street to picking them up at the school they would otherwise attend, to save gas. If you choose to drive your kids to school rather than put them on the bus--because they have to get up at an ungodly hour to be at the school at pickup time--you are paying through the nose for the commute.

Our housing market got so expensive that the urban neighborhoods peaked late and dropped early because anyone who could afford the price didn't want their kids going to the blue-collar local school.

Now the upscale neighborhoods, where to afford the house mom and/or dad must have a professional job and thus the kids are on average better students, are getting more affordable. But you can't move there unless you can unload the house you live in now, or at least rent it out and break even.

So will the teachers, nurses, professors, etc. (people with more education than money) move up into the upscale neighborhoods and further segregate the educational haves and have-nots in the urban schools?

Or will the commute, higher cost of living, and adjusting ARM's keep the middle/educated class out of magnets and private schools and make them turn to their neighborhood schools?

Will this shuffling of families affect how the district operates?

We shall see.


Dave Kliman

The Electranet is coming, and it will rock the world.

Matt Jensen

I am curious: What if the market is only for organs from the living? The rich will obviously benefit first since they can afford them. However, if we distribute the organs from cadavers to the poor, then the net effect will be an increase in supply for both the rich and poor. Even if we do not limit who can get the organs from cadavers, the supply available for the poor will still be increased, although to a lesser extent. What do you think?


How typical of an economist's feeble grasp of technological change to find that necessity is the mother of invention. Were we really all sitting around needing our phones to take pictures?


Here is an innovative idea, known as the carrot and stick approach to moderating oil prices.

If oil rises by more than 1% in a single day, the US bombs 1% of the power stations and highways in the oil producing countries of the middle east. And it goes up proportionately. On the other hand, if the oil producers drop the price of oil by 1% or more, we give them a credit or a bombing neutralization pass to use should they raise the price on another day. Obviously, the more they drop the price, the more protective credits they will get.

The other innovative concept is nothing in life is free, including the defensive shield provided to the oil producing states in the middle east (other than Iran). The concept here is that the oil barons reimburse the US taxpayers for our costs in providing them the defensive shield they do. One way they can do that and avoid any paperwork is to "subsidize" the price we pay for oil by pumping more to reduce the price.

This is a win-win for everybody. The oil producers do not get bombed or taxed and the US consumers and taxpayers pay less. We and our Arab brothers can then dance in the streets together.


Marisa Landau

I live in Brazil and I quite agree with John Gunther # 27. The sugar cane workers are a sore sight to see. I think it's shameful to destroy food crops and old trees to plant sugar cane for ethanol fuel. To the contrary, people should be encouraged to grow their own market gardens. And all this destruction so people can drive their cars, so often needlessly.
I was glad to read about some new bus companies going NY-DC very cheap. Nice new big buses with internet broadband. That's a welcome innovation!
Brazil has 8,000 km coastline, ideal for bicycles. but very few towns and places are adapted to bikes. Safe, exclusive bike paths like they have in Amsterdam are a wonderful idea.

Michael F. Martin

legal services

especially for inventors

RL Goldstein

One of the current crises is that somewhere between three and five thousand otherwise healthy American adults will die because the established medical/legislative/regulatory health care industry has thus far decided that a regulated, humane, accessible market system matching needy donors to needy recipients is somehow unethical. When the next president and congress tackle health care issues in the coming years, one would hope that they will be able to enact solutions to specific problems rather than solely fixing universal access. Organ transplant policies and practices need to adapt soon to the changing realities of our aging population.


History matters. Kaka at Post No. 42 should know that Truman did not even know about the Manhattan project until he was president (mid-April 1945). The atomic bomb was ready for use in early August. Truman had nothing to do with allocating anything for its development.


The mother of Innovation is political power. Pharoah wanted a bigger pyramid - he allocated the minds and resources and made it so. Hitler wanted killing efficiency - he allocated resources and minds to work on bombers and poison gas. Truman wanted a bomb - he allocated the minds and resources and made it so. JFK wanted the moon - he allocated resources and minds to work on the problem and shortly thereafter man was on the moon. Crisis is simply a market consequence of refusal or failure to innovate.

Anthony Reilley

Infectious disease will require an overhaul soon. Big Pharma's R&D pipeline wants people to take long-term drugs as that is more profitable than short term courses of treatment. This translates into drugs for chronic conditions, lifestyle drugs, and antidepressants. It means a shift away from antibiotics. The pipeline for new antibiotics is nearly nil, and once people start dying from drug resistant bugs, but only then, (now it only happens with the most vulnerable, such as the elderly), it'll spur a new wave of innovation. Or it may come from other countries with a different R&D agenda (or like the US agenda in the 50s, where the public sector stake and involvement was higher), such as China, which spurred development of the latest malaria drug.
On energy, innovations are already happening all around us, with science saving input costs with precision GPS in agriculture and shipping management, lighter materials such as carbon and titanium replacing steel, etc.



Electric bicycles! Great choice--until you're hit by a drunk operating a car.

Until there's a SERIOUS prison sentence for driving drunk, don't lecture people about driving cars that provide protection agsinst idiots on the road.

Or, you could lobby for prohibition of alcohol. Oh, wait, we already tried that and it failed. Now we're doing the same with pot.

who wants to wait....

Dear Ben, ok, concession- but what about history repeating itself- everyone is not so fortunate- we could become extinct by the time this world gets around to cleaning up the environment. Why not crisis prevention management?