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Dynamic Economic Decision Making: Strategies for Financial Risk, Capital Markets, and Monetary Policy by JOHN E. SILVIA

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Chapter 13

Innovation and Its Role in Economics and Decision Making

After the misadventures of Adam and Eve, the need for cloth and the transformation of cloth into clothing became a necessity. Yet, for centuries, the transformation was done by hand and thus was very expensive. Most people went through every day with the same clothes on their backs. This is where innovation comes in, and the results are quite contrary to the impression often conveyed by critics of technology. In 1856, Isaac Singer brought together the earlier advances of others into the sewing machine—Elias Howe had obtained a patent on an earlier machine in 1846. Singer's two major advancements were the now familiar straight needle with a back-and-forth shuttle motion and the action of feeding the cloth through the machine in a continuous fashion. Three advancements came about: speed, flexibility to work with seams of any length, and, very important for the overweight nineteenth-century person, the ability to sew on a curve.

Contrary to conventional wisdom, the sewing machine increased the importance of the individual worker by making each person individually more productive and as a group it increased the supply of clothing to the markets so that the lower prices brought in more buyers, thereby leading to the boom in apparel demand for all households. More women entered the workforce and more families enjoyed a greater variety of clothes than ever before. By the twenty-first century, Adam and Eve could shop ...

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