This concern is particularly relevant to the financial sector, whose innovations seem to be especially attuned to the risk-return incentives created by the safety net and regulatory policies. Designing government policies that minimize the potentially disruptive effects on private incentives to innovate is complicated by how little we really understand the process of innovation and technological change.
Forecasting the direction or pace of technological change has proved to be especially precarious over the generations, even for relatively mature industries. While uncertainty is inherent in any creative process, Nathan Rosenberg of Stanford suggests that even after an innovation’s technical feasibility has been clearly established, its ultimate effect on society is often highly unpredictable. He notes at least two sources of this uncertainty.