How Innovation Works: And Why It Flourishes in Freedom by Matt Ridley

Innovation is the lifeblood of progress and economic success in the modern world, driving economic growth and creating potentially world-altering technology. Matt Ridley’s “How Innovation Works: And Why It Flourishes in Freedom” is an examination of the nature of innovation: what forces drive it, how it can be nurtured and supported, and why it is so closely linked to freedom.

Ridley’s central argument is that much of modern economic progress is rooted in the concept of spontaneous order. According to him, innovation is something of an emergent phenomenon, arising as a practical solution to problems presented by the environment. He cites traditional societies as examples, noting that shamans and locals found creative solutions to simple problems over time, picking up skills, techniques and practices from other cultures as they interacted with them. From this perspective, the exchange of ideas and trade of goods is the engine of innovation, rather than top-down developments driven by individual genius or corporate investment in R&D.

In this context, Ridley argues that freedom - particularly in the form of free trade - is essential for allowing innovation to flourish. It calls for liberal economic policies as a driver for economic progress, enabling people to exchange goods and ideas with little or no interference from the state. By citing numerous examples from history, Ridley further illustrates how this accessible exchange of goods and ideas drives economic progress. It allows new ideas to be tested and implemented rapidly, leading to improvements in the material circumstances of people from multiple backgrounds.

Ridley also discusses the importance of the domestication of plants and animals. He argues that this radically altered natural human economic behavior, allowing for drastically increased food production and giving rise to much of the complex human societies of today. As far back as 12,000 years ago, he states, man has been finding ingenious solutions to the problems posed by his environment.

Next, Ridley dissects the modern-day innovation engine. He acknowledges the importance of research and development in the development of new products, but argues that the more impactful innovation engines are global and decentralized. He points to the rise of the Internet and open source tools as examples of how the power of the crowd has produced new innovations, instead of corporate backed R&D. He also notes how globalization has opened up opportunities for entrepreneurs, allowing them to tap into resources that were previously unavailable.

Finally, Ridley argues that a healthy respect for the entrepreneurial spirit has been essential for economic progress in the late 20th and early 21st centuries. He notes that the modern economy is too complex for a single individual or even a large organization to completely understand and control. Hence, solutions to many problems must arise from collective action and the market.

Overall, Matt Ridley’s “How Innovation Works: And Why It Flourishes in Freedom” is an insightful analysis of how innovation works and how it is enforced in the modern age. He argues that the emergence of innovation is largely an emergent phenomenon, driven by the exchange of ideas and goods. He also points to the importance of freedom – particularly in the form of free trade – in allowing innovation to flourish. Bringing in numerous examples from history and the present, Ridley further argues that collective action and entrepreneurism are essential components of economic progress. This book is an excellent read for anyone looking to understand the role of innovation in human progress and its connection to freedom.