The Benefits: Process Innovations

Abstract

Process innovations mainly benefit consumers by reducing prices of services and of new and old goods, which benefits aspiring ordinary citizens more than the privileged rich. The interchangeable parts of the American system of manufacturing (famously demonstrated at Britain’s Crystal Palace in Victorian England) reduced the costs of many goods, bringing them within the reach of the working class. Process innovations are often financed by rich venturesome consumers who buy expensive early versions of new goods. Besides lowering costs, process innovations also increase the variety, convenience, and quality of goods. Important process innovations include Fritz Haber’s inventing a way to create fertilizer from air; Henry Ford’s adaptation of the assembly line to reduce the costs of manufacturing cars; Sam Walton’s logistical, information technology and managerial innovations to reduce the costs of retailing; and Jeff Bezos’s Internet process innovations to increase the variety, convenience, and speed of delivery of retail goods.