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The Innovation Administration: When It Comes to Social Policy, Is Newer Always Better?

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The most concrete definition of innovation is offered by economists, who point out that with manufacturing and service-sector jobs migrating overseas, the United States cannot compete in the global economy without developing new products, services, and processes. In 1942, Austrian economist Joseph Schumpeter coined the term "creative destruction" to describe how innovation drives economies. When Wal-Mart came up with new, cheaper ways to move products around the globe, it allowed consumers to buy essential goods at lower prices but destroyed local mom-and-pop shops. Similarly, the iPod was an innovation that destroyed the Discman, and the Internet may, someday, completely destroy the daily print newspaper. All these innovations created jobs, even as they made others obsolete. And they all grew the economy.

It makes sense, then, during a recession, for the federal government to invest in technological innovation. It's difficult to argue with the Obama administration's decision to provide $400 million for a new energy-research agency called ARPA-E, which will look for technological solutions to global warming. Or the administration's proposed $19 billion investment in electronic health records, which would result in better, more consistent care for patients.

Social policy is where the innovation agenda gets tricky. The incentives are less clear, the outcomes are more difficult to measure, and the entire endeavor is more open to ideological debate. In the White House, though, the importance of "social innovation" as a poverty-fighting tool is regarded as received wisdom. There is the new White House Office of Social Innovation, led by former Google.org chief Sonal Shah, and the Social Innovation Fund, both with the goal of working alongside the nonprofit sector in order to address joblessness, bad schools, and urban blight. And the Department of Education is using billions of dollars of stimulus money to help local school districts, nonprofits, and colleges enact "innovative reforms."

At its core, social innovation refers to the belief that for-profit institutions should be the model for nonprofit ones, and that nonprofits, in turn, can be more effective protectors of social welfare than government. There's nothing particularly new about these ideas. After the fall of the Soviet Union, American philanthropists spoke of helping former Eastern Bloc countries build "civil society" sectors, which would better care for human needs than bloated communist states had. In the 1990s, business schools promoted the idea of "corporate social responsibility," which held that government regulation wasn't needed in order for companies to do the right thing for the environment or public health. They could police themselves! During the Reagan and Bush years, conservatives suggested the nonprofit sector could serve as an effective replacement for the welfare state. (Some still do. At a health-care town hall meeting on Sept. 21, House Minority Whip Eric Cantor told a woman that her uninsured, cancer-stricken relative should seek care from "charitable organizations. …