But what happens when people innovate and increase others’ productivity? They make some resources redundant and free them up for other, more productive uses. Innovation and institutional change run into distributional problems because some people might be made worse off — absolutely and permanently. Sometimes those who take losses from a changing status quo can veto the change. Government social insurance or trade adjustment assistance, for example, might make it easier for people to swallow the bitter pills of losing their livelihoods.
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