Unfortunately, I don't think that stimulating production or innovation is a good idea either.
When you just stimulate production, it is true that production will increase but not in a way the consumers actually want. The evidence for this is that production has been stimulated (along with consumption) for a long time due to artificially low interest rates. The housing boom is a boom in production of houses.
"booms" in general are caused by the illusion that there are more savings than in reality exist - i.e. lowered interest rates, easy loans, etc. This causes the business to over invest, thinking there is enough in the way of resources to do so, and the consumer to consume more, thinking the same thing. Unfortunately, because the lower interest rate does not coincide with increased savings the businesses soon find out that there are not enough resources to complete their projects. This is when the boom starts to stagnate. In the late '90s, the scarce resource was programmers and IT employees, who were increasingly hard to find as businesses continued to hire them all for new internet projects.
Artificial stimulation is a very bad idea in either case, consumption or production. It is especially bad when you stimulate both at once.
However, I don't think you have to worry about innovation too much. Especially in this period of economic decline, people will be able able to innovate even without stimulation ;)
When you just stimulate production, it is true that production will increase but not in a way the consumers actually want. The evidence for this is that production has been stimulated (along with consumption) for a long time due to artificially low interest rates. The housing boom is a boom in production of houses.
"booms" in general are caused by the illusion that there are more savings than in reality exist - i.e. lowered interest rates, easy loans, etc. This causes the business to over invest, thinking there is enough in the way of resources to do so, and the consumer to consume more, thinking the same thing. Unfortunately, because the lower interest rate does not coincide with increased savings the businesses soon find out that there are not enough resources to complete their projects. This is when the boom starts to stagnate. In the late '90s, the scarce resource was programmers and IT employees, who were increasingly hard to find as businesses continued to hire them all for new internet projects.
Artificial stimulation is a very bad idea in either case, consumption or production. It is especially bad when you stimulate both at once.
However, I don't think you have to worry about innovation too much. Especially in this period of economic decline, people will be able able to innovate even without stimulation ;)