> If one imagines we need more widgets than we currently have this might be a
> problem. Any important innovations would likely come from Govt. funded
> research.
> Certainly I would expect a slowdown in the rate at which innovations become
> personal goods but this hardly seems a tragedy to me.
> This gain seems small when compared to the risk I list above but obviously
> your opinions may vary.
>
Not all innovation comes in forms the government is really good at, like basic research. Sometimes it's a matter of using existing technology to make products no one had thought of before. Obviously capitalism right now is using this vast well of imagination primarily to produce a more and more perverse cornucopia of consumer electronics, but if income and thus demand were distributed differently...
As for cooperatives' ability to take on risk, I don't think this is a problem a sufficiently large welfare state couldn't handle. As liberals always hasten to remind, social insurance encourages risky behavior (which we need.)