January 7, 2009
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While a variety of reasons exist for why President Clinton defeated President Bush, Sr. in 1992, a primary reason was his focus on the economy. We saw a replay of this scenario in 2008 with President-elect Obama defeating his rival, in part, because of the high marks he received from voters on the economy in the days leading up to the election. Indeed, he emphasized in debate after debate that not only would he make the economy a top priority in his administration, but that he would also invest in areas such as broadband, health IT and developing green technology, like alternative fuels and the smart grid.
In fact, President-elect Obama is correct to recognize that these areas will drive long-term economic growth and be the basis for future prosperity and American competiveness. And investing in these sectors will also boost employment in the short-term. These are exactly the reasons why the proposed $775 billion stimulus package should include, at least in part, investment in digital infrastructure.
In the past, stimulus packages targeted traditional infrastructure projects—building more roads, bridges and sewers—to create jobs, and quite literally, dig our way out of a recession. These are important projects, and given reports of America’s decaying infrastructure, these projects will help cash-strapped states move forward with these projects that have been stalled because of insufficient funds.
But the fact is that investing in physical infrastructure will not have the same short-term impact on American jobs, or long-term impact on U.S. competitiveness and productivity, as a similar investment in our “digital infrastructure.”
ITIF released a report today that finds that $30 billion of investment in our IT network infrastructure would create or retain almost 1 million jobs. The report looks at the employment impact of a $10 billion investment in each of three digital infrastrucutres: broadband networks, health IT, and the smart power grid. It finds that spurring or supporting this level of additional investment would create or retain 498,000 jobs from broadband, 212,000 jobs from health IT, and 239,000 jobs in the smart power grid. Approximately 525,000 of these jobs would be for small businesses.
Investing in IT infrastructure has a number of benefits. For one, IT jobs are generally higher-skill, high-paying jobs. For example, jobs related to broadband deployment pay 42 percent higher than the national average and jobs in the information technology industry (taken as a whole) pay 84 percent above the national average. In addition, these types of IT infrastructures enable a whole host of innovations and new industries that a comparable investment in physical infrastructure would not.
For example, broadband Internet has spawned entirely new industries—from Internet search to online retail—creating employment not just in the new firms in these industries (e.g. Google, eBay) and the new occupations needed to support them (e.g. user interaction designers and online experience managers) but also through jobs created by individuals leveraging or using these technologies and services. To take but one example, eBay has found that more than 724,000 Americans report that eBay serves as their primary or secondary source of income. While obviously these are not all full time jobs (though quite many are), this lone example demonstrates the powerful ability of digital infrastructure to create jobs from the “network effect.” These are new jobs being generated far upstream from the direct jobs associated with the initial investment to lay fiber optic cable, to develop new software that supports health IT, or to build a smart electric grid (not to mention the ensuing indirect and induced jobs created)
Finally, each of the digital infrastructure technologies reviewed in the ITIF report are also transformative—that is, they have the potential to fundamentally alter our society. Take the smart grid. Modernizing our grid infrastructure with sensors and two-way communication will not only allow utilities to generate and distribute energy more efficiently and reliably, it will allow widespread use of new technologies like plug-in hybrid electric vehicles, commercial energy storage, and residential solar generators. It will also enable time-of-use pricing which will create new demand for smart appliances that not only use energy more efficiently, but also use it more intelligently.
We’ve elected a president that seems to truly grasp the importance of our digital economy. He will likely be regarded historically as America’s first “tech” president. As Congress considers ideas for a stimulus package, it would do well to remember lessons from the past—it’s the digital economy, stupid.
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December 19, 2008
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This October, Columbia Business School Professor Amar Bhidé published a new book called The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World. Bhidé’s core thesis is that technologies developed overseas (even if they mean a loss of domestic jobs) can enhance American prosperity. This argument is based on his view that there is a general misunderstanding of how innovation contributes to economic growth, specifically that too much attention is paid to upstream development of new technologies by scientists and engineers and too little to the commercialization of innovations into products and the willingness of “venturesome consumers” to adopt cutting-edge products and services whose economic risks and benefits are difficult to judge. Bhidé believes that worries about the off-shoring of technological research and design are misguided because it’s actually consumer’s willingness to use products derived from scientific research that is “far more important” than generating new technology stateside.
We certainly agree with Bhidé that venturesome consumption and productivity on the user side, including the widespread use of information technology, is of crucial importance to innovation competitiveness and economic growth. Spurring demand and adopting more innovative technology, at individual, organizational, and governmental levels, is vitally important to unlock the potential of solutions like health IT, rapid learning networks, and smart grids, for example, to solve health care and environmental challenges.
Where we disagree with Bhidé is that we believe he presents a false choice between the importance of innovation production and innovation consumption, for there is no reason why the United States should not seek global leadership in both the upstream development of new technologies and inventions by scientists and engineers and the downstream activities that realize effective commercialization of innovations. To simply write-off leadership in innovation production as opposed to its application is to miss the point; innovation production remains at least as important as innovation consumption. In fact, there’s more than a passing relationship between innovation production and innovation consumption. It is not coincidental that the United States leads the world in use of information technology and also its innovation of it. The twain are not mutually exclusive, and in fact operate complimentarily.
One reason innovation production is so important is that there are two ways that nations get rich, either by enhancing their overall productivity growth (the “growth effect”) or by changing their industrial mix, meaning replacing firms in low-productivity sectors with firms in high-productivity sectors (the “mix effect”.) And while the United State has increased its lead in productivity, we have lost our lead on the mix effect. This is important because changing the mix effect—shifting the economy to higher-productivity sectors, such as technology or IT—is crucial because it leads to higher wages. For example, wages in the tech sector are 70 percent higher than in the rest of the economy, as ITIF’s Digital Prosperity report noted. The distinction between the growth and mix effect can be illustrated through the following example (see ITIF’s report The Rise of the New Mercantilists for a deeper explanation.) Consider a community whose automobile factory installs robotics technology; this is good, raising productivity, causing a large share of the benefits to flow to the firm’s customers in the form of lower prices. But if the community attracts or grows a high-productivity semiconductor firm to replace a lower-productivity firm that moved away (or died), most of the benefits accrue to the residents in the form of higher wages. If we want to be able to afford imports we have to export, and one area we can is in innovation production, where we still retain a competitive advantage (even if the size of our lead has slipped.)
In general, Bhidé’s thesis is really directed at the wrong nation. While the United States can and should continue to take measures to enhance its venturesome consumption, it’s actually other nations that need to more-closely heed the lesson of encouraging venturesomeness in their consumption to stimulate native demand and grow their economies domestically. (The United States, on the other hand, needs to become a more venturesome exporter.) In claiming that those who have sounded alarms about U.S. competitiveness are “techno-fetishists or techno-nationalists,” Bhidé also miscasts their message by insinuating that they “fear catch-up” by other countries. But that’s a red herring; that camp does not fear catch-up if other nations achieve it through venturesome consumption, technological superiority, or old-fashioned market competition, what it opposes is when nations use protectionist trade strategies to gain a competitive advantage over U.S. firms by shifting the cost equation, taking technology without paying for it, or blocking or limiting U.S. firm’s access to their markets. It fears more that the United States has yet to truly grasp the serious threat posed by foreign economies and their companies, not just through their genuine technical strengths and attractive products in many cases, but also illegitimate approaches that erect unfair or protectionist trade policies that systematically disadvantage foreign competition.
Bhidé’s argument that China or India as entire economies won’t be innovative for fifty years also misses the point. Rather, they are highly effective “branch plant innovators,” economies characterized by a high volume of transplant technology firms. The notion that U.S. firms may offshore their manufacturing (and jobs), but that the higher-valued added (and thus higher-paying) research, design, and management jobs will remain in the U.S. is becoming increasingly inverted. Intel’s recent decision to locate a $4 billion manufacturing plant near its R&D center in Israel (so the manufacturing facility could be close to its R&D site that spawned the innovation) shows than an economy that initially controls R&D and manufacturing can lose the value-added first from manufacturing, and then R&D. In other words, economies can use a branch-plant innovation approach to quickly become powerful competitors and migrate up the value curve to rapidly achieve competitiveness in high-value added industries, when once they were thought only to be low-skill, low-cost manufacturing centers.
Ultimately, Bhidé—and others who view the increasing technological competitiveness of foreign workforces and countries as an unalloyed positive development for American prosperity, even if it means a loss of U.S. jobs—fails to recognize that there is a difference between creative destruction and simply destruction. Their neoclassical-like view holds that if Boeing, for example, goes out of business, as long as America maintains flexible labor and capital markets, these resources will flow into other industries, including into expanding or new firms and sectors. In such a market environment, policies are needed only to facilitate resources from losing to winning companies.
This view may have accurately described a country’s economy before the emergence of globalization over the last two decades, which has caused a substantial increase in the proportion of an economy that is internationally-tradable (a point Bhidé misses entirely by claiming that the size of the untradeable sector of the U.S. economy is growing.) But in the new global economy, knowledge is increasingly the major factor of production (as opposed to the tangible capital embodied in machinery, laborers, and financial capital that characterized the old economy). It is embedded in organizations and if organizations die so too does a significant amount of knowledge. Thus, losing international competitions in knowledge-based industries (whether through other countries’ interventionist policies or the superiority of their firms) means losing much more than just the firms; it means losing the value from these dispersed pieces of value now represented by unemployed workers and under-utilized suppliers. When much of a country’s capital resides in intangible capital, it does not get reallocated easily, and it can’t be easily reconstructed. Put differently, a nation can’t expect to simply lose its high-tech industries, along with the high-skill, high-paying jobs they embody, and expect that its economy will readily reallocate those now displaced resources to other high-value-added forms of production. In fact, there is strategic complementarity between the percentage of high-skill workers and high-value, innovative firms in an economy, as economist Elvio Accinelli has noted. Losing the former risks losing the latter.
In conclusion, Bhidé is correct that the demand-side is important to an innovative economy, but it does not follow that an economy’s ability to produce innovations—based largely on the underlying scientific and technological strength of its workforce and industries—is not of vital importance (or a legitimate policy objective) to an economy’s ability to innovate and remain economically competitive.
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November 21, 2008
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Five states—Massachusetts, Washington, Maryland, Delaware and New Jersey—are leading the United States’ transformation into a global, entrepreneurial and knowledge- and innovation-based New Economy, according to The 2008 State New Economy Index, released this week by the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation (ITIF).
Robert Litan, vice president of Research & Policy at the Kauffman Foundation, noted in releasing the report that, “The New Economy is creating profound, irreversible changes in the U.S. economic structure at a pace we would not have imagined even a decade ago. Innovators in the United States—and worldwide—are increasingly investing in resources to compete based on this new reality.”
Mississippi and West Virginia ranked lowest among the states in making the transition to the New Economy. The other lowest-scoring states include, in reverse order, Arkansas, Alabama and Wyoming.
Regionally, the New Economy has taken the strongest hold in the Northeast, mid-Atlantic, Mountain West and Pacific regions; 14 of the top 20 states are in these four regions. In contrast, 16 of the 20 lowest-ranking states are in the Midwest, Great Plains and Southern regions.
The State New Economy Index measures states’ economic structures. Rather than measuring state economic performance or state economic policies, the Index focuses more narrowly on a single question: To what degree does the structure of state economies match the ideal structure of the New Economy?
The Index builds on the 1999, 2002 and 2007 reports, using 29 indicators to rank each state on the extent to which its economy is structured and operates to effectively compete nationally and globally. It divides the indicators into five categories that best capture what is new about the New Economy: knowledge jobs, globalization, economic dynamism, transformation to a digital economy and technological innovation capacity.
The principal driver of the New Economy, according to the Index, is the information technology revolution that, since the mid-1990s, has driven increased productivity and transformed virtually all industries. This “IT engine” is unlikely to slow down anytime soon. For the foreseeable future, the most promising New Economy advances will relate to a state’s ability to use information more effectively.
“These and other opportunities and challenges mean that, to succeed in the New Economy, states face a new imperative to boost the competitiveness of their economies—not just relative to each other, but to other nations,” said Dr. Robert D. Atkinson, president of the Information Technology and Innovation Foundation and primary author of the Index. “If they are going to meet the economic challenges of the future, states will need to overhaul their familiar approaches to economic development.”
The report foudn that states at the top of the ranking tend to have a high concentration of managers, professionals and college-educated residents working in “knowledge jobs”—those that require at least a two-year degree. With only a few exceptions, manufacturers in these top-ranking states generally are more geared toward global markets, both in terms of export orientation and the amount of foreign direct investments.
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November 11, 2008
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(guest blogged by Daniel Castro)
While new gadgets like the iPhone and the ever-shrinking iPod still elicit amazement and appreciation among the general public, most do not recognize the true impact that the IT revolution has had and continues to have on our daily lives. In 2007, Rob Atkinson and Andrew McKay documented in the report Digital Prosperity: Understanding the Economic Benefits of the Information Technology Revolution how IT, since the mid-1990s, has been the principal driver of increased economic growth not only in the United States but also in many other nations. However, IT is also at the core of dramatic improvements in the quality of life for individuals around the world. In a new report from ITIF, Digital Quality of Life: Understanding the Personal and Social Benefits of the IT Revolution , Rob Atkinson and I show how IT is the key enabler of many, if not most, of today's key innovations and improvements in our lives and society, from better education and health care, to a cleaner and more energy-efficient environment, to safer and more secure communities and nations.
With input from experts across multiple disciplines, we compiled a representative, though by no means exhaustive, sampling of the various ways IT is helping to reshape our world. Whether it is from faster processors, more storage or faster networks or the growth of technologies like GPS, RFID or wireless sensors, we are crossing a threshold where IT is making the world come alive with information. Throughout the 17 chapters of the report, we cover a variety of subjects including education, health care, public safety, personal safety, transportation, energy, the environment, accessibility for individuals with disabilities, communities, government and the development world. Over the course of writing this report, we came to at least one clear and convincing conclusion: IT matters...a lot.
In fact how well we solve many, if not most, of todays pressing societal challenges will depend on how effectively we use IT. Whether it is using telematics to implement congestion pricing on roads and highways to improve surface transportation or implementing electronic health records to improve the quality of care and reduce costs in medicine or investing in technologies to foster telework and cut energy use for business travel, IT will be part of the solution. Therefore, it is important for policymakers at all levels of government to implement policies that foster digital transformation. These policies can include anything from good telecommunication policies to ensure that high speed broadband networks are affordable and available to the public to fostering digital literacy in schools and the general population.
In later posts, I will talk more about the specific areas where IT can help improve our quality of life and the public policies that can help support this vision for our future.
And of course, we welcome you to share your ideas with us in the comments.
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November 5, 2008
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During the long and winding road to the White House, there was an interesting side story that played out about which candidate really “got” technology, particularly IT. Obama was portrayed as web-savvy, carrying a Blackberry and regularly using the Internet. In contrast, McCain was seen as out of touch, even personally admitting that he didn’t use a computer or email. And certainly one reason for Senator Obama’s historic victory was his campaign’s unprecedented and innovative use of new technologies, including the Web and social networking.
Now that Senator Obama has made history as being the first African American President, will he also be the first digital president. Some might say that that honor belongs to Bill Clinton. And while the Clinton administration certainly focused on the Internet and IT (they after all had an Internet tsar, Ira Magaziner), there were also areas in which they did not do as much as they could, particularly in the area of e-government. But given the amazing developments in IT in the course of the last eight years (e.g., the deployment of new ubiquitous broadband, Web-2.0, much cheaper storage and processing, etc.) it’s not clear whether the Clinton administration could have claimed this mantle even if they had worked harder for it.
The Bush administration certainly could have. But from the very beginning of the Administration to the end, IT in general and Internet issues in particular, never really got much attention. To be sure, a few Bush administration appointees (most notably Commerce officials Bruce Melman and Phil Bond, and OMB official Mark Forman) worked hard at this during their time in the administration, but by and large, this was an analog presidency, not a digital one.
Which brings us to today. Senator Obama has promised an ambitious digital government and society plan, including promising to create a Chief Technology Officer, to use the Internet to create more open government, to spur broadband deployment and adoption, and to advance health IT, among others. But the real question is whether the Obama administration will use IT to accomplish a few narrow (albeit important) goals, such as using IT to bring a bit more accountability to government, or whether he and his administration will look to IT as key tool to solving a host of pressing public policy problems that the nation will face.
These include growing the economy in the short term and the long term, addressing climate change, reforming health care, improving education, and making government work. As we argued in a recent ITIF report Digital Quality of Life, IT is now at the point where it can and must be applied to these and a host of other areas in order to make real progress.
If President Obama works to tackle these and other challenges by in part using IT, he will have amply earned the right to be called the first digital President.
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October 29, 2008
03:19 pm | 2 recommendations | Be the first to comment
As talk of a possible recession grows, so too does consideration of a second economic fiscal stimulus package. Indeed, House Speaker Pelosi has spoken of the need for a stimulus package potentially as high as $300 billion in order to get the economy moving again.
There should be no question that Congress needs to pass a stimulus package. But rather than craft a conventional spending-oriented stimulus package focused solely on tax cuts for individuals and spending increases, Congress should craft one of which at least a portion not only gives a quick shot in the arm to the economy but at the same time boosts investment that spurs productivity growth and innovation, especially in information technology, which has been the engine of U.S. economic growth for the past decade.
In the past, the standard approach to heading off recessions through fiscal policy was Keynesian pump-priming—stimulating consumption through a range of temporary government spending increases and/or tax cuts/rebates. Whether such pump priming did anything more than spur consumer spending—such as boost productivity or innovation—was beside the point. The sole focus was to get a lagging economy moving again.
But in an economy which also faces key challenges going forward in the moderate to long term in areas such as the need to increase international competitiveness, raise productivity, and reduce greenhouse gas emissions, any stimulus package should also at least in part help address these challenges. Indeed, in an era of increased international economic competition, we can no longer afford a “consumption-based” stimulus package that leaves the nation with little to show after consumers spend the money and the economy gets back on track. It’s not enough to just consider the amount of short-term “bang for the buck” that any stimulus will create, policy makers need to also consider what kind of long-term “bang for the buck” it creates.
Yet, to date, virtually all discussion of a second stimulus package has been focused on questions of ensuring that the provisions are timely (e.g., take effect over the next year or so), targeted (focused on activities that have relatively high economic multipliers), and temporary (expire when the slowdown is over). While these three considerations are critical, it is equally important to ask whether some measures cannot also be “transformative;” that is, whether they boost investments that in turn will spur growth and innovation long after the initial spending has done its work of creating economic demand and jobs.
As a new ITIF report, Timely, Targeted, Temporary, and Transofrmative: Why Congress Should Craft an Innovation-Based Economic Stimulus Package, recommends, there are a number of areas that meet these criteria of being timely, targeted, and temporary, but also being transformative in their impact on innovation and productivity.
One is to allow companies to “expense” for tax purposes investments on information technology equipment and software in 2009. As ITIF showed in its report Digital Prosperity: Understanding the Economic Benefits of the Information Technology Revolution, investments in IT produce outsized productivity gains, spurring higher company productivity and higher real wages. Allowing companies to write off all the costs for tax purposes in 2009 would raise the rate of return of new equipment and software, spurring companies to invest more and more rapidly turn over older, less productive equipment and software.
Congress should also take steps to spur adoption of health IT. IT promises to revolutionize health care by improving the quality and containing the costs of care. But compared to other nations, the United States lags significantly behind in the adoption of health IT. To get us closer to the needed “tipping point” where health IT is widespread, Congress should provide a one-time tax credit during the first half of 2009 to incentivize health care providers to invest in this technology.
Congress should provide $2 billion to help universities purchase needed state-of-the-art research equipment, such as DNA analysis equipment for cancer research, nanoengineering research facilities for new materials and systems, and supercomputers to create virtual reality environments. To qualify for grants colleges and universities would have to place an order for the equipment within two months of receiving an award (which they must match with at least 10 percent of funding from other sources).
There are a host of other proposals that could spur innovation while also spurring economic activity in the short run. Congress should double the energy efficient home improvement tax credits extended by the Emergency Economic Stabilization Act for investments made in 2009. It should provide a tax credit of 50 percent for companies that reduce their data center power consumption by 15 percent for qualified expenses, including virtualization and consolidation, energy-efficient CPUs, energy-efficient computer power supplies, and server racks with improved airflow. It should provide $1.6 billion to help over 1 million low income households with children at home afford to purchase a computer and get subsidized Internet service for one year.
This kind of “transformative” stimulus package marries some of the best insights of neo-Keynesian economics with prescriptions from an emerging field of economic growth theory – innovation economics – that argues that technology, entrepreneurship, and innovation are central components of driving economic growth. Keynes’ insight that governments can encourage economic rebounds by stimulating aggregate demand through government spending or tax cuts has merit as a short term economic strategy, but it can and must be paired with a strategy to return the United States to long-term economic strength.
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October 23, 2008
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I had the pleasure to be on a panel on Capitol Hill last Friday sponsored by the Advanced Communications Law and Policy Institute. The subject was whether the current financial crises and the likely push to rightly reregulate the financial services sector would lead to calls to reregulate the telecommunications sector (particularly broadband and wireless telephony). As James Gattuso, the moderator, noted, somewhat tongue in cheek, there are probably scores of such events taking place in Washington this month as industry after industry scrambles to figure out how to avoid the regulatory reaction that is sure to happen as Congress works to figure out how to avoid such a mess like this in the future.
There are two key questions here. Will telecom get caught up in this wave, and should it. With regard to “will it,” only time will tell. With regard to “should it,” the answer is no. But my reason for arguing this was quite different than that given by most of my fellow panelists.
They argued that the advanced telecom sector is now competitive and therefore should be spared any regulatory backlash.
But I argued that the reason for restraint is actually just the opposite. It was precisely because there was too much competition and too little transparency in the financial services industry that the crisis emerged, and precisely because there is more concentration and a large degree of transparency in the telecom industry that a rush to reregulate would be ill advised.
As Columbia law professor Michael Heller argues in his excellent new book, The Gridlock Economy, the current financial meltdown stems in part from too many owners of mortgages. He writes, “There were so many partial owners of pooled mortgages that no one cared to act like an old-fashioned mortgage banker with careful underwriting and loan servicing…. Scattered owners of pooled mortgages could not easily reach agreement to restructure troubled loans.” But it’s even worse, for U.S. banks themselves are too dispersed. Because of arcane, populist inspired laws, we have over 8,400 FDIC insured commercial banks. Compare that to Canada where there are essentially 5 major national banks. Not only does our banking system lead to inefficiency through lack of scale economies, it leads banks to be poorly capitalized and exposed to much higher risk than in Canada. This is one reason why Canada has largely escaped the mortgage crisis. Throw on top of that the fact that large parts of the market, especially derivatives markets, were largely invisible to regulators, and you had an industry that was ripe for problems.
In contrast, the telecom sector is made up of a much smaller number of national, well capitalized players – like AT&T, Verizon, Comcast, and Time Warner Cable. The actions of these companies are highly visible, with a host of consumer watchdog groups watching their every move, ever ready to blow the whistle on any behavior they question. And surrounding the entire industry is a state and federal regulatory system which still has significant influence, if for no other reason that firms in the industry are dependent on the oversight and good will of the Federal Communications Commission.
A major reason why Washington ignored the growing problems in the financial services industry was because most policy makers believed in the primacy of unfettered markets and the belief that competitive markets are the holy grail. This belief is not just some random notion that happens to be in vogue. Rather, it lies at the heart of the economic doctrine that prevails in Washington: neo-classical economics. Indeed, since the late 1970s, neo-classical economics, with its belief in the primacy of markets and the inherent limitations of government, has been the dominant economic doctrine shaping most of Washington’s thinking and action on the economy. Whether it’s the conservative version (supply-side economics) or the liberal version (sometimes called “Rubinomics,” referring to the policies of President Bill Clinton’s Secretary of the Treasury Robert Rubin), the neo-classical doctrine has become so prevalent that for many it has become synonymous with scientific truth.
If we are to go forward into this brave new world it will be critical to have the right economic doctrine to shape Washington’s thinking so that it can more effectively determine questions like when does regulation makes sense, when it does not, and what kind of regulatory interventions make the most sense. In subsequent posts, I will be writing about what I think that doctrine – what ITIF calls innovation economics – should look like and what kinds of policies toward innovation we should be focusing on.
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October 20, 2008
08:59 am | 1 recommendation | Be the first to comment
The New York Times wrote a cover story, "Rivals' Visions Differ on Unleashing Innovation", last Friday that compared the budgetary impacts of the Presidential candidates' technology and innovation policies.
Using data provided by the Information Technology and Innovation Foundation to chart the budget impacts of the candidates' spececific proposals, the Times reported that Senators Obama and McCain would commit approximately $85.6 billion and $78.8 billion annually, respectively, in resources towards science and technology policy.
About $70.6 billion, or 90 per cent, of the budgetary impact of McCain’s policies would stem from tax expenditures in the form of extending research and development tax credits and allowing firms tax deductions for investments in equipment and technology in their first year. McCain proposes about $8 billion in new federal funding for science, technology, innovation initiatives.
Obama’s approach features new outlays in federal expenditures to support new science, technology, and innovation initiatives, especially through his proposals to double federal research and development funding for basic research, to fund $150 billion (over 10 years) for clean and alternative energy research, and $50 billion (over five years) for health information technology. Eighty-three percent of the budgetary impact of Obama’s proposals stem from over $71 billion worth of new direct expenditures for science, technology, innovation programs, and only 17 percent ($14.5 billion) from tax revenue forgone by extending corporate research and development tax credits – roughly the inverse of McCain’s proportions.
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October 15, 2008
02:07 pm | 1 recommendation | 1 comment
(Guest blogged by Daniel Castro)
A new study published last Friday in the Notices of the American Mathematical Society titled “Cross-Cultural Analysis of Students with Exceptional Talent in Mathematical Problem Solving” is aimed at rebutting the hypothesis of some scholars that men and women have separate “intrinsic aptitudes” for mathematics. But the report goes a step further and argues that one important reason for the lower numbers of women in graduate level mathematics programs is that “it is deemed uncool within the social context of USA middle and high schools to do mathematics for fun; doing so can lead to social ostracism.”
The study reviews female participation in rigorous mathematical challenges such as the International Mathematical Olympiad (IMO). It found that some countries (such as Eastern European and Asian countries) produced more girls with “profoundly gifted” mathematical ability—that is not just merely bright and industrious students, but those with truly stellar potential. The study also found that whether or not these girls are identified as such “is due, at least in part, to a variety of socio-cultural, educational, or other environmental factors that differ significantly among countries and ethnic groups and can change over time.” The authors argue that identifying these girls is necessary so they can be encouraged to stay in the field and utilize their talent.
In our innovation-based global economy having enough highly skilled scientists, engineers and mathematicians is critical for a country to be competitive. Unfortunately, the numbers do not look promising for the United States. Graduates in science, technology, engineering and mathematics (STEM) fields in the United States are increasingly foreign born—in fact, the number of PhDs awarded by American universities to U.S. citizens dropped by 23 percent from 1996 to 2006.
And as my colleague Stephen Ezell pointed out recently:
"U.S. annual expenditures per elementary and secondary school student relative to GDP per capita are the second highest in the world. Despite this investment, the performance of U.S. students in international assessments of math and science competencies continues to lag that of foreign students."
This issue was raised at the recent Innovation Economics conference in Washington, D.C. A member of the audience asked a panel what the United States should do to boost home grown talent in STEM fields.
In response to the question, Phil Weiser argued that one key factor to improving the supply of domestic talent in STEM fields is to increase the number of women and minorities who pursue these degrees. He applauded groups like the National Center for Women and Information Technology that are working to increase women’s participation in IT fields.
ITIF President Rob Atkinson agreed and pointed out the need for increased funding of STEM magnet high schools. Currently these high schools enroll about 47,000 students a year—he’s called on policymakers to think big and increase funding for these schools with the goal of quadrupling enrollment to 250,000 by 2014. These schools create the kind of supportive environment that allows profoundly gifted students to flourish. Being a math nerd in one of these schools is cool. Indeed, as a principal of one of these schools noted, in these schools, “females stop worrying about their looks and whether they will be popular. Instead they compete with the males in their classes and find that the guys like them for their smarts and not just their looks.”
Now if only we can make it cool for Congress to support such programs…
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October 10, 2008
03:10 pm | 1 recommendation | Be the first to comment
There has been substantial debate recently whether DARPA - the Defense Advanced Research Projects Agency - still effectively spurs U.S. technological innovation.
On Tuesday, September 14, The Information Technology and Innovation Foundation will host Dr. Erica Fuchs of Carnegie Mellon University for a presentation on DARPA's role in U.S. technological innovation.
Dr. Fuchs will discuss the results of a new study examining the role of the Defense Advanced Research Projects Agency (DARPA) between 1992 and the present on innovation in the United States. In recent years, there has been rising concern over the ability of the United States to remain competitive in the global economy. In particular, the shift of the U.S. innovation system away from vertically integrated firms with large R&D labs, toward networked firms with interdependent technologies has created new challenges for cross-firm coordination and long-term innovation. These challenges raise important questions on the appropriate and most successful roles for federal programs within this framework.
To shed insights into these questions, Dr. Fuchs unpacks the processes by which DARPA traditionally had great success in influencing technology development, and assesses the implications of recent changes in DARPA for its effectiveness within the new innovation ecosystem. Dr. Fuchs’ study focuses on DARPA’s Microsystems Technology office, and its role in technology development in photonics, microelectronics, and other technologies supporting Moore’s Law. Drawing on in-depth field interviews of DARPA program managers, as well as additional interviews of technologists within the five established computing firms, start-ups, universities and government institutions, Dr. Fuchs provides fresh insights into the role of DARPA, how that role can be improved, and what the implications are for federal innovation policy.
All are invited to attend to this public Breakfast Forum at ITIF's offices at 1250 Eye Street NW, Suite #200, in Washington, D.C. from 9:00am to 10:30am on Tuesday, October 14. After the event, we'll share presentation slides and a link to video of the presentation through this blog.
- Rob Atkinson, ITIF
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