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Innovation and policy

There were two types of people talking policy in Aspen. One group was composed of, well, policymakers. The Peter Orszags, Alan Greenspans, Ezekiel Emanuels, amd Melody Barnes of the world. The second group was largely composed of technological innovators. Bill Gates, Craig Newmark, and a few others fit this group. They'd made their money in Silicon Valley, but they were there to talk about Washington.

The latter group was considerably more optimistic, and for good reason: In Silicon Valley, seemingly intractable problems have been solved at an accelerating rate. In Washington, seemingly tractable problems have overwhelmed thew system at an accelerating rate. If you're coming from the technology sector, your perspective has been shaped by a remarkable pace of innovation that has made incredibly expensive tasks -- geo-location, for instance -- cheap and broadly available. The policy folks were more pessimistic, as the tools they have to work with -- Congress, in this case -- don't have quite such an inspiring record in recent years. It is, predictably, much more fun to talk to the innovation types.

But as they made clear, the spheres are connected: Innovation needs public support. The role of policy, at its best, is to create a structure in which innovation can happen, and a fallback for when innovation doesn't happen. The fact that we have the iPhone doesn't necessarily mean we'll have a cheap, endlessly renewable energy source anytime soon. If technology makes policy unnecessary, that's great. But you can't depend on it, you can only encourage it.

Encouraging it means ensuring there's money and material for the component parts of innovation. But the innovation types look out and see a failing K-12 education system, massive cuts in public universities, inane quotas on high-skill immigrants, a tax code that could be a lot friendlier to research and development, and so forth. When they talked about it, they sound, well, downright pessimistic.

By Ezra Klein  |  July 12, 2010; 10:39 AM ET
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--"But as they made clear, the spheres are connected: Innovation needs public support."--

Surprise. Surprise. One more area Klein is convinced needs public support.

Government does nothing but stifle innovation, Klein. All it can do is service those faux-innovators who make the most noise or work their political connections. The real innovation in the country takes place with people pursuing their own dreams with their own resources. Government inhibits those people by sucking their productivity off to give to its preferred patrons.

Posted by: msoja | July 12, 2010 10:56 AM | Report abuse

While it's not possible to run the core functions of federal government (defense and infrastructure) like a business, the fringe federal dabblings certainly could be more businesslike. One key advantage that most innovators have is familiarity with failure -- the willingness to admit mistake, to halt fruitless pursuits, and to try again in the manner that Michael Lind mentions in the opinion cited in today's Wonkbook edition. The federal government lacks that drop-back-and-punt mentality and, with an unlimited budget, has no reason to develop such sensibility.

Why allow a cancer to grow unchecked? To use an unpopular example, the overwhelming majority of Johnson's Great Society initiatives have been failures since inception, yet they have been allowed to fester to the point that Medicaid and "other mandatory programs" (welfare, housing assistance, etc.) account for $916B of federal spending each year [Federal Budget Proposal, 2011, Table S-6.]. Ultimately, these non-core functions of federal government -- functions once provided more efficiently by churches and charities -- have to be acknowledged as failures and eliminated; in contrast, the contract made with existing contributors to Social Security ($730B) and Medicare ($491B) must be honored even though changes to the contracts are necessary.

But how does one get the non-tax-paying recipients of the $916B in "free money" to vote for a businesslike approach? If I were one of the non-payers rather than one of the payers, I'd certainly favor the fiscally foolish approach which gives me benefit without payment. How does one eliminate representation without taxation? Short of taxation via capitation, is it even possible for a representative government of freemen to successfully operate programs which subsidize individual voters?

Posted by: rmgregory | July 12, 2010 11:17 AM | Report abuse

"They made their money in Silicon valley..." You miss, or more importantly deny, that a new class of wealthy policy makers has arisen. They made their money in Washington! Bill Clinton and Al Gore, well on their way, both of them, to being billionaire policy makers. Many people at the highest level of this white house have become phenomenally wealthy as a result of their power over policy, sometimes after leaving office, other times, interestingly, between holding high office.

Posted by: truck1 | July 12, 2010 11:20 AM | Report abuse

"In Silicon Valley, seemingly intractable problems have been solved at an accelerating rate."

It seems like they solved the problem of 'Made in America' by outsourcing pretty much everything they do other than showing up at pricey conferences in Aspen.

Posted by: leoklein | July 12, 2010 11:29 AM | Report abuse

Can I get a witness that Bill Gates is not a technological innovator, but rather a marketing/business genius? Microsoft technology was never particularly excellent or even good; Windows 97 was Mac 84, and the gap continues. The only thing that makes PCs marginally tolerable is that a genuinely innovative company called google now allows you to do most things on the web. Gates' genius lied in making his mediocre software universal--and then defending his turf like a Mob don or a streetcorner warlord.

Posted by: TomPhilpott | July 12, 2010 11:29 AM | Report abuse

Did the rich techies say nanything about being willing to pay their fair share of taxes to improve the educational system? I know Bill and Melinda Gates have given much money to education (and other things), but it isn't the same as convincing the cyberselfish that they should be more willing to pay taxes and take a role in advocating for better education. Too many of them would rather not pay taxes and import cheaper engineers from India. After all, all that Silicon Valley wealth is in CAm, ehich is seeing its once vaunted K-PhD public education system falling apart.

Posted by: Mimikatz | July 12, 2010 11:40 AM | Report abuse

--"Innovation needs public support."--

That's utter nonsense, really, Klein. It's the kind of thing someone says who really hasn't a clue as to how things work in the real world.

"Uh, Bob, could you run down to the plant and bring back some innovation, please?"

"Yeah, the biggest innovation you can get with ten dollars."

And, of course, since Klein doesn't know what innovation is, he'll never be able to tell if all the stolen money he's thrown at it has got him any or not. And that's the way government works on a day to day basis. Wasting what doesn't belong to it, on things it has no idea about, without a clue.

Posted by: msoja | July 12, 2010 12:01 PM | Report abuse

--"Did the rich techies say nanything about being willing to pay their fair share of taxes to improve the educational system?"--

I hate to break it to you, Mimikatz, but the government education system is as good as it's going to get. You can throw money at it until you're blue in the face, and you might eke out a fraction of percent gain here or there, but you'll lose a like amount elsewhere. Expenditures per pupil in most states is already astronomical and there's little to show for it compared to leaner, freer times.

Meanwhile, ever rising property taxes to fund the government school monstrosity are helping kill the middle class.

But you keep on keeping on, ya know, because *next* year miracles could happen. wink wink.

Posted by: msoja | July 12, 2010 12:10 PM | Report abuse

"Government does nothing but stifle innovation, Klein."

This is absolutely absurd. Government plays a huge role in innovation. Government funds almost all basic research. Improvements in technology are of course closely related to advances in science. However, since basic scientific research has uncertain and often only long-term, the private sector does not invest in it, so the government steps in. Government also plays an important role in providing infrastructure and standards. Believe it or not, standards play a huge role in advancing technology. A famous example is the fax machine. In the 70s the different brands couldn't send and receive to each other until the Japanese government stepped in and set a standard all manufacturers, making the machines vastly more useful and making the market for fax machines more efficient and competitive. I think you'd also have to be pretty dense to say that no innovation has ever come out of the defense industry, which of course is government-funded.

From a theoretical standpoint, Nelson and Winters studied technological innovation and its importance to growth through the lens of their "evolutionary economics." Their model said innovation depends on the "triple helix" of business, government and the academy. Without important support from all of these three, innovation, and as a result long-term growth, will grind to a halt.

Posted by: AndrewDClark | July 12, 2010 12:13 PM | Report abuse

AndrewDClark, see if you can track down a copy of Bastiat's "Seen and Unseen", and give it a gander.

The things you talk about are what you can see. What you can't see are all the innovations that never were because people and businesses had to send off such large percentages of their personal wealth in service to the permanence of the state.

Yes, government scientists do occasionally beat the odds and make a discovery, usually early on in the life of the endeavor (what has NASA done for anyone, lately?) But government, overall, wastes huge amounts of its ill gotten gains, and can rarely begin to explain where all the money went.

I have much more faith in the free market (where innovation is the coin of the realm) than I do the political disbursement agencies in Washington.

Posted by: msoja | July 12, 2010 12:51 PM | Report abuse

msoja, ask Boeing if they need the public to provide a good system of roads so that they can move parts around efficiently. I mention Boeing specifically because one of their constant complaints with the Seattle area (where I went to college) was that Seattle has a horrid traffic problem that was negatively impacting Boeing's business.

Also, ask pharma companies if they'd like the government to stop funding basic research at public universities, which ends up being a big component of their own research and development. The private sector may chafe at "government intrusion" from time to time, but only a fool would deny that public spending only ever gets in the way.

Also, you guys realize that a lot of this post is Ezra reporting what he heard from business people in Aspen, right? It's not that he thinks public schools should be better funded, though I'm sure he does; it's that these titans of industry made this point. Maybe you disagree with their conclusions, but you can't peg this as some crazy lefty, anti-business nonsense from Ezra. These business people said it!

Posted by: MosBen | July 12, 2010 1:41 PM | Report abuse

MosBen, I'd also add that they're mostly debating a argument Klein doesn't make. Klein closes the post saying that we have suffered budget cuts in public universities, flaws in K-12 education, and have a tax code that doesn't encourage business. Instead of responding to the substance of that allegation, we've got a train of comments talking vaguely about how "government stifles innovation" and forays into the desirability of welfare and Medicaid.

I'd have those arguments if they were on the table, but I'd much rather like to hear what the commentators on this blog find so offensive about a retrograde K-12 education, public universities, or tax cuts for businesses.

Posted by: strawman | July 12, 2010 2:04 PM | Report abuse

--"These business people said it!"--

There are plenty of unscrupulous business people who don't mind "government" handouts in the slightest. Doesn't make it right.

And, you've got to look past the simplistic labels. The entire collectivist endeavor has as one of its stratagems the blurring of distinctions between such things as "business" and "government".

Posted by: msoja | July 12, 2010 4:32 PM | Report abuse

So, we should listen to business people unless they disagree with you?

Posted by: MosBen | July 13, 2010 8:14 AM | Report abuse

--"So, we should listen to business people unless they disagree with you?"--

You should quit trying to lump people into convenient categories in order to alternatively demonize or praise them. It's a form of bigotry.

Posted by: msoja | July 13, 2010 1:00 PM | Report abuse

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