Wednesday, February 23, 2011

It's the Government, Stupid, And It's Good!

There wouldn't be any computers or any Internet if it wasn't for the government. And what would the cars drive on if it wasn't for the federal and local funding of highways and roads. Kenneth Flamm showed this in his two volumes about the computer industry (Targeting the Computer, 1987 and Creating the Computer, 1988). Fred Block, a professor at the University of California, brings the discussion up to today in his new book State of Innovation: The US Government’s Role in Technology Development.

Watch an interview with Block from the Institute for New Economic Thinking (INET):

Here is a quote from INET's site:

"Block, a professor at the University of California, Davis, lays out a strong case that in the modern era government has provided essential support at the crucial early stages of all fundamentally new technologies – despite the rhetoric of those extolling the wonders of the free market. In Reagan’s era, government played a central role in the development of information technologies and, of course, the Internet.
But even today the central role of government in technology development is the norm. Fortune 500 companies have outsourced most core technology innovation, and almost all businesses rely on the government and nonprofit universities for supporting fundamental research, and taking on the initial risks of getting new technologies working. Even storied VC firms frequently point entrepreneurs to government funds to get their embryonic ideas to the point where the private sector can invest.
Government – both in the US and around the world - is also critical in getting many technologies from the commercialization phase to the more difficult mass production phase. This is particularly true now in clean energy technologies that require large economies of scale for large-scale adoption.
Looking forward, Block makes the case that even more sustained government investment and intervention is needed in this global era of climate change. For example, he talks about the idea of creating a national innovation fund that would spread the costs of core technology innovation across many businesses, but also have the public share in the upside that eventually comes."

Wednesday, February 16, 2011

The Low-Hanging Fruit Is Picked and the Young Generation Is Spoiled - Really?

The conservative New York Times columnist David Brooks discusses Tyler Cowen's book The Great Stagnation in The Experience Economy. Cowen writes that the growth stopped in 1974 - the year before the Vietnam War ended. He attributes this to the fact that the United States by then had picked the "low-hanging fruit," resulting in "slower growth, slower increases in median income, slower job creation, slower productivity gains, slower life-expectancy improvements and slower rates of technological change." (Brooks) 

What happens when the music stops? Well, at first it looks like David Brooks is going to adress the really interesting discussion of what we are doing with our wealth and technological prowes, but his conservative superego quickly pulls him by the ear and leads him down the isle of repentance:
"It could be that in an industrial economy people develop a materialist mind-set and believe that improving their income is the same thing as improving their quality of life. But in an affluent information-driven world, people embrace the postmaterialist mind-set. They realize they can improve their quality of life without actually producing more wealth."
He then introduces us to Sam and Jared, a fictional grandfather and his grandson. Sam was born in 1900 and was a hard working manufacturer, while young Jared, born in 1978, "organizes conferences... brings together fascinating speakers for lifelong learning" when not writing his "blog on modern art and takes his family on vacations that are more daring and exciting than any Sam experienced."

Here we have the crux of problem: Young Jared doesn't want to do the heavy lifting his grandfather did. Oh, those lazy young people.... David Brooks tweaks the story in a predictably conservative fashion, rather than pointing out that it was thanks to big government, sponsoring big science, big production, big highways, big social programs and big space programs that helped us achieve all that post-world war economic growth. Unfortunately, we also had the big Vietnam War and the big unproductive military spending that went with it, undermining America's long-term economic potential. But why mention all these complications when it so easy to point to the moral softening of the young generation.

Hans Sandberg

Hubble Telescope Images