The Innovation Nation versus the Warfare-Welfare State

by on January 27, 2012 at 7:30 am in Books, Economics, Political Science | Permalink

We like to think of ourselves as an innovation nation but our government is a warfare-welfare state. To build an economy for the 21st century we need to increase the rate of innovation and to do that we need to put innovation at the center of our national vision. Innovation, however, is not a priority of our massive federal government.

Nearly two-thirds of the U.S. federal budget, $2.2 trillion annually, is spent on just the four biggest warfare and welfare programs, Medicaid, Medicare, Defense and Social Security. In contrast the National Institutes of Health, which funds medical research, spends $31 billion annually, and the National Science Foundation spends just $7 billion.

That’s me writing at The Atlantic drawing on Launching the Innovation Renaissance. Here is one more bit:

Our ancestors were bold and industrious–they built a significant portion of our energy and road infrastructure more than half a century ago. It would be almost impossible to build that system today. Could we build the Hoover Dam today? We have the technology but do we have the will? Unfortunately, we cannot rely on the infrastructure of our past to travel to our future. Airports, an electricity smart grid that doesn’t throw millions into the dark every few years, ubiquitous Wi-Fi — these are among the important infrastructures of the 21st century, and they are caught in the regulatory thicket.

Putting innovation at the center of the national vision is not simply about spending more, it’s about how we approach all problems. Read the whole thing for more discussion of regulation and other issues.

1 Marcos January 27, 2012 at 7:47 am

That is not a very good comparison in other ways. E.g. some of that money spent on warfare and welfare is unsed on inovation, and most of that money spent on research institutes goes to welfare.

2 Robert January 27, 2012 at 12:29 pm

The first claim is true, the second one false.

3 Bill January 27, 2012 at 8:02 am

Phoney chart.

What we pay our annual taxes for, and for which there is a deficit, is the annual budget, which excludes SS and Medicare.

If you use the annual budget, 68 percent is defense and security related. Cut defense more.

If you inflate the base, you make defense look small.

4 John Thacker January 27, 2012 at 8:05 am

Medicare and Social Security only don’t have a deficit when viewed as part of an annual budget, when viewed as taking money in this year to pay for this year’s expenditures.

If you view them as paying for the eventual payments and care of the people paying taxes (the quasi individual account view), then both are in deficit, Medicare more than Social Security. The difference is because of the shape of the demographics.

So I don’t think it’s misleading to include them in annual expenditures.

5 Bill January 27, 2012 at 9:14 am

As you well know, SS and Medicare have run surpluses for over 30 years. They purchase bonds that have to be redeemed, and they will continue to collect revenue from SS and Medicare taassessments going forward. Now, if we had been like Sweden, which ran surpluses rather than give tax cuts funded by issuing bonds for current expenditures, we would have had surplus, or more borrowing capacity.

I like it how people choose a unified budget when it suits their purpose, but not when it does not. What you are telling me is that we can now not raise medicare taxes By cutting defense

6 Careless January 27, 2012 at 9:18 am

” What you are telling me is that we can now not raise medicare taxes By cutting defense”

… indeed, spending cuts do not equal tax increases.

7 Andrew' January 27, 2012 at 11:11 am

Ah, yes the old “it’s a self-contained, self-funding program” when talking about expenses but “regressive” when talking about revenues meme.

8 Bill January 27, 2012 at 1:08 pm

Thank you Andrew for your support by pointing out the hypocrisy of those who switch between budgets to suit their own purposes. Remember the Bush tax cuts. Do you know which budget they chose– the one with SS and Medicare, or the one without, ie unified budget or annual expenditure budget.

9 Laserlight January 27, 2012 at 8:40 am

“What we pay our annual taxes for […], which excludes SS and Medicare”

Because the “Med” and “SS” lines on my paycheck aren’t taxes, they’re just the government taking money from me?

10 Careless January 27, 2012 at 9:15 am

Yes, of all the weird stands bill has taken, this promises to be the strangest. The government takes money for them but they’re not taxes, then it spends the money but they’re not spending.

11 Stuart January 27, 2012 at 10:52 am

Agreed, annual spending is annual spending!

12 Andrew' January 27, 2012 at 11:13 am

It’s actually even more bizarre than that. Bill is arguing to exclude precisely because they AREN’T public goods.

I agree whole-heartedly about cutting defense because it is mostly not a public good either.

13 R Matthew Songer January 27, 2012 at 3:26 pm

No, they are not taxes, they are insurance premium payments that are supporting the current beneficiaries. Make sure that there are workers paying premiums when you become a beneficiary.

14 Matthew Dutton January 28, 2012 at 1:14 am

The moment someone will put me in jail for not paying something, it becomes a tax.

15 doctorpat January 30, 2012 at 2:51 am

So if defense was re-organized as an insurance program, where you paid a % of your income and in return were promised a certain value of physical protection in the event of war, that would make it OK then?

Because you could do that very easily. Wouldn’t have to change anything much at all.

16 Rahul January 27, 2012 at 9:24 am

What percent of defense cost is labor; does any one know? Hypothetically if we did scale back defense (at a high unemployment time like the present) do we have a tricky unemployment mess on our hands?

17 KLO January 27, 2012 at 11:30 am

This is a preoccupation of mine as someone who thinks that we spend too much on defense. The defense industry employs many high-skilled persons, including many engineers. Reducing spending, particularly on procurement, would adversely affect the job prospects for a large number of engineers at a time when we claim to need more of them. Moreover, it is unlikely that government spending on defense can or will fully be re-allocated to activities that produce as much R&D. More likely it will be spent on even more wasteful endeavors such as keeping the most disinterested students in high school until the age of 18 or funding agricultural subsidies.

18 Marcos January 27, 2012 at 11:46 am

Talk about a broken window.

Of course there will be more money available for buying other things that may require those engineers or may require other kinds of work. But, of course, there will be some more money saved, that won’t generate jobs immediately, altough the relationship between savings and long term employment is anything but stablished.

All said, the US will get richer overall if they (you?) put all those people out of their jobs.

19 Marked to Market January 27, 2012 at 8:04 am

I agree in general that the government does too little to support research, however in this particular instance I think the chart maybe misleading because I believe R&D is a significant fraction of defense spending, though I suppose I do not know this.

20 Ted Craig January 27, 2012 at 10:37 am

Well, all defense spending has produced is the Internet, jet engines, GPS…

21 JWatts January 27, 2012 at 11:58 am

You forgot microchips and LED’s. But they probably don’t have any non-defense related usage. 😉

22 John Thacker January 27, 2012 at 8:07 am

While you say that it’s not simply about spending more, Alex, the chart is worth more words than that, and the chart argues that it is simply about spending more. Someone who looks at the chart would argue that we need more Solyndras, more Ener1s, more Beacon Powers.

Setting up a proper regulatory infrastructure can be separate from direct expenditure.

23 Andrew' January 27, 2012 at 11:14 am

It’s mainly about firing all politicians who aren’t focused on general welfare, public good, or whatever phrase hasn’t been commerce claused into meaninglessness.

24 Rahul January 27, 2012 at 8:10 am

In the libertarian manifesto isn’t warfare higher up the state-functions priority list than innovation which would rather be left to private citizens? It’s interesting to see Alex make the case for government investment in sectors that are taboo in the conventional libertarian sense.

Also, is the environmental calculus so clear that hydro is better than nuclear at equal generating capacities?

25 Slocum January 27, 2012 at 9:19 am

As far as that goes, safety net programs (e.g. Milton Friedman’s ‘negative income tax’) rank higher, too. A better question, maybe, is whether the welfare/warfare spending is significantly higher than it should be AND whether it is crowding out private R&D spending.

26 Careless January 27, 2012 at 9:21 am

Not a lot of libertarians think we need $700 billion a year in defense, AFAICT. A lot more to be trimmed there than in things 5% the size.

27 Rahul January 27, 2012 at 9:28 am

Yes, but fundamentally you’d rather have the state spend a dollar in defense than innovation, right?

Is the issue spending reduction or spending reallocation?

28 Turkey Vulture January 27, 2012 at 10:01 am

A libertarian coming from a utilitarian angle would probably prefer to spend a dollar on innovation, at least above a certain minimum level of defense.

29 Andrew' January 27, 2012 at 11:20 am

A libertarian would never have to fight a war. In fact, in my current thinking any more than a .308 in every hand is the occasions for tyranny. Try invading Switzerland for example. What we’ve managed to work out is how to fight a war or 3 every decade that exposes our weaknesses. Blowing up children in Pakistan with RC planes is not defense.

30 Rahul January 27, 2012 at 11:49 am

@Andrew’

What’s the ratio of children-blown-to-terrorists-blown?

I have mixed feelings about this war too but this argument isn’t the most compelling I’ve heard.

31 careless January 28, 2012 at 9:45 pm

A quick look has Switzerland at 8 non-homicide, non-suicide gun deaths A year.

32 doctorpat January 30, 2012 at 2:55 am

Didn’t Iraq and Afghanistan have every adult with a rifle, or close to? Have they been invaded recently?

33 JWatts January 27, 2012 at 12:00 pm

“In the libertarian manifesto isn’t warfare higher up the state-functions priority list than innovation ”

If you mean the US Constitution? Then yes Warfare is higher up the list as it’s specifically detailed as a function of government.

34 Loren F. File January 27, 2012 at 8:11 am

The problem in recent history has been that financial innovation – or at least putative innovation – has paid so much better than any other kind that it drained all the brains and the funds from other less profitable pursuits. This was a direct result of deregulation – as was the collapse of the innovative products. Deregulation also gave us innovation in the energy industry. Remember Enron?

Do we really want to go down those roads again?

lff

35 Cliff January 27, 2012 at 10:28 am

This is an oft-repeated narrative, but I seldom see it backed up with any facts.

36 The Original D January 27, 2012 at 11:24 am

I wonder if anyone has done an analysis of the percentage of MIT grads going to Wall Street vs. other industries. Has that number changed over the last 20 years? A while back someone linked to study about Harvard grads, but I don’t remember what the delta was.

37 Andrew' January 27, 2012 at 11:27 am

The recent efflux of Harvard grads to finance indicates high investment. Poor returns is kind of assumed based on recent events.

38 Urso January 27, 2012 at 11:39 am

You’ve never seen any facts supporting the hypothesis that finance pays well?

39 Ted Craig January 27, 2012 at 11:51 am

No, that it drains people from “more productive” fields.

40 doctorpat January 30, 2012 at 2:57 am

Or the claim that finance was deregulated.

41 doctorpat January 30, 2012 at 2:56 am

Maybe a complete deregulation of more useful areas is therefore the best approach.

42 john personna January 27, 2012 at 8:15 am

Good work. As an aside, someone should figure out why the only science right-fundamentalists like are on the moon and mars. Far enough away or something?

43 marris January 27, 2012 at 8:15 am

Alex,

What did you use to make this graph? It’s beautifully formatted.

44 Sean January 27, 2012 at 8:25 am

Welfare and warfare are the things that our government spends money on, because they are the things that governments exist to spend money on: Those things where fee ridership is too high for private initiatives to fill the roll. Should our government spend more than it does on basic research: a difficult thing for private enterprise to monetize? I would argue yes. Should more of our taxes go to welfare and the military than to research? Yes to that as well.

45 Curt Fischer January 27, 2012 at 8:40 am

1. The chart doesn’t show the annual spending that goes to the Department of Energy. The DOE funds a lot of scientific research. Is it more than the NIH?

2. Defense spending includes some research spending, such as by defense research agencies including the ONR or DARPA.

3. How do we decided if a given NSF program is a societally worthwhile research project or a welfare program for a team of scientists?

46 Jim January 27, 2012 at 9:07 am

Alex discusses this in the linked piece.

47 Ted Craig January 27, 2012 at 10:42 am

“But most defense R&D is for weapons research that is unlikely to generate significant spillovers to other areas of the economy.”

Some discussion. No numbers, no examples.

48 doctorpat January 30, 2012 at 2:59 am

To paraphrase P.J. O’Roarke: “Many products originally designed for military use are now vital to us in our everyday lives. Guns for example.”

49 MIchael Foody January 27, 2012 at 8:42 am

Yes the military does directly and indirectly end up funding a fair amount of R&D. A lot of what they develop has ended up having important civillian applications. I don’t really find this too compelling however, a better way at making innovations that actually make people’s lives better is pursuing them directly rather than pursuing innovations that make ending lives easier and hoping for for spill over benefits. We could just as easily pursue life saving and improving innovations actively and sit with our fingers crossed that some of these developments might hav military applications.

50 Vuk Vukovic January 27, 2012 at 8:44 am

Even if the graph is a bit biased, the fact is the US is increasing its welfare-warfare state.
A lot of funding from the welfare state can be replaced by private initiatives, especially in the US, where there is a strong incentive for charities and charitable donations: http://im-an-economist.blogspot.com/2012/01/how-charities-and-religion-should-solve.html

51 Really Curious January 27, 2012 at 8:55 am

Don’t forget that a lot of Medicare / Medicaid spending indirectly pays for R&D by drug and medical device companies – because it generates price-insensitive consumers for the new products.

52 Rahul January 27, 2012 at 8:57 am

>>>Moreover, since 97% of U.S. dams are generating zero power today, these projects would not require building any new dams. <<<

This might be an academic point but I don't think all dams are commercially and technically feasible for generating power. The head of water, flow rates, reservoir area, turbine siting, etc. probably make only a certain fraction of exiting dams able to be retrofitted for power projects.

So, IMHO it's a bit misleading to use that 97% statistic.

53 Kevin Edwards January 27, 2012 at 10:21 am

I’m a small hydro developer. True, most of those 97% of non-power dams have too small a resource to be economic. But, there are thousands of sites that could make a few tens, to a few hundreds of kilowatts, which are commercially and technically feasible, except that the burden of regulation is too great a hurdle for such small projects. There are also a smaller number of non-power existing dams, capable of producing 1 to 50 MW. Even where all the state and federal regulators agree it is a good project with minimal environmental impact, and there is zero public opposition, it can still take years of paperwork to get an FERC license or exemption. I have considered and rejected scores of sites because the hassle of regulation outweighs the return. Recently, the FERC has changed some rules in an attempt to expedite approval of small projects, and this is a good initiative. But this is a group that thinks that just 1 – 2 years of paperwork and thousands of dollars in studies is something to be proud of. Federal incentives are nice and all, but the economics and engineering aren’t holding back development – heavy regulation is.

54 NAME REDACTED January 27, 2012 at 9:04 am

“We have the technology but do we have the will”
Nothing to do with will, it has to do with environmental regulations. The hoover dam would be illegal nowadays.

55 msgkings January 27, 2012 at 3:01 pm

+1, sadly.

56 Yancey Ward January 27, 2012 at 7:51 pm

I consider that to have to do with “will”.

57 doctorpat January 30, 2012 at 3:06 am

That IS will. Modern society does not choose to have such projects, rather it chooses to have complex environmental regulations.
Queen Elizabeth the First would have just passed a simple law that anyone who required an environment impact study would be sold into slavery and their assets and children divided up among the good souls who were seeking to provide the country with a valuable project. But we don’t have the will.

58 David January 27, 2012 at 9:52 am

@rahul: almost all of defense spending is labor. Some goes to pay the actual fighting men (and women). Some goes to pay the civilian infrastructure that supports the warfighter. And quite a lot goes to buy the tools of war. Since to build stuff you need workers, quite a substantial proportion goes to pay for labor, of which a high proportion is industrial labor–the very kinds of jobs, btw, we are told we should be paying for by the current administration. After all, if there is anything more blue-collar than welding in a shipyard, I cannot really think of it.

As to the overall point, even John Galt would agree that national defense is an intrinsic state function, and that taking money from thrifty and industrious Peter in order to transfer it to indigent and indolent Paul is not.

I am, of course, aware that modern Rothbardian libertarianism rejects the notion of intrinsic state functions. But to the extent that I consider myself a libertarian, I am a Randian minarchist rather than a Rothbardian anarchist.

59 chuck martel January 27, 2012 at 10:52 am

The US has 11 aircraft carriers, no other country deploys more than one. But why just eleven? Maybe a truly effective navy would have forty aircraft carriers and ancillary vessels. Never mind that no one else is contemplating a massively expensive and probably futile confrontation with the US navy. Ignore the fact that international conflict no longer presupposes divisions of tanks sweeping across the plain. Just keep designing and building equipment to fight the wars of yesterday.

60 Ted Craig January 27, 2012 at 11:40 am
61 JWatts January 27, 2012 at 12:10 pm

“Never mind that no one else is contemplating a massively expensive and probably futile confrontation with the US navy… Just keep designing and building equipment to fight the wars of yesterday.”

That’s a completely unsupported statement. Clearly China is building up a force specifically for that purpose.

From The New York Times:
“The pace and scope of China’s military buildup is “potentially destabilizing” in the Pacific, a top defense official warned Wednesday as the Pentagon released an annual report cataloging China’s cruise missiles, fighter jets and growing, modernizing army.

The Chinese military remains focused on Taiwan, which it claims as part of its sovereign territory, and it has deployed as many as 1,200 short-range missiles aimed in its direction. Moreover, it is developing antiship ballistic missiles, potentially capable of attacking American aircraft carriers.

It is also developing its own aircraft carriers, and is already in sea trials with a refitted Soviet-era carrier from Ukraine — a development the report anticipated, but which occurred after it was printed. Finally, China is developing a new-generation stealth jet fighter, the J-20, which it boldly tested in Beijing in January during a visit by Robert M. Gates, then the defense secretary.

http://www.nytimes.com/2011/08/25/world/25military.html

62 chuck martel January 27, 2012 at 1:13 pm

Of course a top defense official is going to warn of the Chinese buildup, that’s his job, inspiring fear in the population that allows skimming their wealth to finance the organization he represents.

63 JWatts January 27, 2012 at 2:02 pm

So your reply to evidence that indicates you might be wrong is basically “It’s a lie.”. I’m sorry, but I’m not overly impressed with your argument.

64 The Original D January 27, 2012 at 7:09 pm

China is not preparing for all-out war with the US. It’s preparing to hold a defensive position post-invasion of Taiwan. But our military is built as if we’ll have to defend the entire world instead of an island.

How many countries as China invaded since WWII? How many has the US? Who should be more worried about whom?

65 CBBB January 28, 2012 at 12:42 pm

It’s true, why is it the US’s job to defend every corner of the planet? If you think this defense spending level is just MERELY providing protection for United States territory you’re deluding yourself. It’s at a level totally beyond what is necessary, and it really just allows US allies to free-ride on the American taxpayer for defense.

66 doctorpat January 30, 2012 at 3:12 am

How many countries as China invaded since WWII?

Vietnam, Korea, Tibet and India.

67 The Original D January 30, 2012 at 9:42 pm

They were invited into Korea. They were provoked into Vietnam. All of these are border states.

68 CBBB January 28, 2012 at 12:39 pm

There’s a difference between spending money on a military for defensive purposes and the insanely ridiculous spending the US does in order to maintain a massive network of bases world-wide. I don’t even see why the US needs much of a land army, that really could be pared down significantly – a decent navy I can understand.

69 byomtov January 27, 2012 at 9:54 am

I too long for the glorious days when private companies gave us such wonderful projects as Hoover Dam and the intersate highway system.

These works show how unnecessary government spending on infrastrusture really is.

70 Cliff January 27, 2012 at 10:31 am

I don’t get it.

71 Matt January 27, 2012 at 12:04 pm

The government built both of those things–He’s making fun of people who argue government spending on infrastructure is wasted.

72 JWatts January 27, 2012 at 12:11 pm

“I don’t get it.”

It’s a strawman argument.

73 EB Hansen January 27, 2012 at 9:59 am

I wonder if the burden of regulation has risen for new development in part because the value of everything around a given new development has risen in real terms. We can’t build a new airport today, like we did in the 30-50’s because in real terms the value of all the area around the proposed development is so much higher that existing interests are willing to spend time getting regulatory protections. In the 30-50’s the assets nearby were worth so little that it wasn’t worth it to seek regulatory protection.

Is a slowness to build new infrastructure a symptom of being very wealthy?

74 Lewis January 27, 2012 at 10:04 am

That’s a good point. The places it makes the most sense to build high-speed rail and such are california and the northeast cooridor, which have the most expensive real estate (and most environmental activists) in the country.

75 andy January 27, 2012 at 10:49 am

I will just say what a friend of me just told me: EU is going to subsidize conventional electricity power plants. Why? Because the payoff from power plant is too long (i.e. more than 10 years). Why is that “too long”? Because of institutional incertainity; in an environment of drastically changing tax codes (see Czech republic and solar power plants), drastically changing rules (see Germany closing several nuclear power plants in a few days) nobody wants to risk these long-term projects…

76 Ted Craig January 27, 2012 at 10:50 am

“an electricity smart grid that doesn’t throw millions into the dark every few years”

As one of the millions who was thrown into the dark for a weekend nine years ago, I’m going to have to call that statement hyperbole. Looking at a Wikipedia list of the largest power outages, the Northeast seems to suffer one every decade or so, usually because of a major weather event.
I’d like to see a smart grid as much as the next fellow, but the need seems overblown.

77 Ted Craig January 27, 2012 at 10:54 am

And “ubiquitous Wi-Fi” really seems like more of a nice idea than a critical need.

78 Rahul January 27, 2012 at 12:04 pm

For wide area coverage is Wi-Fi the right technology? I doubt it.

In any case, I’m curious what the “regulatory thicket” angle is that impedes WiFi provisioning? The issues seem mostly commercial or technical.

79 Dana January 27, 2012 at 1:25 pm

Yes, this seems akin to blaming child labor laws for high unemployment among urban youth. I expect there are many reasons why we do not have universal internet access (and why inner city kids do not have jobs); government regulation seems pretty far down on the list of these reasons, if it’s an explanation at all.

80 Ryan January 27, 2012 at 3:39 pm

Spectrum?

81 Dan January 27, 2012 at 10:56 am

Just a few months ago:

“A major power outage knocked out electricity to up to 5 million people in California, Arizona and Mexico on Thursday, bringing San Diego and Tijuana to a standstill and leaving people sweltering in the late-summer heat in the surrounding desert. ”

http://www.msnbc.msn.com/id/44446563/ns/us_news-life/t/southern-california-hit-major-power-failure/#.TyLJAUow8oE

82 Ted Craig January 27, 2012 at 11:07 am

That was a few hours. Like I said, a smart grid would be nice, but I’m not sold on the national emergency talk.

83 JWatts January 27, 2012 at 12:26 pm

Many Europeans manage about 0.1% better grid reliability. For twice the price.

The US electrical grid averages 99.9% up time during the year. For comparison Germany is the most reliable electrical grid in Europe with 99.99% up time.

So on average a German customer experiences about 16 minutes of power outages
a year and a US customer experiences about 160 minutes of power outage a year.

http://www.renewablesinternational.net/german-grid-most-reliable-in-europe/150/537/31462/

The cost to the consumer:
US: $0.112 /kWh
Germany: $0.307 /kWh

http://en.wikipedia.org/wiki/Electricity_pricing

TANSTAAFL

84 Rahul January 27, 2012 at 11:04 am

@Kevin

I agree with most of your comment. Regulatory red tape in the US is indeed excessive.

OTOH comparisons with the ease of approvals in China etc. are misleading. It seems understandable that nations lower on the development curve will be more cavaliar about externalities.

What would be interesting is a comparison of regulatory ease across the developed nations. Is the US substantially worse?

85 mulp January 28, 2012 at 3:21 am

The Kelo case is a joke if you are comparing the US to China on business friendly – in China she would have gotten such kid glove treatment only if a close family member of the national leadership – most people just get kicked off their land.

Didn’t conservatives want to increase the obstacles to development in their reaction to the Kelo appeal and decision?

86 Troy Camplin January 27, 2012 at 11:29 am

Germany leading into WWI was a welfare-warfare state. Things did not go well.

87 4runner January 27, 2012 at 1:32 pm

Since when did social insurance become welfare?

Look– the most reliable counterparty insurer in the world is the US govt. If the biggest and the best banks in the world were still trying to insure themselves at AIG and the monolines right up until the crash– how do you expect the masses to be able to identify insurers?

Sorry– but this is a bunch of nonsense.

88 mw January 27, 2012 at 3:00 pm

last I checked, the NIH and NSF don’t build infrastructure. nor has a single republican presidential candidate come out in favor of it, while obama’s been talking about a smart grid since he took office. the stimulus included (far too little, due to republican opposition and insistence on tax cut inclusion) infrastructure funding, but i guess somehow that’s not the “right” kind for you?

89 Troy Camplin January 27, 2012 at 3:34 pm

Social insurance is by definition welfare.

90 4runner January 30, 2012 at 4:00 am

Why?

I can buy unemployment insurance, disability insurance, or “old age insurance” from the gov’t or from a private party.

The gov’t requires me to buy some minimum level of this insurance from itself.

This is great news for me. My counterparty for this minimum level of coverage is completely safe. I don’t have to spend my time or my effort trying to figure out which private party will be solvent, e.g., several decades from now when I need to file a claim.

How is this welfare?

91 me January 27, 2012 at 5:10 pm

Isn’t the incredible debt we’ve accrued. The real problem is that freedom, safety and rule of law are at all time lows in this country. I don’t know what’s legal anymore, all I know is that police abuse is omnipresent and never successfully if at all prosecuted. I don’t know that my money will be worth anything in ten years, I know that if I create something new and try to sell it I am exposing myself to completely unknown liabilities and that any property I hold may be seized at any time for any reason. Why would I risk innovating?

92 mulp January 28, 2012 at 3:17 am

Sounds like you are living in China where innovation is extremely high.

93 cranky critter January 27, 2012 at 5:15 pm

i read your book and really enjoyed it. If the atlantic article is supposed to be a shorter and more digestible abstract of your thesis, I think it falls flat.

The book is much more inspirational, and I think that’s because of the section on education reform and a clearer call about creativity. The article comes across way too much like “we need to decrease entitlements and reduce regulation.”

If it’s really innovation that you want to spread as a core message, IMO you need the atlantic thesis so that you sound like a pied piper for creativity, not a pied piper for the republican party.

I’ve studied creativity quite a bit, and was a grad assistant in a now defunct program on critical and creative thinking. From watching many classes of students become more open to creativity, I believe the key to increasing such openness is to demystify creativity. People tend to fear it a bit because they believe its some sort of genius gift that a chosen few are born with. The capital-C mythical DaVinci version of creativity is a real barrier. Certainly such creative genius exists. But its like 1%. The other 99% of creativity involves motivated problem-solving by people who develop a real connection with their work. Many more would aspire to it if they felt that it was attainable, that it was fundamental to our nature.

So, celebrate and demystify.

94 Sergeant Tomato January 28, 2012 at 1:39 am

In 2000, 18 of the top 30 busiest airports were in the United States. In 2011, that number is down to 11 (source: Airports Council International).

To remain the dominant and exclusive global power, the U.S. must spend as it does on its military/defense. The sad thing is that misguided strategic policy is diminishing American power despite all this money.

95 doctorpat January 30, 2012 at 3:17 am

I’m not sure how you’ve linked those two paragraphs. Are you suggesting that the USAF shoot down foreign planes to keep it’s own airports top of the rankings?

96 mulp January 28, 2012 at 1:54 am

Just to pick one statement to illustrate the real source of innovation: “The Department of Defense, for example, spends $78 billion on R&D.”

But the innovation of the Dreamliner which depends heavily on composites, a “revolutionary” innovation in commercial aircraft, would never have happened without the hundreds of billions spent buying production military air and space craft and other extremely high cost goods only the military can afford because it gets to argue a human life is worth $10 million or a human life is only worth $100,000 but the risk is for a million deaths,

The commercial jet was possible only after the cold war military spending bought huge numbers of military jets.

And the military promotes commercial production to both reduce the cost of military craft and sustain the R&D and engineering and machinists and supply chain and refining and mining of metals on the basis of national security and war readiness.

Inventing carbon composites and then scaling up production to only expensive fly fishing and high end bike frames isn’t going to create the production scale necessary to build the Dreamliner. Even as it was, the Dreamliner took existing military technology that was supposed to be in full military production by the time Dreamliner prototypes were made, but those slipped because they were so bleeding edge advanced so the Dreamliner paid a huge cost paving the way for production. Without the military paying to develop manufacturing scale for the innovation technology, the Dreamliner would never have started.

If an innovation requires actually spending $500 billion in manufacturing to perfect it, and the buyer is the military, then the military stealth bomber and stealth fighter buys are funding innovation. And if you are honest, you will admit those stealth aircraft are totally wasted spending – bin Laden, the baddest of the terrorists didn’t have any fighters to fight, nor cities to bomb, nor radar to detect aircraft, nor antiaircraft batteries to evade with stealth.

97 Ted Craig January 28, 2012 at 9:28 am

Not to mention the pilots to fly those jets.

98 mulp January 28, 2012 at 3:04 am

Just out of curiosity, what airport has been blocked by regulation? (assuming the complexities of the Kelo ruling aren’t considered regulation.)

I guess I’m showing my age by remembering the problems of multiple “new” airports that were in competition and then replacements for existing airports. I remembered the debate over Midway v OHare, the debate over Love v DFW, the debate over the way distant Denver airport.

Airports are really subject to the network effect – adding an airport to a region that is overloaded with traffic creates real problems that are hard to overcome unless an existing airport is shutdown. If a hundred “small” cities (Indianapolis) feed into an “international” airport, adding a new airport isn’t going to reduce the burden of flights from those hundred small cities,unless the international flights are going to double.

This was the issue with Boston Logan. In the 60-70s the debate was over moving Logan to central mass, but who would want to drive 50 miles into Boston, even if two-thirds of of arrivals traveled 30-50 miles out of Logan to their destination. Then the solution in the 80s was to make Pease airbase an alternative to Logan. That failed. What has worked a bit is the NH airport in Manchester expanding and calling itself Manchester-Boston with good commuter service to NYC and DC and beefed up regional service – it has probably gained 20% of Logan’s growth.

99 mulp January 28, 2012 at 3:15 am

Just noticed the NY Times article on the multiple NYC airports http://www.nytimes.com/2012/01/28/business/ny-airports-account-for-half-of-all-delays.html

It points out, for example, a wind direct change requires coordinating changing runways at all the airports so the flight paths don’t conflict.

100 CBBB January 28, 2012 at 12:37 pm

Yeah well you know Paul Krugman always says whenever people try to pretend that the budget issue is caused mostly by foreign aid or Solyendra type deals that the US Government is essentially an insurance company with an army.

101 R. Richard Schweitzer January 28, 2012 at 11:40 pm

First, innovation as a general objective activity is not a function of government. When it does occur as a result of some proper function of government, such as DARPA, Defense, or other proper objective activities, the further evolutions are retarded when retained excusively within government functions, and thrive to the extent fully released.

Innovation in enterprises is disruptive. In what has developed into “Managerial Capitalism” disruptions are not welcomed by the exrended network of the managerial class which dominates the decisions on redeployment of surpluses in all the major sectors, including governments. The fragmentation of ownership, control and responsibilities, noted as far back as the 1930s by Berle and Means has spread to the point that we have managers (of investments, e.g.) managing managers of large scale enterprise; and other managers managing them; none of whom welcome disruption. With slowly evolving reactions (“Private Equity” e.g.), to these institutionalizing conditions, but no change in the increasing vicariousness of modern social life, with its comforts and evasions and transfers of responsibilities, innovations will not occur at a pace sufficient to provide expansion of our Western Civilization.

102 R. Richard Schweitzer January 28, 2012 at 11:59 pm

Let me add, for clarification, that “Regulation” is a form of “management.” It is the extreme political form made possible by the vicariousness of the electorate, and by a sector of managers (mostly of lower echelon, though ambitious) who, as “regulators” generally avoid and evade direct responsibilities for their tasks, a penchant which they take with them into any upward or outward movements. We do recognize that regulations are disruptive, but what they disrupt simply calls for more “management” and managers at both the governmental and enterprise levels.

103 Bilbo January 30, 2012 at 12:40 pm

That chart should probably include the Education Department budget on the innovation side as well. That’s close to $70 billion. Not enough to destroy the argument, but it does balance things a bit more.

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