A Toolkit of Policies to Promote Innovation

That is the new Journal of Economic Perspectives article by Nicholas Bloom, John Van Reenen, and Heidi Williams.  Most of all, such articles should be more frequent and receive greater attention and higher status, as Progress Studies would suggest.  Here is one excerpt:

…moonshots may be justified on the basis of political economy considerations. To generate significant extra resources for research, a politically sustainable vision needs to be created. For example, Gruber and Johnson (2019) argue that increasing federal funding of research as a share of GDP by half a percent—from 0.7 percent today to 1.2 percent, still lower than the almost 2 percent share observed in 1964 in Figure 1—would create a $100 billion fund that could jump-start new technology hubs in some of the more educated but less prosperous American cities (such as Rochester, New York, and Pittsburgh, Pennsylvania). They argue that such a fund could generate local spillovers and, by alleviating spatial inequality, be more politically sustainable than having research funds primarily flow to areas with highly concentrated research, such as Palo Alto, California, and Cambridge, Massachusetts.

In general I agree with their points, but would have liked to have seen more on freedom to build, and of course on culture, culture, culture.  At the very least, policy is endogenous to culture, and culture shapes many economic outcomes more directly as well.  I’m fine with tax credits for R&D, but I just don’t see them as in the driver’s seat.

Comments

Nah. America bets on its winners. It is the best in the world because it finds the best and throws money at them. That means more for CA and MA. There's a reason why the IPhone or Tesla automobiles weren't invented in Alabama. Bringing up inequality is loser talk.

theres also a reason that huge advances in agriculture science and many other fields weren't made in silicon valley & cambridge

Wrong. Agricultural robots and drones are developed and sold by Silicon Valley and Route 128 based companies. Cloud-based weather analytics companies are making money. Meatless protein companies from California are IPOing. Google for "agtech" and "openag".

didn't mean to imply that no big advances in ag science were made in
silicon valley or the other place, just that many/perhaps most are not

"... more for CA and MA."

Yes. There is a reason for that. Check out the ranking of states by IQ:

http://worldpopulationreview.com/states/average-iq-by-state/

MA and NH (my home and birth states) are #1 and #2. The bottom six include Alabama, Mississippi, Louisiana (see a pattern?) and ... 🥁 ...California!

California has IQ inequality due to the disparate impact of uncontrolled illegal immigration from mostly Mexico and to a much lesser extent, Central America.
The high end of the IQ range would include all the STEM people drawn to UC Berkeley, Stanford, Caltech, and the other UC campuses, UC being the largest public research university on the planet.

Silicon Valley, where I worked as a high tech hiring manager for decades, draws talented people from all over the world. The competition is fierce and the cost of living is high. Excellent jobs are abundant but, CA being an "at will employment" state, losers are easily fired. Since housing is outrageously expensive, losers leave... mostly. Only the skilled and the politically astute (sales, marketing, managerial) survive.

As for spreading around the success to places like Rochester and Pittsburgh and Baltimore and other sh*thole states and cities, it ain't gonna happen. Most of those places are either butt ugly, have a miserable climate - both too hot and humid AND too cold - or a seriously deficient local population. Some have all three problems - think Baltimore.

Otoh, the wealth has been spread around organically without government intervention - Portland, Seattle, Austin, etc. I am sure there are others in industries not familiar to me.

There seems to be a disparity between Northern and Southern California as well. San Jose has the second-highest education immigrant population in the US (interestingly, Pittsburgh is first), while Los Angeles is near the bottom: https://www.ucsur.pitt.edu/perspectives.php?b=20190314614270

I have zero confidence that government employees know what to do to promote innovation. If they had a clue they would quit their job and become rich doing it.

We all know that 100% of these grants are doled out by politicians to curry favor and votes. It isn't about innovation or actually discovering anything. It is classic political corruption. The government and politicians should not be allowed to give away the publics money for anything or to anyone.

He said on the government's "Internet."

Where Wizards Stay Up Late, in PDF format

That's right, Gore invented the internet.

It isn't the government's internet although they have their fingers in the regulation of it and would like to regulate it even more.

How ya feeling about El Paso? I guess it's not too bad, buncha low IQ invaders, not actual people eh? Tired of winning yet?

"Just a reminder, that the "invasion" language is very mainstream in Texas Republican politics. Senator @JohnCornyn sent this tweet out a few weeks ago, as he began his 2020 reelection bid."

https://t.co/OBO7p2ENIz

"As a lifetime law enforcement professional and retired F.B.I. executive who worked terrorism their entire career, I don’t believe the FBI can effectively crack down on white supremacists under this POTUS."

https://twitter.com/AllThingsNatSec/status/1157985106578960384?s=19

Culture is important but how to incentivize it if not things like R&D spending? Without a job to legitimize the huge amount of time on a task that is intangible as research, others will think you a quack or worse.

Culture is the hardest thing to replicate. Middle America absolutely hates the culture of Cambridge and Palo Alto and would rather they twiddle their thumbs as opportunity keeps passing them by. The next best thing they can do is exactly what they did. Elect Trump and have him push more policies that take from the richer states to redistribute to poorer states. Create a trade war to bail out electorally important farm belt states while hurting coastal states with big ports, create a "new" trade agreement that looks suspiciously like the old one to keep the rust belt in play, and pass tax "cuts" that actually raises taxes on more prosperous states.

It's hard to deal with the current cultural conflicts. When tradition and masculinity itself are under attack, the political economy reasons for moonshots become ideological acts.

The culture of so-called tech is to be avoided: we don't need more of what tech is offering, which is another hyped and overvalued software company. The culture of the mid-west, on the other hand, might offer innovations in businesses that would address pressing needs that aren't being addressed by so-called tech, such as efficient methods to mitigate the rising seas on our coasts and rising rivers inland, an efficient modern transportation system, and the chronic diseases that are taking some of our most productive and draining our resources that might otherwise be directed toward education, industry, and commerce. America has banked its future on (1) rising asset prices as the path to prosperity and (2) so-called tech, with the latter serving to facilitate the former. To what end? For tech billionaires to go to war over who is best at surveillance. https://www.nytimes.com/2019/08/01/opinion/peter-thiel-google.html

New treatments for chronic diseases will actually accelerate the draining of our resources given how our current healthcare system works. Blockbuster drugs are cash cows.

What common innovation are Jeffrey Epstein and tech billionaires pursuing? Their own immortality. https://www.washingtonpost.com/opinions/jeffrey-epstein-is-a-perversely-tragic-figure/2019/08/02/e49d1bae-b568-11e9-951e-de024209545d_story.html I know, life extension for a privileged few is an incredible service to humanity by Epstein and friends that is going to have spillover effects on everyone. I'm not sure I want what they have to be spilled over on me.

You can't change the culture of shithole states. That's why they are what they are. Immigration is maybe the only thing but the xenophobes are in charge.

",,, xenophobes are in charge."

I wish that were true. If it were, our border would not be the porous joke that it is today.

I don't think importing millions of fertile low IQ future maids and landscapers is going to improve innovation. We have been doing that since 1965 and yet we are still trying to improve high school test scores. After all the money burned on this effort, Latinos still lag way behind their white and Asian peers. Despite being approximately 37% of the population of California, they are poorly represented in the engineering departments in Silicon Valley. They are abundant in the cleaning crews.

Immigrants from Asia and Europe are an entirely different story.

Meanwhile, this is what your tribe is doing:

https://twitter.com/willwilkinson/status/1157366692487540737?s=19

You may think "Immigrants from Asia and Europe are an entirely different story" but white nationalism has "spillover effects" of its own.

Oh mouse, you are nothing if not consistent.

You love to play that race card.

Sorry about the Mueller thingy. You must be so butthurt. I feel your pain.

How is the Barr investigation going? We need to get to the bottom of THAT Russian collusion - you know, the real one.

lol, you just named races.

fwiw, I think forums like these is where this stuff took root, before it hit "Walmarts near you."

Maybe (local) censorship would have been pro-social after all.

Maybe you should champion local censorship - your tribe has been working on that for a long time. In fact, they have succeeded implementing local censorship - local to the school, local to the university, local to employers, local to Twitter and YouTube. All you have to do is move it up a notch to local government. Maybe you could even be the local censor - a perfect job for you.

That "lol" was posted before I heard of even greater Walmart tragedy. Not lol at all.

Xenophobes are in charge but they are also incompetent stooges.

....at shooting up Walmarts however.

The mini-tech hubs in Pittsburgh and Rochester only exist because of immigrants (and that’s also why those cities have low incomes relative to education levels). Native-born Americans with tech talent all gravitate to the coasts.

Then there is the issue of who gets to decide the who, how, what, when, why associated with allocating the grants? This is where things always get messy.

"...who gets to decide..."

The same people that selected Solyndra for a $500,000,000 loan.

The entire process will be subject to political patronage - it can't be avoided.

This scholarly paper is a waste. Hopefully not too much public money was wasted paying the salary and rich benefits of the people who wrote it. It is an expensive jobs program for useless academics. I bet the impact of the sum total of all such papers in economics is very close to zero.

You are a foolish troll, but the fact of the matter is that Solyndra was not bad from a venture capital perspective. You don't need all wins, you just need more wins than losses. The US government has invested hugely in solar research.

Solar power is now cheaper than coal. Win.

Well, I might be a troll, just like you, and sometimes foolish, just like you, but I'm not innumerate, unlike you.

It's all about the numbers, especially power density.

What about the numbers where solar is cheaper than coal? Because it is.

Exactly. The money would go to tech toys for the rich and politically-connected (solar power being one such). The R&D innovations that have done the most to improve quality of life in low-income America have come from Bentonville, AR, but I can't imagine any grant money being allowed to flow in that direction.

" The R&D innovations that have done the most to improve quality of life in low-income America have come from Bentonville, AR"

False. Those cheap goods that low income Americans buy from Walmart when they aren't shot at by white nationalists come from China. Red China. Communist China. Globalization is what did the heavy lifting not imagined innovation.

@Mark:

yeah, this is standard socialist groupthink -- "smart" government people in Wash DC extort huge amounts of money from taxpayers and spend it at their whim for extremely vague goals of research and technology.

It is complete nonsense, yet TC strongly endorses it.
Does anyone remember when TC had libertarian leanings? Me neither.

"Most of all, such articles should be more frequent and receive greater attention and higher status, as Progress Studies would suggest."

Whence come the shoulds, musts, and oughts of Progress Studies (or of Tyler Cowen)? Is this new domain of Progress Studies authoring its own model of "cultural morality", or is it relying simply on "the moral momentum" of history to help it achieve its precious goals?

"Should" has absolutely no business being in or coming out the mouth of any applied scientist or applied technologist, since the only morality Holy Science recognizes derives from "Can", the categorical imperative of "mere ability".

Progress Studies begins its academic life morally bankrupt, to judge from the status applied science and applied technology SHOULD BE ENJOYING today now that Technogenic Climate Change is breaking out the world over.

That was a very nice paper in it's own right, and I had not heard this pithy economic exploitation for why government research is necessary:

Market economies are likely to underprovide innovation, primarily due to
knowledge spillovers between firms.

Ray will remind us that patents are important, but as this paper explains, (1) they don't precisely manage capture vs spillover, and (2) spillover is really what creates broad progress.

Ray likes to talk patents, I like to talk Raspberry Pi. The Raspberry Pi is a tremendously powerful $35 computer, with an awesome software stack, because spillover.

Did the paper mention the open source movement as working directly for spillover? Is that the culture Tyler seeks?

lol, its .. explanation. Drink more coffee

The web early on moved very quickly because someone would see something interesting and could read the html to see how it was done. The current web development is mostly focused on tools so that developers can become more productive, and are based on a bunch of open frameworks. Microsoft, Google, Facebook, Amazon are all in the mix competing on offerings of storage and servers and development frameworks. And you can see the code for most of it.

What government did for the internet was to provide, for free, a communication protocol. The hardware, software and everything built upon it came from innovators. They could all communicate on top of a baseline protocol. There is something to consider in that model; no micromanagement or regulation, but a baseline upon which things can be built.

@anonymous - thanks for mentioning patents. The literature is already well established that the secondary patent (what you call "spillover effect") is always more valuable than the primary patent (the first or 'pioneer' patent in an invention). Wright Brothers Flyer vs Boeing 747 is the analogy, or Write Brothers pen vs quill ink pen. Nothing new here, I have a list of patent research papers showing this. The thing we need to do in the future is make it so there's more incentive to develop the base patent (the Flyer, the quill and ink pen). IMO other countries (Japan, Germany) have more incentives built in for an inventor to create the base patent; these countries have either moral rights--JP -- or workman comp type laws--Germany--so the inventor gets something from the state or patent assignor, unlike what PCR inventor Cary Mullis did not get in the USA (except for his Nobel Prize) for inventing a pioneer invention.

Hey, thanks for the shout out. This is about as far as most people are willing to entertain patents, never mind the Solow equation says they are basically the only reason long term growth increases (technology productivity).

As an aside on culture, what the innovating engineers really need are customers. An innovative society lines up to buy new stuff.

We're that. We line up for the new iPhone. We plonk deposits for new Teslas sight unseen.

Oh, Kickstarter might be lossy as well, but full of spillover. That might be why progress lovers don't mind making a few losing bets.

Go shopping.

Nikolai V. Stavrogin on religion, science, and culture (Pevear & Volokhonsky, tr.):

"It has never yet happened that all or many nations have had one common God, but each has always had a separate one. It is a sign of a nation's extinction when there begin to be gods in common. When there are gods in common, they die along with the belief in them and with the nations themselves. The stronger the nation, the more particular its God. There has never yet been a nation without a religion, that is, without an idea of evil and good. Every nation has its own idea of evil and good, and its own evil and good. When many nations start having common ideas of evil and good, then nations die out and the very distinction between evil and good begins to fade and disappear. Reason has never been able to define evil and good, or even to separate evil from good, if only approximately; on the contrary, it has always confused them, shamefully and pitifully; and science has offered the solution of the fist."

It looks like you're starting to verge on "penicillin is bad, because God" Edward.

Innovation is about technology. Technology is just about doing stuff. We can learn to do stuff better without losing God or philosophy.

Nyet: technology is NOT "just about doing stuff", because in the US our applied science and applied tech communities are keen to exercise their power and influence unmolested and unsupervised even by informed non-scientists and non-technologists.

Feyerabend's appeal for both a strict separation of Holy Science from State (as strict a separation as we have ever wanted for traditional religions from State) and the strict supervision of sci/tech enterprises by non-scientists remains THE democratic challenge of this century, as the Technogenic Climate Change unleashed by our heedless brainiacs threatens all life on the planet. (Decades of unremitting heat stress beckon.)

Technology in the US has become an expensive political game that the American people themselves are losing to the constipated souls and diseased mentalities of tech coaches, players, and cheerleaders.

It's what the word means.

And didn't we see the claim yesterday that technology killed slavery? We don't do it now because it's bad, sure, but it's also uneconomic.

Pretty big win for technology.

Technology has hardly "killed slavery", grandiose claims to the contrary, since meanwhile, our self-aggrandizing technocrats are busily imposing new forms of economic slavery and servitude, according to their enlightened perspectives and applied misanthropies.

Technogenic Climate Change shows itself already to pose a HUGE threat to most human enterprises: and for this gift that promises to keep on giving, first and foremost we have to thank our self-aggrandizing technologists and the many hierarchs, acolytes, and devotees of Holy Science.

The top causes of Global Warming are fossil fuels, agriculture, and human population. Today's technologists are actually looking to push back on these old 19th century technologies or improve them. We can certainly poke fun at them for making self-driving electric cars when public transit is more eco-friendly.

Nobody knows how bad the warming will be or how fast it will come on.

We see many alarmist reports in the clueless MSM, but there are subtle hints about error margins and uncertainty that few people bother to read. Furthermore, it is in the best interests of climate scientists to exaggerate the scope and magnitude of the problem - they are not immune to confirmation bias and motivated reasoning.

The warming may come on quickly and be very bad, or not. It is not knowable.

That said, there is nothing wrong with implementing a no regrets suite of policies.

I'm addition to reducing carbon emisions we should:

1. Reduce coal burning because it is dirty.

2. Take fewer airline flights, especially frivolous ones. This would negatively impact poor people in poor countries that need foreign money.

3. Stop cutting down rainforests to grow palm oil and soybeans and raise cattle.

4. Stop or reduce beef consumption.

5. Maybe cut back on makeup that has palm oil as an ingredient.

6. Build more efficient buildings - cooler in summer and warmer in winter. To his would save money too.

7. Build smaller homes that use less energy for heating, cooking,band lighting. All those wealthy virtue signallers can put their money where their mouth is.

There's more, but that is plenty for now.

Don't lose sleep over global warming.

“progress” is our myth
that the future we possess,
that our pasts are dead.

buildings older than
entire nations still stand, stone
staircases still trod.

photography shows
just what telescopy tells:
all we see is past.

plays, poems, and prose
composed centuries ago
continue to speak.

the past is not dead:
if it were, we'd have no words
nor could we hide stars.

our futures still mute,
we do not hear in advance,
our sound is so slow.

“history” ebbs not,
flows not: our sentiments do
but with vigor slosh.

“égalité”? where?
never in France, nowhere else,
no ideal world here.

“reason” itself now
counts as a myth, such a vain
and elusive trait:

you sometimes still hear
rational lunatics sing
moving hymns to “truth”.

“truth”, fanciful “truth”,
“truth” itself some less than myth,
some less than “half-truth”.

(if “truth” does exist,
it continues to exceed
both our reach and grasp.)

Holy Science says:
“our tall cathedrals console
with hieratic truths,

and with lethal truths:
with our hieroglyphic math
do we conquer all.”

science and math lie:
these cannot tell truth entire,
Reason's halfwit slaves.

medieval the new:
days of rational belief
and mythical thought . . .

econo-babble. tl;dr but from skimming the article, the authors are all over the place first it's productivity growth, then "innovation", then progress, then "welfare"; I didn't see motherhood* and apple pie, but they're probably in there somewhere. (*population growth rates SHOULD be discussed in a paper like this, right?) I think it's illuminating that the null hypothesis isn't let the taxpayer keep the money, but what should we do with the money we've taken? I guess they believe that the reason why central planning has such a poor track record is that the decision makers just don't listen to the wisdom of economists. Shouldn't the first question we ask be "Is the question posed here, what to do with "a fixed budget of financial and political capital", one we SHOULD be asking? Is there good evidence to suggest that advice given (to central planners) is more likely than not to result in higher innovation? Color me dubious. To paraphrase a no longer acceptable joke: Q: What do the tens of thousands of politicians with economic problems have in common? A: They just don't listen.

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