John McCain and Barack Obama--What Is Your Innovation Policy?

Posted by: Bruce Nussbaum on September 8, 2008

I’ve been offline for two weeks, spending much off it in the Southwest, outside of broadband range. Returning to the theater of our politics is a jolt, with most of the discourse beside the point. We’re in the toilet. How do we get out? That’s the big question. The old, conventional economics of more spending or more tax cuts just don’t cut it.

We have to begin thinking about a new field—Innovation Economics—and the policies associated with it on a state and national level. There is a big conference in Washington DC on Sept. 25 called “Innovation Economics for the Next Administration.” Go if you can. It’s important.

Let me quote from The Information Technology & Innovation Foundation: “Up to now, innovation economics, and innovation policy, has not fully been appreciated by policy makers, in large part because the dominant economic policy models advocated by most economic advisors and implicitly held by most policy makers largely ignore innovation and technology-led growth, in favor of macro economic issues, such as tax cuts on individuals, budget surpluses, or social spending, which at the end of the day pale in significance to innovation in driving economic growth.

In contrast, “innovation economics” recognizes the reality that a global, knowledge-based economy requires a new approach to national economic policy based less on capital accumulation, budget surpluses, or social spending and more on smart support for the building blocks of private sector growth and innovation.”

What does Information Economics focus on? Here are key questions:

Are entrepreneurs taking risks to start new ventures?

Are companies investing in technological breakthroughs and is government supporting the technology base (e.g., funding research and the training of scientists and engineers)?

Are regional clusters of firms and supporting institutions fostering innovation?

Are research institutions transferring knowledge to companies?

Are our trade policies working to ensure a level playing field for American companies?

Are workers getting skilled and are companies organizing production in ways that utilize those skills?

Are policymakers avoiding erecting protections for companies against more innovative competitors?

And perhaps most importantly, are policies supporting the ubiquitous adoption of advanced information technologies and the broader digital transformation of society and the economy?”

The shape of this nascent field is just coming into view but it is important for the two candidates for the US Presidency to begin to embrace Innovation Economics. Indeed, it is critical for them to be discussing just what innovation policies they intend to implement once in office.

Suggestions folks?

Reader Comments

Concerned reader

September 8, 2008 9:38 PM

What about reconciling sustainability and economic growth? How can policymakers and economists address the elephant in the room that cheap oil and skewed incentives to consume resources in the name of economic growth are unsustainable in the long run? Or do we not care because (in Keynes's words),"in the long run, we are all dead" anyway?

bourgogne

September 8, 2008 11:44 PM

Sounds similar to Robert Reich back in 1991...

In the beginning this blog covered product innovation, then business, and now macro economic innovations. Keep going...you're getting closer.

Matt.A

September 9, 2008 2:04 AM

In a way, I think in this election we are seeing numerous candidates at least giving some air time to issues of innovation. While it seems unlikely that innovation will shoot ahead of Economy as a whole, as well as war and healthcare, the word "change", which is kind the core concept of innovation, is being used heavily by both sides.

And as far as business goes, there has been talk of promoting science and creating green jobs based on our own technologies. Education policies can certainly create the innovation of the future.

Talking about information economics in a way that the whole country understands is the hardest issue. That's probably why no one really discusses it outright as its own issue, but more as parts of hot button issues. Certainly campaign members and websites especially have served a role of making things like this available to those that care, but the main talking point issues seem to default to what we are obsessing about as a nation (or what the media is telling us to obsess about).

Maybe if someone could get a word in about innovation in an interview, or as question at a debate. Maybe if enough of us clamor that we want to hear it asked of the candidates, then the media will ask it. Maybe you should issue a challenge in the next print issue of Businessweek to clog all political news sites with commenting on articles about economic policies, and write some pieces for the heavily read political blogs that this is a game changer for their economic policies, then people will pay attention. Sometimes its really a matter of how loud you are talking in politics.

Bryan

September 9, 2008 11:12 AM

So much of todays 'business talk' doesn't actually exist as far as I can tell except on paper or as sound waves leaving someones mouth.

You want to help America's economy? encourage what made it successful in the first place.

Hard Work and open minded forward thinking business leaders

KKado

September 9, 2008 5:15 PM

Innovation economics is an interesting notion.

More to the point is the need to rethink the impact of innovation. The fact that many new technologies and innovations are truly disruptive. The level of disruption will be more and more staggering and arrrive in a much faster pace than the Schumpeter models. Not decades, but in months. How does an economy prepare, adjust, retrain etc.are critical issues.

In addition there is a need to re-think the impact of knowledge intensity and innovation intensity as they creat and modifify the notion of nation states, and comparative advantage of nation states. The rise of hub city states, Singapore, Hong Kong, Emirates etc. signify a different trend and focus from traditional economy to both innovation and the use of innovation, and away from the usual; land, labour and capital. They have no land, they have no labour, they have capital and knowledge to select and implement technology.

Will Straw

September 9, 2008 7:12 PM

The Center for American Progress has been grappling with these questions for a number of years. We recently published a series of documents under the banner, Progressive Growth: Transforming America’s Economy through Clean Energy, Innovation, and Opportunity: http://www.americanprogress.org/issues/2007/11/pdf/progressive_growth.pdf

The second of these reports - A National Innovation Agenda: Progressive Policies for Economic Growth and Opportunity Through Science and Technology written by Tom Kalil (former Deputy Assistant to President Clinton for Technology and Economic Policy) and John Irons (Research & Policy Director at the Economic Policy Institute) - emphasizes the following points:

Accelerate America’s transformation to a low-carbon economy.
• Implement an economy-wide cap-and-trade program for greenhouse gases.
• Dedicate cap-and-trade revenues to, first, offset energy costs for low- and moderate-income consumers and support the employees and communities of carbon-intensive firms, and second, invest in innovation and the transformation to a lowcarbon economy.
• Implement complementary policies to reduce emissions and increase energy efficiency in the transportation and electricity sectors.
• Create a White House National Energy Council to manage the transformation and ensure that the federal government leads the way.
• Exercise global leadership. Spur innovation to sustain productivity growth and job creation.
• Make significant new investments to stimulate innovation to address our nation’s grand challenges and emerging opportunities.
• Build a flexible, problem-solving workforce that includes more workers with world-class science, technology, engineering, and math skills.
• Restore the integrity of American science.

Rebuild the ladder of opportunity by restoring economic security and mobility.
• Guarantee quality, affordable health care regardless of employment or life circumstance.
• Expand access to effective education for our children and adult workers to ready the workforce for 21st century jobs in the global innovation economy.
• Make work pay and incomes keep pace with growth through the minimum wage, expansion of the Earned Income Tax Credit and Child Tax Credit, the right to organize, and reforms to unemployment insurance and adjustment assistance.
• Provide greater opportunities to build and secure wealth through work, retirement savings, affordable and safe financial services, and home ownership.

Create a virtuous circle of rising economic fortunes for a growing global middle class—future consumers of U.S. products and services.
• Refocus the three main elements of our international economic policy—trade, aid, and monetary policy—on achieving progressive growth around the globe.
• Enlist all the international institutions—the International Labor Organization, the International Monetary Fund, the World Bank, the World Trade Organization, and regional multilateral development banks—in a coordinated strategy to promote decent work: quality jobs, fundamental rights at work, social protection, and social dialogue.
• Support construction of the laws and institutions that will enable middle-income nations to share new growth widely within their populations.
• Support low-income nations in meeting basic human needs, advancing decent work, moving more workers into the formal economy, eliminating trade barriers to their exports, and supporting the creation of trade-related infrastructure.

Adopt a responsible fiscal policy to finance needed investments in national priorities.
• Make needed investments in economic growth and restoring economic mobility.
• Dedicate cap-and-trade revenues to ease the transition to a low-carbon economy and invest in policies to spur innovation and the energy transformation.
• Adopt a tax system that is fair and rewards human capital by:
o Rewarding work and wealth equally.
o Expanding the Earned Income Tax Credit and Child Tax Credit to help make work pay for low-income workers.
o Providing tax breaks to employers and employees to encourage more investment in credentialed and portable education of adult workers.
Improving retirement security through matching contributions for lower-wage workers in a new Universal 401(k) plan.
o Lifting the cap on which the employer pays social security taxes while maintaining the employee cap.
o Permanently reforming the estate tax so that only a tiny fraction of the wealthiest heirs would be subject.
o Closing loopholes and improving tax enforcement.
• Put America on course to reduce our debt as a share of our Gross Domestic Product.

http://www.americanprogress.org/issues/2007/11/pdf/innovation_chapter.pdf

Dr Ekaterina Khramkova

September 11, 2008 4:43 AM

Though I'm Russian and at first sight it might seem innovation policy issues of the future John McCain or Barack Obama presidency is not my business, I am sure you will apprecite my concerns.

I like 'Innovation economics' concept. But is not it the same as Creativity economy? If so, to me, the idea behind these two is the issue of ...tacit knowledge. Ill-defined, sticky and vague knowledge, both inside (workers) and outside (customers) companies, with which people, corporations, brand managers and even policy makers cannot cope.

The way out? Yeah, design thinking. (Today's design thinking = Tomorrow's human thinking). The ability to transfer ideas, concepts in a less time-consuming way, preventing errors, from head to head, new language if you wish.

So, if you wish to talk about Innovation economics, you first need to talk about mind changing and, thus, bases for educating new peoples' generation. 'A whole new mind' after all.

Bruce. On the issues depicted above, I have an article called 'The Creative Tamers of Chaos' which I wrote following the case study of collaborating IDEO with its first Russian client Vympelcom (Beeline). I interviewed both IDEO in London and Russian top management in Moscow.

And, just in case, this is an english version of the first interview taken by Russian designer with IDEO - http://www.lumiknows.com/files/interviewwithideo-e.khramkova.pdf

Tom Marsailes

September 14, 2008 6:14 PM

As you quote in "Can America Invent its way back?", "The number of domestic jobs in the computer and electronics sector continues to plunge....".

Globally, the number of jobs in the computer and electronics sector is on an upward trajectory.

What has been migrating is manufacturing and engineering work to other countries. This is happening even as Lean (JIT) initiatives and high fuel costs should be keeping at least some of this work here.

From a domestic job standpoint, the bottom of the pyramid is being taken out, ie; where most of the employment comes from. This becomes even more obvious when you look at the nested nature of manufacturing, with a multitude of suppliers feeding the logistics chain. When the manufacturing of the final product moves, so do all the suppliers.

There are structural and microeconomic problems which have led to the long term decline of US manufacturing (an anti-manufacturing legal & political environment, geopolitical barriers to US products, physical infrastructure issues, lack of collaboration between universities & industry, to name a few).

Innovation needs to be applied to remedy some of these infrastructure and microeconomic barriers. As with companies (as you suggest in your article), the biggest bang for the buck comes from having an innovative model. Our model for domestic manufacturing needs to be tweaked.

Richard Ferrers

September 15, 2008 7:32 AM

The Commerce Dept is trying to measure innovation - www.innnovationmetrics.gov.

Australia is trying to work out what their innovation policy should be - www.innovation.gov.au/innovationreview

I am writing my PhD on innovation, and my take is Innovation = something new that adds value.

But value is in the eye of the beholder.

So firms need to talk more to customers to find out what they value. Governments need to talk more to interest groups, and facilitate problem solving with Web 2.0 initiatives.

And firms need to realise that maximising profit, is not the only reason to do innovation - an alternative is find what customers value, create more customer value, create happy customers, do more business.

www.valman.blogspot.com - start the customer value conversation...
Price rises, increase profit, but decrease customer value.

Stephen Ezell

September 15, 2008 6:50 PM

The Information Technology and Innovation Foundation, whose conference on Innovation Economics for the Next Administration Bruce references, has just released a report comprehensively comparing Obama's and McCain's Technology and Innovation policies at http://www.itif.org/index.php?id=176

As Mr. Ferrers points out, it's high time the United States got serious about creating a National Innovation Strategy; something almost all other developed-world countries have done. As innovation is central to economic growth, these countries recognize that the main purpose of economic policy should be to spur innovation and growth. The emerging field of Innovation Economics builds on traditional neo-classical and neo-Keynesian economics doctrines to intentionally include knowledge and technology into economic growth theory, as ITIF explains in another report, Economic Doctrines and Policy Differences: Why Washington Can’t Agree on Economic Policies, available at http://www.itif.org/index.php?id=177

James Todhunter

September 17, 2008 8:37 AM

Hi Bruce,

Nice to see how your thinking has evolved since your May post on this topic (http://www.businessweek.com/innovate/NussbaumOnDesign/archives/2008/05/time_for_a_nati.html). This current post raises a lot of the right questions. Of course, answers are needed. For some starting points, take a look at http://www.innovatingtowin.com/innovating_to_win/2008/09/an-open-letter-invitation-for-mccain-and-obama.html

Now, if we could only hear some real definition from the candidates on the topc...

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About

Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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