Winning the Race with the Eight “I’s” of Innovation Policy
When we think about the causes of the Great Recession, the first one that comes to mind is usually the burst housing bubble. But the origins of the recession—and our sluggish recovery from it—go deeper than that. According to Robert D. Atkinson and Stephen J. Ezell, co-authors of Innovation Economics: The Race for Global Advantage, an important reason is that America hasn’t been paying enough attention to the race for innovation advantage. Once the forerunner, the U.S. is now being overtaken by other nations who make innovation policy a more central pillar of their economic strategies.
So how exactly can the United States start to rectify this oversight and design a better innovation policy? Atkinson and Ezell answer this question in Chapter 8 of their book with the 8 “I’s” of innovation policy:
Setting Ambitious Goals
The first thing America needs to do is “overcome its shortsightedness, partisanship, and ambivalence toward innovation.” To emphasize their point, the authors highlight five ambitious goals to be achieved by 2020, which include creating two million new jobs in technology industries, increasing the rate of productivity growth by 50%, and developing clean energies which cost less than fossil fuels.
Make Innovation-Based Competitiveness a National Priority
Arguing that the Washington Economic Consensus is increasingly outdated, Atkinson and Ezell propose that national economic security should be made more of a priority among economic policy elites; in particular, they need to help the U.S. economy regain its leading position in innovation-based global competition.
Having good intentions is all well and good, but without the right insight to go along with it, America will continue to lag behind. In the authors’ view, “the United States has never felt that it needed to develop this kind of strategic economic intelligence to really understand the competitive position of the U.S. traded sector.”
Encouraging Innovation, Production, and Jobs in the United States
“Figuratively speaking, most nations were absent for the lecture in Economics 101 that incentives are bad because they distort allocation efficiency. But unlike other pupils, Uncle Sam went to class next week, wrote a term paper on why incentives are bad, and got an A for it.” Turns out, Atkinson and Ezell say, that this term paper is only harming the U.S. economy.
More Public Funding for Innovation and Productivity
Once number one in investment for innovation, America is now eighth place among OECD countries in R&D intensity. The authors point out, “When a nation underfunds research by such a whopping amount, industrial decline should not be a surprise.”
Doing New Things in New Ways
It’s not just technical innovation that’s needed, but also organizational innovation. By moving away from “bureaucratic, managerial programs established after WWII” and toward new, dynamic institutional systems like that exemplified by the Franklin W. Olin College of Engineering, the U.S. will develop a truly comprehensive innovation policy.
Information Technology Transformation
Technology platforms have long served as launching pads for innovation: without the World Wide Web, there wouldn’t be Amazon, and without broadband, YouTube wouldn’t exist. Atkinson and Ezell go further, pointing out, “there are thousands of job-producing new products, services, and business models ready to be launched once the needed digital platforms are in place.”
International Framework for Innovation
Finally, the authors write, “Competing effectively in economics, sports, or any other area depends not only on competing at the highest level but also ensuring that the opponents play by the rules.” The federal government should treat the fight against foreign innovation mercantilism just as seriously as national security.