A coalition of public policy groups is urging President Barack Obama to make the federal government the nation’s primary driver of technological innovation—a task many experts say would be better left to the private sector.
At a post-election meeting in Washington, DC sponsored by five institutions—including the Economic Policy Institute, The Breakthrough Institute, and Ford Foundation—University of California researchers Fred Block and Matthew Keller introduced a report examining the role of government in innovation.
The researchers argue U.S. government action has produced some of the most significant innovations of the past several decades. They point to government research in molecular biology as applied to agriculture and pharmaceuticals, along with semiconductor development, as efforts that contributed to the information technology revolution.
“Large firms acting on their own account for a much smaller share of award-winning innovations, while innovations stemming from collaborations with spinoffs from universities and federal laboratories make up a much larger share,” said the report, titled “Where Do Innovations Come From? Transformations in the U.S. National Innovation System, 1970-2006.”
“Second, the number of innovations that are federally funded has increased dramatically,” the report found. “These findings suggest that the U.S. innovation system has become much more collaborative in nature. Federal innovation policy needs to reflect this fact.”
Freedom More Important
But many economic experts say the government largely gets in the way of more nimble private-sector technology firms.
Daniel Ballon, a technology studies policy fellow for the San Francisco-based Pacific Research Institute, says the market does a better job of efficiently advancing innovation.
“Policymakers frequently talk about investing in innovation as if it were a commodity that could be purchased,” Ballon said. “Unlike grain or oil, you can’t buy a barrel of innovation. The greatest innovations arise spontaneously and surprisingly in ways that nobody would have predicted.
“Innovators must be free to take risks on wild ideas,” Ballon said. “Failures should sink quickly and be replaced by a new slate of even wilder ideas. Ironically, governments’ attempts to force innovation through central planning rarely succeed, because bureaucrats refuse to accept failure.
“Year after year, politicians will continue to pour money into pet projects with little hope of success,” Ballon said. “Markets provide the most ruthlessly efficient litmus test for new ideas: Do people believe enough in this technology to invest their own money?”
Tax Relief Wanted
Robert Atkinson, president of the Washington, DC-based Information Technology and Innovation Foundation, is more sympathetic to the report’s findings. He suggests the government expand federal research budgets and institute more liberal immigration policies for highly skilled workers wishing to enter the United States.
At the very least, Atkinson said, the government should help spur more private research by increasing research-related tax credits to high-tech firms.
“An important step is to expand research and development tax credits. Studies show that the research and development tax credit is an effective way of stimulating private-sector R&D,” Atkinson said, noting the United States has fallen from first in R&D “tax generosity” among the 30 nations of the Organization for Economic Cooperation and Development in 1992 to 17th in 2005.
“To spur more R&D in the United States, Congress should expand the Alternative Simplified Credit from 14 percent to 20 percent,” Atkinson said.
Time Limit Suggested
Ballon agrees the Obama administration should play some role in promoting information technology innovation. The consensus diverges, however, when determining how long the government should stay involved.
“There has always been a key role for government in funding basic research,” Ballon said. “As [the report] demonstrates, there is also a role for government in helping the results of basic research diffuse into the private sector.
“Once the private sector demonstrates a willingness to invest, however, the best thing that government can do to promote innovation is get out of the way,” Ballon said.
Aricka Flowers ([email protected]) writes from Chicago.
For more information …
“Where Do Innovations Come From? Transformations in the U.S. National Innovation System, 1970-2006,” July 2008, Fred Block & Matthew Keller: http://www.itif.org/files/Where_do_innovations_come_from.pdf