If the tectonic economic events of the last few months have shown us anything it’s that many of the core assumptions embedded in the prevailing neoclassical economic doctrine that drives much of Washington’s thinking on economic policy are no longer valid. Moreover, recent theoretical and empirical work has called into question the core tenents of the neo-classical doctrine that markets are stable, are driven by rational actors responding solely to price signals, and require little role for government in driving growth. In this article in The Democracy Journal Rob Atkinson reviews two new books that present important critiques to neo-classical economics: The Gridlock Economy: How Too Much Ownership Wreck Markets, Stops Innovation and Costs Lives by Michael Heller and The Origin of Wealth: Evolution, Complexity and the Radical Remaking of Economics by Eric Beinhocker.
ITIF President Rob Atkinson asks in his recent Huffington Post article what will Obamanomics look like? That is to say, in what direction with America’s President-elect lead the nation’s economy? The three contenders are Rubinomics, with its focus on deficit reductions and national savings, Neo-Keynesian, emphasizing social policy such as universal health care and tax cuts for lower and middle class Americans, or Innovation Economics that argues growth is, and always has been, a function of innovation and a robust R&D tax credit along with public-private partnerships are the tools needed to spur such innovation.
An Innovation Economics Agenda for the Next Administration
In today’s economy, innovation – the development and adoption of new products and services, more efficient production processes, and new business models – is the most important factor driving increases in American standards of living. By putting innovation at the center of our nation’s economic policies, we can ensure robust economic growth and rising standards of living for all Americans. ITIF’s Innovation Economics Agenda for the Next Administration lays out eight key recommendations to spur innovation-led economic growth in the United States. Amongst others, these measures include: significantly expanding the federal R&D tax credit, allowing companies to expense new investments in IT in the first year, creating a National Innovation Foundation, and reforming patent and trade policies.
Economic Doctrines and Policy Differences: Has the Washington Policy Debate Been Asking the Wrong Questions?
In an election year when both presidential candidates in the United States are confronted with a troubled economy, the current U.S. political dialogue is giving scant attention to innovation and policy to promote innovative activity.
Innovation policy has gotten short shrift in the U.S. political dialogue largely because the three dominant economic policy models – conservative neoclassical, liberal neoclassical and neo-Keynesian economic doctrines– advocated by most economic advisors, and implicitly held by most Washington policymakers, ignore the role of innovation and technology in achieving economic growth in the global, knowledge-based economy of the 21st century. Unfortunately, while the U.S. economy has been transformed by the forces of technology, globalization, and entrepreneurship, the doctrines guiding economic policymakers have not kept pace and continue to be informed by 20th century conceptualizations, models, and theories.
Fortunately, as described in this policy brief, a new theory and narrative of economic growth based on an explicit effort to understand and model how technological advances have emerged in the last decade. This new economic doctrine on the block— called “innovation economics”—reformulates the traditional model of economic growth so that knowledge, technology, entrepreneurship, and innovation are positioned at the center of the model rather than seen as independent forces that are largely unaffected by policy.
This policy brief briefly explains the three prevailing economic doctrines, as well as the newer doctrine of innovation economics, that are competing for the attention and allegiance of U.S. policymakers. In addition to discussing each doctrine’s principles, goals, and what each believes about the economy, it discusses the advantages and limitations of each economic doctrine. Finally, it examines how each doctrine views particular real-world economic challenges and the different types of policy prescriptions that result from each.
Who's Your Economic Daddy?
For most people, debating economic doctrines is a pastime best left to the Ph.D. economists working in government, think tanks and universities. Yet economic doctrines are at the heart of the economic policies being debated right now in the presidential campaign, in the halls of Congress, and in the current administration. Virtually all policy makers involved in economic policy, including our two major Presidential candidates, subscribe to a particular economic doctrine, even if they may not be aware of which “camp” they are in.
Supply-Side Follies: Why Conservative Economics Fails, Liberal Economics Falters, and Innovation Economics is the Answer
The 21st century knowledge economy requires a fundamentally different approach to boosting growth than simply cutting taxes on the richest investors. The alternative is not, however, to resurrect old Keynesian, populist economics as too many Democrats hope to do. Rather, as Rob Atkinson makes clear, our long-term national welfare and prosperity depends on a new economic strategy that fits the realities of the 21st century global, knowledge-based economy: innovation-based growth economics.
The Past and Future of America's Economy: Long Waves of Innovation that Drive Cycles of Growth
The Past and Future of America’s Economy focuses on how periodic cycles of technological and economic change have fundamentally reordered the way we work, the organization of business and markets, and the role of government. It examines this process of change over the past 150 years and explores the responses of people and institutions. The book then analyzes today’s New Economy, including the new information technology system, and effects on markets, organizations, workers, and governance. Taking into account the historical record, the book discusses the shortcomings of prevailing liberal and conservative economic doctrines and lays out a new growth economics agenda aimed at maximizing the productivity and innovation-enhancing forces of the New Economy.
Table of Contents
PART I : HOW TECHNOLOGY DRIVES ECONOMIC AND SOCIAL TRANSFORMATIONS
1. Introduction: A New Economy?
Is the New Economy a Flash In the Pan? – The Course Of Productivity Growth – Since it is a New Economy, What Should We Do About it?
2. Technological, Economic and Social Transformation
Technology And Economic Cycles – The Process Of Transformation and Consolidation – Periods In American Economic History
3. Economic Transformations From the 1840s To The 1990s
The Factory-Based Industrial Economy: the Early 1890s to the Early 1940s – The Corporate, Mass Production Economy: the Mid-1940s to the Mid-1970s – The Calm Before the Storm: the Triumph of the System At the End Of the 1960s – The Turbulent Transition to the New Economy: 1974 to 1994
4. Today’s Entrepreneurial, Knowledge-Based Economy
The New Technology System – Industrial And Occupational Change – The Rise Of Globalization – The New Organizational and Market Environment – Social, Political and Spatial Changes
5. The Key To Productivity Revival
The Productivity Boom Of the Old Economy – The Great Productivity Slowdown – The Productivity Paradox: “We See Computers Everywhere but in the Productivity Statistics” – Why Did Productivity Go Up In the 1990s? – IT’s Role in Driving Productivity Growth – The Contours Of the Emerging Digital Economy – Why Is Digital Transformation Taking So Long? – Sources Of Productivity Growth In the Next Economy
6. The New Economy And Its Discontents
Opposition To Past Transformations – Today’s Opponents To Growth and Change – The Politics Of Progress: Modernizers Vs. Preservationists
PART II MODERNIZING PUBLIC POLICIES FOR THE NEW ECONOMY
7. Legacy Economic Policy Frameworks
The Old Economy Policy System – The Liberal Faith In New Deal Economics – The Supply-Side Sidetrack – The Failure of the Left’s and the Right’s Economic Doctrines
8. Growth Economics For the New Economy
The Emerging Field Of Growth Economics
9. Implementing Growth Economics
Stimulate Technological Innovation – Foster Digital Transformation – Foster Higher Skills – Foster Entrepreneurial Innovation and Competition
10. Building A More Humane Economy
Creating More Humane Workplaces – Getting More Time for the Rest of Life – Creating Family-Friendly Capitalism – Creating Livable Communities – Are a Humane Economy and a Productive Economy in Conflict? – The Politics of Creating a Humane Economy
“Rob Atkinson is one of our best analysts of how technology drives local and regional economies, and what to do to take advantage of technological change. In his new book, he fluently articulates the principles of a new ‘growth economics’ that is America’s best hope for a prosperous future leaving no one behind.”
- Rosabeth Moss Kanter, Harvard Business School professor and author of Confidence: How Winning Streaks & Losing Streaks Begin & End.
“Rob Atkinson has produced a powerful and far-reaching look at the underlying mechanism powering today’s New Economy. In particular, he shows how the U.S. is just at the beginning of an innovation wave which is not only boosting productivity, but transforming economic organization and economic policy as well. This book is essential reading for anyone who wants to understand how the U.S economy got to where it is today, and how it can best get to a prosperous and humane future.”
- Dr. Michael Mandel, Chief Economist, Business Week and author of Rational Exuberance: Silencing the Enemies of Growth and Why the Future is Better than You Think.
“Rob Atkinson is one of the most creative thinkers about the American economy. In this fascinating book, he puts the “new economy” spurred by the digital revolution into the context of other historic transformations. By doing so, he shows how we can preserve the gains in productivity and implement policies that will keep the economy growing. Everyone concerned about our economic future should read this.”
- Walter Isaacson, author of Benjamin Franklin: An American Life.
“I couldn’t agree more that the political party that comes closest to supporting humane growth economics should be the leader for the next 25 years. The book is a great vision for the future, and its scholarly but readable mix of history, technology, economics and politics is very persuasive. It’s the sort of stuff that should be taught in economics courses, but almost never is.”
- David Moschella, author of Customer-Driven IT: How Users Are Shaping Technology Industry Growth
“Any person concerned about the future of our economy should read this book. Atkinson offers terrific historical perspective as well as specific policy proposals that would give us the best chance for broad-based economic growth now and for generations to come. It should be mandatory reading for public policy makers.”
- Congressman Adam Smith (D-WA, and co-chair of the House New Democrat Coalition).