Demand innovation explains how market structure often protects incumbents from the need to improve. Customers in every market want better, cheaper and faster services. But in many industries, the existing rules and practices effectively protect suppliers from having to respond to the full force of these competitive pressures. A wave of new technology is about to enter the economy. Major industries can show significant productivity improvements if they reorganize around these technologies. Doing so will entail a great deal of economic disruption, however.
Grasping at Luddite Straws
Benjamin Freidman has joined the ever growing neo-Luddite movement in America that mistakenly attributes our economic problems to too much technology and automation. This theory has now basis in the facts and is damaging to long term U.S. economic and innovation competitiveness.
Innovation Economics: How a New Theory Casts Light on an Old Problem of the Budget Deficit
The recent government shutdown and debt ceiling brinksmanship just postpones the time when the nation’s budget issues will have to be addressed. Unfortunately the “Washington consensus” on the budget, based on neoclassical economic thinking, leads to the wrong solutions. With its focus on cutting debt, rather than the debt-to-GDP ratio, and its overriding mantra that “everything should be on the table,” this mantra, being promoted by groups such as Simpson-Bowles, Domenci-Rivlin, The Concord Coalition, and the Committee for a Responsible Federal Budget, is generating budget solutions that will lead to less, not more U.S. growth.
It is time for a budget debate that is based on a new approach to economics – innovation economics – that focuses on maximizing innovation and long-term growth. This report argues that any budget solution must set a goal of improving the debt-to-GDP ratio as opposed to simply cutting the debt. It also needs to actually increase public investment and cut corporate taxes to drive growth, even though in the short run these steps will increase the budget deficit. These policies will be much more effective at spurring growth and U.S. competitiveness, which is what the ultimate goal of any economic policy, including budget policy, should be. Moreover, by spurring growth, these policies will help cut the debt-to-GDP ratio, a more accurate measure of the government’s fiscal condition.
Effective Innovation Policies and Institutions Continue to Help Drive Success of Nordic Economies
Denmark, Finland, and Sweden are three of the world's most competitive and innovative economies, as speakers commented at an ITIF event on Nordic Innovation: What Can America Learn from the Scandinavian Innovation Ecosystem. The recent success of the Nordic economies is a result of several factors that the United States can learn from, including: a strong bipartisan consensus regarding the importance of federal investment in education, scientific research, and innovation; well-organized national innovation systems that benefit from formally articulated national innovation strategies (Finland’s, Sweden’s, Denmark’s) and well-funded national innovation agencies; and fundamental reforms undertaken in these economies over the past two decades that have made their tax structures more globally competitive, markets more competition-based, federal budgets better balanced, and workers greater skilled.
The Department of Commerce Should Establish an Office of Data Innovation
While President Obama has signed an historic executive order on open data and various government agencies have begun to promote data-driven innovation within their communities, such as the successful Health Datapalooza, there is still no federal government agency responsible for developing and implementing a national strategy to promote data-driven innovation across all sectors of the economy. To help fill this void, the Department of Commerce should establish an Office of Data Innovation.
Winning With Innovation-Based Economic Development
Robert Atkinson presented "Winning With Innovation-Based Economic Development" to the North Carolina Association of County Comissioners. His presentation touched on getting the economic development principles right and ensuring that the region's competitive future rests on innovation and entrepreneurship.