Good and bad effects of innovation ; Halocaust, effects of productivity on jobs, creative destruction and what it is and what it does,;
A extreme focus on constant change and creativity and innovation can produce too much disruption that people, firms, governments, and even industry can digest. Absorbion of change is one thing, but constant change never takes time to absorb. One can eat a pizza one slice at a time but can we actually tinker with the system to produce a digestable amount of innovation and not too much. How if technological change and innovation takes generations to really diffuse and once let out of the bottle cannot really be put back in. The jelling of change will occur after the innovator is dead and gone; the inventor is seldom ever remembered. All this combined with the reality that bad change will occur simultaneously with good change and there is no guarantee one will balance each other out.
All this primacy of economics makes one wonder if culture will strike back. Digestion of economic change, demographic and cultural reaction, followed by political revolution is not a silly thought=history. Productivity can create a permanent underclass and how do we expect most of any society to be creative, well educated, etc. People wise, some will compete and probably most will fail. In a society of constant change, the liklihood of personal failure is high–and that has consequences.
The Curmudgeon Speaketh
And finally, the reader knows it was coming, what are the Curmudgeon’s warblings regarding growth and innovation economics? From a more practical, non economist, but local economic development perspective, the Curmudgeon offers the following concerns and observations:
1. Innovation economics, in current usage, has become an ivory tower buzz-policy. As such, innovation and knowledge based literature is a mélange of very generalized, broad policy prescriptions which often fail to discern or even concern itself with the logical question of which types of innovation initiatives produce the most significant results. That is to say, what actually has worked? For instance, is technology commercialization preferable to basic research? The academic theoretical answer is both, but offers no proof. And, if you can’t do both with existing resources which of the two policy options has the greater potential impact. How does one measure these impacts?
2. The lack of policy specificity and evaluation has led to a laundry list of academically created curriculum in innovation, entrepreneurship etc. (taught, of course, by tenured academics). Growth economics calls for government and educational institutions to teach what the Curmudgeon believes is the unteachable and ignores what the Curmudgeon thinks have been significant catalysts for past innovation: necessity (as in the mother of invention), adventure, laziness and greed. Innovation policy and economics is pure rationality at its best; innovation and entrepreneurship curricula ignore the non rational, idealist elements of life and simply assume that “you too can be an entrepreneur” and “everybody can be an innovator”. Garrison Keiler said it best when he described his hometown as a place where “everyone is above average”—so too with entrepreneurism and innovation.
3. Innovation and knowledge based policy is inherently broad brush, macro-economic, long term, aggregate level policy. Can innovation economics and policy be relevant to sub-state policy-makers (with the obvious exception of universities and schools)? How can macro-policy initiatives bridge a cultural gap to include local sub-state economic development whose policy characteristics are instinctively silo-specific, micro-programmatic, short term, decentralized and heavily politically impacted? Not surprisingly, innovation-style policies often are felt to require a new level of government in order to be successfully implemented (witness Andrew Cuomo’s recent New York regional council initiative). Regions are needed to isolate innovation initiatives from these cannibals of progress, knowledge and innovation who dwell below.
4. Is government up to the task? The expanded role of government inherent in innovation economics belies American government’s complexity and its inherent limitations. Also, the inconsistency ,if not illogical, of innovation economics is self-evident in that a theoretical approach which is fundamentally rational, anti political and anti emotional, turns to government which (duh!) without question is based on politics, emotion and a variety of unpredictable monetary and institutional pulls and pushes. Indeed, many students of American governmental and political history might suggest that much of American public policy results less in “opening” opportunities and increasing competitiveness than “closing” or restricting opportunities and decreasing competitiveness through iron triangles (interest group and campaign funding-based policy-making), tax loopholes, Congressional sub-committee silos, and earmarks. To teach skills, select occupations and future growth technologies and sectors government gets into the business of picking winners. Why is government better at picking winners than the market? Is a government bureaucracy that much better at spotting and facilitating innovation and growth than the private sector has been?
5. American government is built on compromise as we all now realize. American federalism is based on diversity of response from the fifty “laboratories of democracy” (the States). Even clusters or regional councils are likely to display divergent and competing competency in responding to innovation policy. Can American government & federalism provide the patient, coordinated structure for a broad brush, long term, consistently applied macro environment sufficient for attainment of this policy. We all read the newspaper. Is it likely that a policy consensus exists presently in the US? Is it likely our current (and future) political process can devise and agree upon a national policy for innovation and a knowledge-based economy? Even if innovation economics is all it is cracked up to be, shouldn’t we move on to policy initiatives that are more short term and approvable (not to mention implementable)?
6. Knowledge and innovation ultimately are built upon productivity and creative destruction. The question that emerges from both productivity and creative destruction is that conceding its long term benefits, can we absorb in today’s economy their short term disruptions and dislocations? At what point does a temporary transition from one career or occupation to a new gazelle-type occupation become a case study in structural unemployment? Carpenters cannot become engineers overnight and construction workers transformed into entrepreneurs very easily. Is there sufficient short term job creation generated by innovation and knowledge-based initiations to provide a boost to current unemployment? Recent BLS data on the wireless industry, for instance, suggest a negative relationship between productivity and job creation in even the most dynamic of wireless gazelles.
The notion, implied throughout growth economics is creative destruction, new gazelles replacing older, tired gazelles. Creative destruction is central to the Curmudgeon’s concluding comments on growth/innovation/knowledge-based economic approach. Growth economics stress the long term transformative innovation and knowledge-based economy. But in the short term it is similar to watching sausage being made (as the recent debt ceiling politics has been described). The shift from dying gazelles to new gazelles, as far as growth economics is concerned, is as simple as a workforce training program, an entrepreneur seminar, or moving to where the jobs are. Life, and people, is not that simple. Growth economics says little about decline, structural unemployment, and people frozen in their mortgage-underwater homes. It says nothing about dying clusters and collapsed regional economies. To the state and local economic development director and planner, the demand is for more immediate solutions which do not ignore human frailty, inequality, voter unrest and broken households. Certainly, an important component of future policy ought to address our fragile educational system (even through its restored effectiveness will not become apparent for probably several decades), but the shift to a growth economy ought to also consider those who need immediate assistance, jobs quickly.
This innovation economics cannot do.
Ron W. Coan 