The Federal Trade Commission has rules about unfair and deceptive advertising. Too bad they don’t apply to academic papers, because if they did Robert Gordon would be facing an FTC inquiry. His new Cassandra-like paper, “The Demise of U.S. Economic Growth”, has little to do with U.S. economic growth. Rather it is focused on other factors like transfer payments, taxes, and income inequality. He should have titled his missive “The Demise of Robust After-Tax Income Growth for Low and Moderate Income U.S. Workers.” But that’s nowhere near as catchy as his chosen title.
Gordon’s new NBER paper restates his slow-growth forecasts from two years ago, which come in turn from his long tradition of dismissing the potential of technology to drive productivity. This time he is careful to label his more controversial “growth headwinds” (slower innovation and continued globalization) as “speculative”. Still, he fails to make a more convincing argument for an overall growth slowdown. This is partly due to his reliance on assumptions about education, inequality, and globalization, coupled with a fundamental lack of understanding of the nature of 21st century innovation. But it also … Read the rest
It was with great interest and mostly pleasure that I read Martin Baily and Barry Bosworth’s new article in the Journal of Economic Perspectives, “U.S. Manufacturing: Understanding Its Past and Its Potential Future.”
The article attempts to analyze recent trends in U.S, manufacturing performance, including output and employment. This is an area ITIF has been working on for a number of years. And in the past, Baily has been skeptical of our analysis, which claimed that U.S. manufacturing was in fact worse off than official statistics, in part because of the overstatement of computers and electronics manufacturing output. So it was with great delight, and some surprise, to see that Baily and Bosworth have now embraced this analysis. As they note, the fact that measured manufacturing output’s share of GDP has remained stable “is largely due to the spectacular performance of one subsector of manufacturing: computers and electronics.” In fact, as ITIF showed, they also show that by taking out computers, overall real manufacturing output fell from 2000 to 2011, something that is unprecedented in our almost 250-year history. They also rightly point out that the massive … Read the rest
This is the fourth and final article of a four part series chronicling highlights from my seven-city tour, Energy Innovation Across America. The first stop was a tour of Salt Lake City’s energy innovation ecosystem, which can be found here. Highlights from my tours of five Department of Energy National Labs can be found here. And my policy discussions with leaders of the Midwest energy innovation ecosystem can be found here. My goal was to meet energy innovators from across the country and bring their stories and perspectives back to Washington. For a brief introduction to the series, visithere, and for information on the Millennial Trains Project, see here.
Ask the average American about what they feel Pittsburgh, PA represents and you’ll likely hear some typical responses: Steelers football, blue-collar middle class workers, steel mills, and coal plants. If anything, Pittsburgh is considered the quintessential rust belt city – historically focused on manufacturing and industry, but one that has fallen on hard times since the 1980’s when strong foreign competition shuttered plants and stopped offering job opportunities. That’s certainly some of the images I … Read the rest
Last week, the Advanced Research Projects Agency – Energy (ARPA-E) announced support for 33 new projects aimed at developing an affordable and scalable clean energy transportation sector. The projects are the latest round of public investment from ARPA-E in high-risk, high-reward low-carbon energy innovations that could be game-changing in the fight to address climate change. The projects are notable because Washington’s current fragile budget and policy environment – a dangerous combination of sequestration, budget cuts, and an overall negative view of energy innovation – puts ARPA-E’s funding at risk for the next fiscal year.
First, let’s look at the programs. ARPA-E takes investing in new sectors of energy innovation seriously – ARPA-E’s due-diligence includes a small, but dedicated government staff, interaction with industry to understand emerging research problems, and a constant influx of new program managers. Program managers are brought in on three year temporary terms to carry out their investments. ARPA-E’s Deputy Director Cheryl Martin explained this is important because the “three year cycle doesn’t allow us to drink our own cool-aide.” In other words, it prevents stagnation of investments and allows for fresh approaches to energy innovation.
The … Read the rest
Global competition in export credit financing remains increasingly formidable, with foreign competitors enjoying substantial support from their countries’ export credit agencies, as ITIF originally wrote in Understanding the Importance of Export Credit Financing to U.S. Competitiveness. The United States’ Export-Import Bank (Ex-Im Bank) fills an important role in leveling the playing field for U.S. exporters by matching credit support that other nations provide to their exporters, thus preventing foreign exporters from enjoying undue advantage. This ensures that U.S. exporters are able to compete against foreign competitors based on the quality and price of their products and services, and not loose sales because a foreign government has helped a foreign competitor by providing superior financing terms to a potential buyer.
Unfortunately, the 2012 Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the United States underscores just how much more other countries—and principally America’s top economic competitors in Europe and Asia—are investing in export credit financing, both as a share of GDP and—in China’s and Korea’s case—even current dollars.
In fact, in 2012, Korea, India, China, France, Germany, and Italy all invested more in new … Read the rest
The current issue of the New York Review of Books features an article by Harvard economist Benjamin Friedman, “Brave New Capitalists’ Paradise’: The Jobs?” which is yet another reminder why we should not let economists make economic policy.
Freidman starts off by rightly pointing to the period from after WWII to the early 1970s as a golden era of low unemployment and high median income growth. He then rightly points to slower income growth over the last 20 years. His solution: less technology and lower productivity.
For Freidman has joined the ever growing neo-Luddite movement in America that mistakenly attributes our economic problems to too much technology and automation. He writes, “New technology that enhances the productivity of labor… means less labor input is needed to produce what was made before.” So far so good. But he goes on to write that “increasingly over the last quarter century, the balance [of less labor for existing goods plus more labor for new goods] indeed appears to have shifted [toward less labor].”
Why? Because “the pace of labor saving technological change has accelerated.” Okay, let’s stop here. First, of all productivity growth … Read the rest
Evidence of technological change is all around us—smartphones, self-driving cars, amazing drug discoveries, and even drone warfare. With all of this novelty many futurists and other pundits breathlessly proclaim that technological change is speeding up. In fact, some go so far as to claim that the pace of innovation is not only accelerating, it is accelerating exponentially (which, anyone with a rudimentary understanding of exponents can see, is utter nonsense). Peter Diamandis, author of Abundance: The Future Is Better Than You Think, argues that “Within a generation, we will be able to provide goods and services, once reserved for the wealthy few, to any and all who need them. Or desire them.”
But is the rate of technological change really getting faster? Other commentators, including some notable academic economists, actually think the opposite—that we have run out of the “easy” technological advances and new breakthroughs will take much more work.
Questions about the rate of technological change may seem trivial—will I get one hoverboard or two?—but getting a handle on an answer is critical because in economic terms, technological change equals economic growth. And growth has powerful implications for … Read the rest
Making Innovation Part of Climate Hawks Policy Pitch
In a previous article I argued that climate policy advocates should make energy innovation part of their policy elevator pitch. A good opportunity to start is now available through the debate on reforming and re-authorizing the America COMPETES Act.
Within the climate advocacy community there are those that argue for aggressive clean energy innovation policy (such as myself) and those that argue for aggressive deployment of existing clean energy technologies (such as Center for American Progress’s Joe Romm and 350.org’s Bill McKibben). Each provides different policy emphasis and nuance. Today, deployment policies receive higher priority, reflected in it dominating the narrative among advocates as well as dominating the portfolio of U.S. public investments in clean energy. As a result, conflict occurs over what policy changes should be made.
As Grist’s Dave Roberts argues (correctly to a degree), both “camps” agree on a lot and everyone should aggressively work for clean energy to be a national priority to “lift all boats,”—both innovation and deployment of today’s technologies alike. How then should this consensus be reflected in our pitches to policymakers?
In my … Read the rest
The Smart Manufacturing Coalition recently conducted a survey of Americans to get their views of whether modernizing factories with advanced technology and automation was a good or bad thing for the economy.
Amazingly, nearly two-thirds of respondents said it either made no difference or actually hurt the economy. Half of those making $35K to $50K actually said it has hurt the economy.
Wow, have these people not taken economics? Do they want to go back to farms with mules and factories with hand files? Have they not read the newspapers about how our manufacturing sector has been decimated by overseas competition?
Well wait, they probably have not read those newspaper articles, not because most people no longer see that they have a civic responsibility to read the news, but because by and large, the media doesn’t write these stories. Rather, they almost always write that when it comes to explaining the decimation of U.S. manufacturing jobs, the cause is automation. In fact, as ITIF and others have shown, the loss of U.S. global competitiveness has accounted for over half of manufacturing job loss over the last decade.
I suppose … Read the rest
President Obama released his long-awaited FY2014 budget request and while it’s unlikely the budget will be taken up by Congress in its entirety, it remains an important document. Namely, the proposal is significant because it steadfastly argues that America can continue to support next-generation industries like clean energy. In fact, the President’s proposal budgets for a number of high-profile, high-impact programs, including those aimed at growing the domestic clean energy manufacturing sector, reduce transportation fuel use, and calls on Congress to fund a new Energy Innovation Hub to transform the electricity grid.
Across the board, the FY2014 request boosts key energy innovation offices at DOE by about 15 percent compared to the FY2013 Continuing Resolution and seven percent higher than the President’s FY2013 request. The lion’s share of budget gains are aimed at the Office of Energy Efficiency and Renewable Energy (EERE), which would see a budget increase of 54 percent from FY2013 CR levels, and at the Advanced Research Projects Agency-Energy (ARPA-E), which would see a budget increase of 46 percent.
Expanding Research Capabilities in Advanced Energy Manufacturing
The largest budget increase target at EERE – 22 percent to … Read the rest