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Archive for August, 2012

A Response to Dean Baker’s Review of Innovation Economics

A response to Dean Baker’s Huffington Post review of  Innovation Economics

Dean Baker suggests that the causes of the so-called Great Recession—itself precipitated by the mortgage bust and subsequent housing decline—are cut and dried. He traces these to beginning with the “anti-worker policies of the 80s” and continuing through Greenspan’s insistence to keep interest rates low throughout the 2000s, which contributed to the inflating of an asset bubble (housing) that subsequently burst. Today, Baker’s prescription is to throw trillions more of stimulus at the economy (because the initial almost $1 trillion wasn’t enough) to get the economic ship of state straightened.

In essence, what Baker, reflecting the classical Keynesian perspective, proposes is a massive adrenaline shot to the heart to get the economy pumping again. But the point ITIF’s book, Innovation Economics: The Race for Global Advantage, makes is that the constant resort to shots to the heart—whether Greenspan’s low rates or Baker’s stimulus (which are really just different sides of the same coin, artificially pumping up the economy)—miss the underlying problem and solution: the need to strengthen the heart muscle; that is, the competitiveness, innovation, and productivity capacity

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Basic Research the Wrong Focus for ARPA-E

The Advanced Research Projects Agency-Energy (ARPA-E) has enjoyed bipartisan support since its inception, with members of Congress from both parties appearing at this year’s Energy Innovation Summit to laud its achievements. The agency’s reputation is such that a 2010 report by scholars from the American Enterprise Institute, the Breakthrough Institute, and the Brookings Institution entitled Post-Partisan Power called for its annual budget to be increased to $1.5 billion. (Congress appropriated $275 million for the agency for fiscal year 2012). Yet there has been a troubling trend as an increasing number of policymakers and advocates are calling for ARPA-E’s mission to be redirected to focus solely on basic research – exploration of fundamental principles with no regard for commercial applications. A move in that direction, however, would completely misunderstand the role the agency is meant to play in the energy innovation cycle and would be a serious mistake.

Last year, Congressman James Sensenbrenner (R-WI) accused the Obama Administration of shifting the Department of Energy’s focus from basic research to “later-stage technology development and commercialization efforts,” an approach that he panned as “picking winners and losers.” It was thus unsurprising when

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Inconvenient Reality: The Government Role in the Shale Gas Revolution

A recent blog post by the American Enterprise Institute’s (AEI) Mark Perry insists on solely crediting “market forces” for the shale gas revolution. Perry continues to push a false narrative that the market alone developed and deployed the technologies used today to extract shale natural gas, which has resulted in dirt-cheap prices and natural gas industry growth – natural gas is now tied with coal as America’s top source of electricity. It follows a similar piece earlier this year by AEI’s Steven Hayward that characterized the shale gas revolution as occurring “away from the greedy grasp of Washington,” thus completely overlooking any government role whatsoever. “If the political class had known this was going on,” he declares, “surely Washington would have done something to slow it up, tax it more, or stop it altogether.” In reality, the government deserves ample credit for not only developing the next generation natural gas technologies used today but also for partnering with industry to accelerate deployment of those technologies to market.

Oakland-based think-tank the Breakthrough Institute conducted an investigation that sheds light on the extent to which the government helped foster technology innovation in

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Full Speed Ahead for Verizon and Cable

The Justice Department has given the go-ahead to a very interesting transaction between Verizon Wireless and the cable companies, with certain conditions. The government’s review followed the template we suggested in the comments we filed with the FCC in February, where the spectrum transaction and the other arrangements were evaluated separately. While the FCC is tasked with reviewing the spectrum transaction, the commercial arrangement was examined by Justice. Commentary by left interest groups focuses on the resale agreements between Verizon Wireless and the cable companies and ignores the much more interesting joint venture to develop intellectual property. This is a strange omission because the joint venture (“JOE LLC”) figures very prominently in the DoJ review, with its own set of conditions attached.

The long and short of the transaction is:

  • Verizon will be allowed to purchase the licenses to 20 MHz of nice AWS spectrum currently held by the cable companies, except in markets where Verizon seems to be well provisioned for the time being and T-Mobile is less well provisioned; in these cases, T-Mobile will gain licenses.
  • Cable and Verizon Wireless will be able to resell and bundle
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A Promising Government Program Launches Down Under

The Advanced Research Projects Agency-Energy (ARPA-E) is the subject of numerous ITIF blog posts – including a series on the Energy Innovation Summit hosted by the agency this year – and a report, A Model for Innovation: ARPA-E Merits Full Funding. It has been consistently held up as a clean energy policy success due to its focus on transformational energy technology research and development; “Pound for pound, dollar for dollar,” FedEx chairman and CEO Fred Smith has remarked, “it’s hard to find a more effective thing the government has done than ARPA–E.” But the agency now has company with the launching of the Australian Renewable Energy Agency (ARENA).

“ARENA’s mission,” the chairman of its board, Greg Bourne, notes, “is to drive innovation in renewable energy technologies and thereby improve the competitiveness of renewable energy in Australia and increase its role in our energy mix.” The agency was created last year through the consolidation of multiple government clean energy initiatives, a move that received support from across the political spectrum. It began operations in July of this year and is overseen by a board

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Innovation Economic Consensus Versus Washington Economic Consensus

Wondering why the economic recovery has been so sluggish? We need to shift from the Washington Economic Consensus to the Innovation Economic Consensus. Here is a preview of both of these opinions, as laid out in the forthcoming book, Innovation Economics: The Race for Global Advantage: ... Read the rest

MCX Announcement Highlights Growing U.S. Interest in NFC-Based Mobile Payments

The announcement today that more than a dozen retailers have announced plans to create a mobile-payments system called Merchant Customer Exchange (MCX) highlights the growing interest in near-field communications (NFC)-based mobile payment solutions in the United States, a field in which the United States has trailed several Asian countries. The competition this will create with Isis—a mobile-payments solution being developed by AT&T Mobility, T-Mobile USA, and Verizon—Google Wallet, Square, and others will drive innovation and growth in the nascent industry while encouraging competitors to develop solutions delivering maximum value for consumers. However, as ITIF notes in Explaining International Leadership in Contactless Mobile Payments, it remains important for policymakers to support the development of interoperable NFC standards so that these solutions can work across a wide array of mobile devices and point of sale systems. Moreover, any successful mobile wallet system should be able to do more than simply handle payments; it should be fully functional, storing identification/authentication credentials and/or key codes, thus enabling customers to check into hotels, movie theatres, schools, gyms, etc. using their mobile device.

One Step Closer to Game-Changing Electric Vehicle Batteries

Envia Systems’ breakthrough battery is one step closer to commercialization after a public vote of confidence last week from the CEO of General Motors (GM), Dan Akerson. ITIF has previously blogged about the battery, which performed at an energy density of 378-418 watt-hours per kilogram (Wh/kg) in independent tests. In contrast, conventional electric vehicle batteries possess substantially lower densities – the battery of the high-end Tesla roadster, for example, has an energy density of 121 Wh/kg, while the Nissan Leaf’s is 79 Wh/kg. GM is conducting further tests on the battery, but its CEO expressed hope that it could be installed in an electric vehicle in just two to four years. “These little companies come out of nowhere, and they surprise you,” Akerson remarked in regard to Envia. “I think we’ve got better than a 50-50 chance to develop a car that will go to 200 miles on a charge. That would be a game changer.”

Envia and its battery did not come out of nowhere, of course – they were in large part the product of a supportive energy innovation ecosystem. As related in a previous blog post,

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Tariffs Well-Justified in Fighting Green Mercantilism

In May, the Department of Commerce moved to impose “anti-dumping” tariffs on heavily subsidized Chinese solar PV manufacturers. Now comes the news that the Department has reached a similar decision on Chinese wind-energy tower manufacturers and a group of 20 or so European solar panel manufacturers has filed a formal complaint with the European Commission, the European Union’s lead trade body, accusing Chinese solar manufacturers of dumping their products in the EU at prices below cost as well. The group, led by Germany-based SolarWorld (the same company that spearheaded the anti-dumping trade claim against China in the U.S.), is seeking retaliatory tariffs as a result. These developments have sparked concerns over a potential trade war between the U.S. and Europe and China. But tariffs are well-justified in fighting green mercantilism and, by encouraging innovation, could be greatly beneficial to the clean energy industry in the long-term.

The Wall Street Journal notes that the “vast majority” of the jobs in the American solar industry are in “sales, marketing, design, installation, engineering construction and maintenance of solar projects,” jobs which benefit from cheap Chinese solar panels. As such, many solar developers and

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electronics assembly line

Admit it, I am an Offshorer and Uncle Sam Made Me Do It

In this overheated political season there is no worse thing to be accused of than an offshorer: someone who moves jobs out of America. With unemployment stubbornly stuck north of 8 percent, offshoring is seen as a convenient culprit for what ails us. The Obama campaign accuses Romney of offshoring jobs when he ran Bain capital. The Romney campaign has pushed back dubbing Obama the “outsourcer in chief” and charging that public green energy investments created jobs overseas instead of the United States. In this environment, the last thing you want to be known for is moving jobs offshore.

This is not new of course. During his 2004 presidential campaign, John Kerry called U.S. CEOs who moved jobs offshore “Benedict Arnolds.” Lou Dobbs made a good living accusing U.S. corporations of fighting a “War on the Middle Class.” Russell Shaw, a technology writer and Huffington Post blogger, even went so far as to call CEOs who move jobs offshore, “evil.” Not callous. Not greedy. Evil. More recently, Apple has been pilloried by the New York Times and others for making iPhones in China.

It is no wonder that

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