Who Invests in the High-Tech Knowledge Base?


A nation must accumulate a high-tech knowledge base to prosper.  In this paper, we provide a historical perspective on the interaction of household families, government agencies, and business enterprises, or what we call “the investment triad”, in providing a foundation for the accumulation of a high-tech knowledge base in the United States. Households and governments interact by making investments in education. Governments and businesses interact in the development of the high-tech knowledge base by investing in research and development. Businesses and households interact to invest in the knowledge base through the employment relation. Read more

Mariana Mazzucato's TED Talk: Government — Investor, Risk-taker, Innovator

Why doesn’t the government just get out of the way and let the private sector -- the “real revolutionaries” -- innovate?

The Two Innovation Economies

Originally posted on Project Syndicate

HONG KONG – For 250 years, technological innovation has driven economic development. But the economics of innovation are very different for those at the frontier versus those who are followers striving to catch up. Read more

FT Names INET Co-founder Janeway's Book One of the Best of 2012

As the year comes to a close, the Financial Times released its annual list of the Best Books of the year. And right at the top was INET co-founder William H. Janeway's new book Doing Capitalism in the Innovation Economy, which the FT named one of the the best economics books of 2012.  Read more

Division of labour was common knowledge by the 1770s

I always think of Adam Smith when I hear the term 'division of labour' - but I'm being cured of this by reading a bit more about Britains late 18th century in Jenny Uglow's The Lunar Men. A very good read on industrialists and doctors, it remarks on Matthew Boulton's (think steam engine / manufacturing) explanation to Lord Warwick (in 1773) that it is ithe seperation of processes which allow British manufacturers to compete with continental Europe. So Adam Smith's comments were not so much brilliant discovery, but rather explanation of well established fact: Read more

Manufacturing jobs will disappear - no matter where you are

just as the agricultural share of employment has fallen from 40% in the 1920s to less than 2% of the workforce in Europe today, manufacturing's share of employment will fall to less than 5% of employment. That is not jyst for Europe, according to Adair Turner's excellent dinner speech, but that is across the world. He has pointed out that it is not an issue of international transfer of jobs (although it dominates headlines) but it is because of innovation which makes the productivity of (manufacturing) labour increasinglty higher. As that happens, less and less labour input will be needed to prodcue the tangile products we need - hey, even China's manufacturing workforce has been falling for a decade - and the logical conclusion of such a tendency is that we won't need as much labour. Read more

Alexander Field: A Great Leap Forward - Productivity Growth During the Great Depression

Alexander Field offers a new take on postwar prosperity in the United States. While public spending during the Second World War is often credited with laying the foundation for postwar growth, Field suggests this foundation had long been laid. In this INET interview with Rob Johnson he says productive capacity increased tremendously in the years preceding the war, and that fact – not the war spending – provided the basis for prosperity and productivity improvements in the 1950s and 1960s. Read more

Diego Comin – Why New Technologies Do Not Make Poor Countries Rich

Over the past two hundred years, poor countries have become faster at adopting the technologies of rich countries. So why is it, the economist asks, that poor countries have remained poor, by and large? The answer, Diego Comin says, is that poor countries use technologies less intensely: fewer people use less advanced computers less often. To find out why – finance, institutions, geography? – Diego amasses data to measure the diffusion of technologies over two centuries. Compiling a big data set to study the drivers of technology adoption – this is new economic thinking.

William Lazonick - How Government Helps, and Wall Street Hurts, the Innovative Enterprise

About the Interview

Innovation drives economic growth and welfare, and the industrial corporation drives innovation, says William Lazonick. But just how do corporations innovate? The key idea is commitment. People with knowledge of and experience in particular industries commit to a business model that ventures into unknown territory. The main problem is that modern financiers are not prepared to support commitment, and the modern executive pushes for stock buy-backs -- that is how Wall Street undermines innovation. Understanding how organization drives innovation -- this is new economic thinking. Read more