Thursday, January 27, 2011

Michael Mandel on Innovation

Michael Mandel breaks down the State of the Union's focus on technological innovation, arguing that the US should focus on areas where we already possess a big competititve advantage over the rest of the world.

I'm not really in a position to evaluate the wisdom of that position, but I do think it's worth looking at the bigger picture here. American commentators are constantly fretting that "health care spending" and "education spending" are consuming larger and larger shares of our national income. Supposedly this constitutes an "unsustainable" trajectory that will eventually bankrupt us.

However, if you look at the macroeconomic situation that's actually being described by these measures, what's happening is that the economy of the richest, most prosperous country in the world is being devoted more and more to hospitals, universities, and research facilities. It's hard to see why that's a problem; in fact it's basically what you'd expect to happen.

I personally don't see the US as facing a choice between clean energy research and biomedical research - I think we can do both and do them well. But the big problems with these things come on the production and consumption side, not the development side.

The problem with our medical system isn't that it's expensive - it's that a lot of the stuff we spend money on isn't actually useful medical care. Ditto education spending - it's not that we need to spend less money, it's that we need to address the areas of our education system that don't work very well.

Of course the most useless and wasteful spending in in government actually also happens to be the area where we pour the lion's share of our federal R&D money - military technology. The US could shift 70% of its military R&D to trying to create leprechaun unicorns and still get more out of those dollars while remaining the largest and most advanced military in the world for the foreseeable future.

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