For several months the Curmudgeon has been trying to build up his courage. He knows that sooner to later he has to deal with this topic, a topic which he can\u2019t figure out how to get his fingers and his head around. No amount of bourbon seems to help. The topic frankly scares him. Why? Because everybody, but everybody, believes in it and accepts it as God\u2019s word. No one questions this topic; it is the universal solution to all problems of economic development, arguably the current most common strategy proposed by our academics, think tanks and politicians.<\/p>\n
The topic? Innovation and the Knowledge Economy.<\/p>\n
The topic scares the Curmudgeon unlike no other. Even admitting to being a serial tax abater and a defender (he prefers explainer) of tax abatement is nowhere near as fearful and dangerous as to offer an explanation and a critique of innovation and knowledge-based economics. Actually, he is not particularly concerned with critiquing the concept\/strategy. He is simply petrified about attempting to explain it. Innovation and the knowledge economy can be linked to education, invention, entrepreneurship, productivity, job training and professionalism, start ups, small business, process improvement, employment, exporting and applied to virtually any sector\u2014especially alternative and green energy, service delivery, manufacturing, agriculture, communications, internet, computer hardware, information technology, hair cutting, spa massage and teaching. Innovation and the knowledge economy are all over the place\u2014it\u2019s economic development\u2019s equivalent to taking two aspirins.<\/p>\n
Despite its pervasiveness in the economic development-related literature, innovation and the knowledge-based economy is a largely asserted without proof, commonsensical, mother and apple pie, almost off the cuff, set of almost religious \u201cbeliefs\u201d.<\/span>Despite its pervasiveness in the economic development-related literature, innovation and the knowledge-based economy is a largely asserted without proof, commonsensical, mother and apple pie, almost off the cuff, set of almost religious \u201cbeliefs\u201d. To add to the confusion, there seem to be no common body of knowledge from which the literature refers and so each individual and author, for the most part fills in, or defines, on their own which policy or initiative they wish to pursue. Finally, no one really questions whether innovation and knowledge is central to economic growth\u2014it just is so deal with it!<\/p>\n Accordingly, this is a topic which, like God, seemingly has neither beginning nor end and is omnipotent. Innovation and the knowledge economy embrace almost every program, sector, policy and concept; it seemingly excludes very little (except perhaps tax abatement) and accommodates virtually everything under the sun\u2014or in orbit around it. This concept has innumerable moving parts, and arrives without any instruction manual. The obvious problem with innovation and knowledge-based economics is a buzzword or buzz-policy, used casually with huge imprecision (like \u201cgreen\u201d and \u201csustainable\u201d)\u2013as an adjective and linked to virtually any noun. Yet what the heck is it? Can you touch it? Why is innovation and knowledge-based economy the remedy to all things unholy? Why is it a central economic development strategy for the current federal administration and for many states and communities?<\/p>\n What we see and hear in the torrent of articles, policy proposals, press releases and programs is only the tip of the iceberg\u2014beneath the surface lay a substantial body of theory and concept which, almost completely unknown to innovation and knowledge economy proponents and believers alike, constitutes a rival, or at least a plug in (or an \u201capp\u201d for a specialized purpose), to conventional market-based economics.<\/span>Innovation and the knowledge economy has been condemned to success as a buzzword, a meaningless but commonsensical and often inspiring, if obvious and self-evident, prescription for our current laundry list of problems. Governors love it; President Obama funds it; academics and think tanks trip all over themselves injecting it into every paragraph and policy proposal. It is the cornerstone buzzword of economic development. But innovation and the knowledge-based economy should be more than a policy proposal or campaign platform. Is there more depth and focus underlying this concept?<\/p>\n What we see and hear in the torrent of articles, policy proposals, press releases and programs is only the tip of the iceberg\u2014beneath the surface lay a substantial body of theory and concept which, almost completely unknown to innovation and knowledge economy proponents and believers alike, constitutes a rival, or at least a plug in (or an \u201capp\u201d for a specialized purpose), to conventional market-based economics. Innovation and knowledge-based economic theory departs in several very important ways from conventional Neo-Keynesian and Neo-Classical economic theory which are the cornerstones of current American national economic policy and its finance system. If the differences between innovation and knowledge-based economics and the two Neo\u2019s are irreconcilable, then somebody has a problem\u2014and the Curmudgeon thinks growth economics and the Two Neos can often work in cross-purposes which doesn\u2019t auger well if innovation economics is to be successfully implemented.<\/p>\n The current dialogue concerning innovation and knowledge-based economics ignores, or stores unseen in its basement, any theory of why innovation and knowledge would actually produce economic growth. The Curmudgeon contends the theory is hidden in the cellar basement of the economics profession\u2014and hence is lost to mankind.<\/span>The current dialogue concerning innovation and knowledge-based economics ignores, or stores unseen in its basement, any theory of why innovation and knowledge would actually produce economic growth. The Curmudgeon contends the theory is hidden in the cellar basement of the economics profession\u2014and hence is lost to mankind. But hidden or not, that unarticulated theory should be best support for the assertions that innovation and knowledge produce economic growth. This invisible, and little appreciated, cellar level theory has to provide the justification, indeed legitimacy for the visible, oft-visited first level tip of the iceberg.<\/p>\n But, sadly in the Curmudgeon’s opinion, few feel the need to visit the foundation level to understand better the innovation and knowledge approach, concepts and value-system. So without anyone rummaging around the basement level of innovation and knowledge-based economics, the first floor of innovation economics is reduced to being a mere buzzword, a universal adjective, lacking a meaningful central focus and often in cross hairs of the dominant economic policies of the nation.<\/p>\n So it is with mixed feelings that the Curmudgeon will offer two quite separate sets of articles. The first article-set (the present article) centers upon \u201cInnovation America: A Final Report\u201d, by Governor Janet Napolitano\/Governor Tim Pawlenty (written by Erika Fitzpatrick) from the National Governors Association (2007)\u2014but will also silently draw from \u201cCrossing the Next Regional Frontier: Information and Analytics Linking Regional Competitiveness to Investment in a Knowledge-based Economy, (2009), Purdue Center for Regional Development and the Indiana Business Research Center; Fareed Zakaria, \u201cInnovate Better\u201d, Time, June 13, 2011; \u201cHow Companies Can Stay Ahead of the S-Curve\u201d, Wall Street Journal, June 9, 2011; and the \u201cSummary of President\u2019s Council on Jobs and Competitiveness\u201d, White House, June 13, 2011.<\/p>\n The second article (Click Here) presents a brief, non mathematical summary of the theory underlying innovation economics and the knowledge-based economy. This summary relies on two books: David Warsh, \u201cKnowledge and the Wealth of Nations: A Story of Economic Discovery\u201d, W.W. Norton & Company, 2007 and Elhanan Helpman\u2019s, \u201cThe Mystery of Economic Growth\u201d, the Belknap Press of Harvard University, Cambridge,2004. The Curmudgeon urges the reader to delve into this little-known growth economics approach because he believes many proponents of innovation and the knowledge economy need to better understand how and why the innovation and knowledge approach was constructed, and how its principal concepts operate to produce a theoretical economic growth machine. They would also be well served to better appreciate the critiques of the innovation and knowledge-based growth economics and how growth economics interact with the dominant paradigmatic Neo-Classical and Neo-Keynesians economic models. The second article sounds intimidating, but trust the Curmudgeon to reduce the theory to English and to focus on only what the non-economist reader needs to know.<\/p>\n Now, let\u2019s take a gander at \u201cInnovation America\u201d, a keystone 2009 report by the National Governor\u2019s Association.<\/p>\n In 2009, the National Governor\u2019s Association published \u201cInnovation America: A Final Report\u201d as a signature initiative intended to:<\/p>\n \u2026strengthen our nation\u2019s competitive position in the global economy by improving our capacity to innovate. The goal was to give governors the tools they need to [1] improve math and science education, [2] better align post secondary education systems with state economies, and [3] develop regional innovation strategies. (P. i) (Curmudgeon injected the number system for clarification)<\/em><\/p><\/blockquote>\n Because governors deal with these and other policy realities daily, they are uniquely suited to create a unified vision for innovation in education and the economy. They can use the bully pulpit to advocate for a comprehensive innovation agenda \u2026. And as chief executives, governors can take executive action to implement the state’ innovation agenda\u2026. As leading advocates, governors are agents of change and the driving force for innovation in their states and in the national arena. (P. 4)<\/span>These three core strategies of Innovation America constituted the proposed agenda of the role of states in leading \u201cthe country as it responds to fast-moving changes in the global economy\u2026”(P. i). The report moves further and asserts the special relevance of innovation and knowledge-based economy to states and governors:<\/p>\n As governors, we know that skills and talents must be nurtured to foster growth, and we are in the best position to advocate for and effect changes that spark innovation \u2026 Governors have led the way in improving our country\u2019s position in the new knowledge-based world economy by boosting science, technology, engineering and math (STEM) standards in the early grades; making critical investments in postsecondary education; and enacting policies that combine resources, talent, institutions, and infrastructure to create strong regional economic hubs with global competitive potential. (P. iii)<\/em><\/p>\n Because governors deal with these and other policy realities daily, they are uniquely suited to create a unified vision for innovation in education and the economy. They can use the bully pulpit to advocate for a comprehensive innovation agenda \u2026 And as chief executives, governors can take executive action to implement the state’ innovation agenda \u2026 As leading advocates, governors are agents of change and the driving force for innovation in their states and in the national arena. (P. 4)<\/em><\/p>\n Innovation America defines innovation \u201cas a process by which new ideas enter the economy and change what is produced, how it is produced, and the way production itself is organized\u201d. (P.1) Indeed, \u201cinnovation is a hallmark of a successful economy, and it drives economic growth and the creation of new jobs\u201d. (P. 1).<\/em><\/p><\/blockquote>\n To the National Governors Association, state-led innovation and knowledge policy plays the critical and central role in restoring America’s lost competitiveness. The Federal role is supportive, but it is the States and the governors who can lead America out of the present day economic morass;<\/p>\n As America works to find its place in today\u2019s global economy-rooted in information technology and driven primarily by \u2018knowledge workers\u2019 and entrepreneurs \u2013 states must develop and adopt new and better institutions, products, processes, and business models\u2026 (P. 2).<\/em><\/p>\n A significant justification for the leading role of states, as opposed to the federal government is that states are the key to establishing and supporting regions \u2013 and innovation and knowledge transformations are probably best achieved through regions (and clusters) (P.2).<\/em><\/p>\n While competition is sometimes viewed as between nations, it is really between high-performing economic regions\u2026.States that effectively grasp the magnitude of the country\u2019s competitive challenges and proactively and aggressively respond can lead the way through this morass of uncertainty by adopting a comprehensive innovation agenda that combines human, intellectual, and financial capital in ways that strengthen their relative competitiveness worldwide (P. 2).<\/em><\/p><\/blockquote>\n This is all great rhetoric, which combined with a charming lack of specifics masks the report\u2019s principal, but unarticulated, fundamental assertion (this assertion is quite compatible with growth economics described in the adjoining article)that government, not the private sector, can create economic growth through programs and policies launched in and by the public sector (the States in this case). Needless to say, the role of government which the NGA Report assets implies and assumes a serious reversal of the traditional role of government vis-\u00e0-vis private enterprise.<\/p>\n Government, in this case at the states and regional levels, will initiate, fund and inject change and innovation into our private businesses through revitalized public institutions such as K-12 and higher education, community colleges, public private partnerships (often public university based or state funded) and subsidized interventions into private business decisions and activities (such as skills, exporting, entrepreneurship, marketing and process\/production efficiencies).<\/span>Essentially, the Governor\u2019s report injects state government and public\/non-profit institutions into the identification, development and implementation of new private sector technologies, occupational skills, ideas and processes (innovation). These \u201cinnovations\u201d will positively transform private production of goods and services (the internal operations of a private business) and result in economic growth. To achieve the growth, government must refocus and enhance occupational skills, target ideas and processes, and identify firms and industries which possess significant capacity to impact future growth (such as information technology, green and sustainable, life sciences, and advanced manufacturing).<\/p>\n Through government effort, America can transform our post industrial economy by refocusing on new skills, ideas, and processes, creating a knowledge-based economy, which will produce high paying, and competitive jobs and competitive firms. This government-led strategy \u201coffer(s) a means-perhaps the only means- by which a high-skill, high-wage economy can successfully compete with high-skill, lower-wage economies without reducing its standard of living\u201d. (P. 1).<\/p>\n Government, as a change-agent, is tasked to lead American private enterprise in a quest for global competitiveness. Government, in this case at the states and regional levels, will initiate, fund and inject change and innovation into our private businesses through revitalized public institutions such as K-12 and higher education, community colleges, public private partnerships (often public university based or state funded) and subsidized interventions into private business decisions and activities (such as skills, exporting, entrepreneurship, marketing and process\/production efficiencies).<\/p>\n This is not your mother\/father\u2019s traditional and orthodox American version of capitalism and it does not faithfully mirror either Neo-Keynesian or Neo-Classical economic policy. Indeed, is quite likely that Alexander Hamilton, J. S. Mills, Lord, Keynes, not to mention Feldstein, Rubin, Summers, Greenspan, or Bernanke would be discomforted (academic jargon for yell and scream), and require some sedation in regards to government in a leading and transforming role, rather than a supportive one. Perhaps surprisingly having failed to develop an industrial policy, we seem to have stumbled upon an informal national consensus around innovation and knowledge and we seem to be well on the road to implementing an unannounced and unapproved plan for our transformation into a knowledge-based economy? We shall return to this subject later in this article.<\/p>\n How are states and governors to accomplish these tasks? What tools are in their toolkits?<\/p>\n From here the report devotes an entire chapter (Chapter 3) to a list of programs and best practices which are found in the various states and which represent models for others to follow. The Curmudgeon didn’t count these programs and benchmarks, but there may be a hundred or so listed. Special emphasis is made for STEM initiatives and it is fair to observe that the overwhelming majority of these program and benchmark suggestions relate to education. It also is fair to observe that many of the programs cited were not originally created to further an innovation and knowledge based economy but rather to address a longstanding disconnect between education, students and private employment.<\/p>\nThe Tip of the Iceberg<\/h2>\n
Innovation America: A Description and Explanation<\/h2>\n
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