Brainstorming the Future of the Economy

by Dave Schuler on July 7, 2011

After my last discouraging post on the bleak politics of fiscal policy, I thought I’d attempt something a bit cheerier. Why don’t we try to brainstorm some ideas for making things better?

As a bit of an introduction (or small digression) the other day I read a post from a woman whom I gather was laid off from a researcher’s job in biotechnology. Politically, she seems a bit left of center. In her post she bitterly declaimed that the problems with the economy weren’t structural, it was just a question of greedy, ignorant managers trying to squeeze the last dollar out the enterprises they manage by off-shoring anything that could possibly be off-shored (not to mention some things that can’t). Far be it from me to defend greedy, ignorant managers (I work with them every day) but what she was complaining about are structural problems.

As I’ve repeated here far too frequently, I believe we have structural economic problems that limiting the time horizon you’re considering to just the last ten years obscures. I think our problems go back much farther and, unless you believe that bubbles of historic proportions are somehow normal, economic growth and its adjunct, employment growth, have been more phlegmatic than they should have been and should be going into the future.

Getting beyond the ideological wrangling and the obvious exceptional issues with our healthcare and financial systems, what should we be doing?

1. Cheap energy

I think that the discussion of energy over the last 30 years but over the last five or six years in particular has been too claustrophobic. The objective, as some have put it, should be energy that is too cheap to meter rather than figuring out how to get by with a lot less energy.

My preference in this area is for small thorium-based fission reactors. These get around many of the security and safety issues posed by yesterday’s reactors. If there’s one area in which I’d like to see an “X Prize”-type contest this is it. However, they’re not the only alternative.

There are other things that go right along with cheap energy including a more capacious, flexible, and resilient power distribution system. With cheap energy all sorts of things become possible; without it I honestly don’t see a particularly bright future.

2. Advanced fabrication techniques

This includes fab labs, 3D digital printing, desktop manufacturing and a host of related activities. If you’re concerned about competing with the Chinese on price, zero labor costs sounds like a pretty good way to do it. This technology will induce a radical reorganization of manufacturing away from dull, boring, mindless, repetitive activities and grant a premium to design.

3. More agriculture and a greater variety of crops

I know that this may seem counter-intuitive but I think there’s a lot of potential for increasing our agricultural production and agricultural exports. Did you know that the Netherlands is the third largest agricultural exporter? Me, neither. If the Netherlands can be an agricultural exporting powerhouse, we can certainly produce a lot more. Heck, we’re twenty times the size of France and we only export twice as much.

The greater variety seems obvious to me. Our policy has been far too focused on a handful of crops for the last eighty years. One of the effects of that policy (beside the environmental effects) is to grant dominance to a handful of mega-corporations.

4. Inexpensive, effective, rigorous higher education

I’m open to other suggestions. Let’s hear your ideas.

{ 24 comments… read them below or add one }

john personna July 7, 2011 at 11:05 am

For 4 we need a system that leverages Cognitive Surplus.

Even knowing that there is a surplus changes the equation.

Icepick July 7, 2011 at 11:23 am

Points one and two sound like they’re right out of one of the Tofflers’ books.

Heck, we’re twenty times the size of France and we only export twice as much.

How much larger than France are we in terms of arable land? One site (I let people look for their own crappy internet resources – I got mine) suggests that the US only has about 9.5 times the arable land of France. So we’re only half as bad as you think we are!

Dave Schuler July 7, 2011 at 11:25 am

So we’re only half as bad as you think we are!

That’s where the example of the Netherlands comes in. It’s not just land but how you use it. IMO water is more important than land.

Icepick July 7, 2011 at 11:34 am

Cognitive surplus – that’s funny. We have the cognitive surplus for LOLcatz but not enough people with science and engineering degrees, correct? Do we really have a cognitive surplus, or have we just misallocated our cognitive resources, as we have our economic resources by pouring money into housing for the last several decades?

I saw something on CNBC the other day. Some CEO was complaining that he couldn’t get the employees with the right kind of education to work for his company. He specifically cited the need for aerospace engineers. He mentioned that he couldn’t get any in St. Augustine Florida. I wondered what the Hell he was talking about, as I have met three separate aerospace engineers who have been laid-off from the space program in the last six months, and there have to be many more available. Then he dropped the kicker – he wanted to import more from China and India through the VISA program. (I forget the nake of it.) His problem isn’t that he can’t find aerospace engineers, it’s that he can’t find aerospace engineers that will happily work for the cut-rate wages he wants to offer, I imagine. (I’m sure he, like most other CEOs, hasn’t cut his own pay.It’s all ab out talent retention, dontchaknow?)

So, do out-of-work aerospace engineers count as cognitive surplus? If so, why do we need to train more of them?

john personna July 7, 2011 at 11:45 am

Cognitive surplus – that’s funny. We have the cognitive surplus for LOLcatz but not enough people with science and engineering degrees, correct? Do we really have a cognitive surplus, or have we just misallocated our cognitive resources, as we have our economic resources by pouring money into housing for the last several decades?

There is a mixed bag for return on cognitive surplus. In certain segments, people “just do it” and prosper. There is a lot of web-innovation that’s done off the cuff.

But when everyone floods a niche with free effort, it has opposite effect. What did Wikipedia do to Encarta sales?

FWIW, much of Dave’s #2 is being shaped by a cognitive surplus crowd (example: Makerbot)

john personna July 7, 2011 at 11:46 am

See also thingverse

Icepick July 7, 2011 at 11:51 am

That’s where the example of the Netherlands comes in. It’s not just land but how you use it. IMO water is more important than land.

That’s the true kicker, isn’t it? I saw a story a few months ago about the vast Oglalla aquifer under the center of the country. That is starting to empty out, and in a few decades will be a real problem. (There’s a fun bit that goes with this – thanks to Texan law, T. Boone Pickens is set to become a water baron, and may well run the whole damned thing dry (if he lives long enough) to make a few more billions. This would be a fun topic for discussion amongst the libertarians, Republicans and Democratic shills that inhabit the comment sections.)

A couple of years ago I drove through the Central Valley in California. At the time it actually looked much worse than the Mojave, on the other side of the mountains. For a variety of reasons, the pols had basically turned off the spigot, and the valley was dead dead dead. (Another fun topc for the same group of people.)

The Florida aquifers have been hit by millions and millions of people insisting on watering their lawns, not to mention all the golf courses.

So if water is the most important element, we can never match the Netherlands in per acre production. And indeed, it is another area in which we may well fall victim to long-term mismanagement by the idiots in charge.

Maxwell James July 7, 2011 at 1:30 pm

Completely agree on all of these Dave. On energy, I think we should be prioritizing next-gen nuclear much more than is likely, especially after Fukushima. That plus solar could form an efficient energy backbone in a couple of decades.

On agriculture, yes yes yes. Everyone makes a big deal about the conflict between organic production and biotech, but IMO both are good developments that should be promoted even more. The more diversity in our food system the better, both in terms of environment and markets.

I want to note that the Netherlands relies heavily on greenhouse systems, which tend to be much more water-efficient (and land-efficient) than other production methods.

http://en.wikipedia.org/wiki/Greenhouse#The_Netherlands

What they’re not is capital-efficient, although there are plenty of ways to make up for that through crop selection and packaging. IMO there’s a lot of potential for increasing greenhouse development, especially through suburban zoning codes.

PD Shaw July 7, 2011 at 1:34 pm

Its noteworth that the Netherlands isn’t necessarily exporting a lot of stuff; it’s exporting a high value of stuff measured in dollars. That can relate to good decisions on what to grow, such as apparently tulips (will they ever learn?) . A quick google suggests that Netherlands takes in less farm subsidies than other EU countries; I don’t know if it’s less than in the US, but it doesn’t appear that the Netherlands prefers about 4 or 5 crops to subsidize like the U.S., but the subsidies are spread all over. That probably promotes crop selection for the greatest value; instead of encourating as many countries do, crops that will enhance food independence or some preferred landed class.

The Netherlands is in a good location near a number of wealthy countries in the same trade zone. I think increasing U.S. exports would depend more on reducing protectionism within our trade zone and economic development in Latin America.

Icepick July 7, 2011 at 2:21 pm

What you are missing is a point 0. None of these ideas can possibly be implemented unless the country has a leadership class that actually wants to AND can do so. And that’s probably not happening unless you get a better electorate. (Call that point -1 if you like.)

Sam July 7, 2011 at 2:25 pm

If there’s one area in which I’d like to see an “X Prize”-type contest this is it

Right now we have 13 billion+ per year in energy subsidies. We also have a lack of investment problem. I propose the government give the next 10 years of those subsidies to the inventor of the next great energy source (after they invent it of course). Set a target of 1/xth cost of the current natural gas plant (the current cheapest I believe) in terms of capital / fuel / distribution / externalities etc. Th final prize winning design may not be patented.

In one stroke of a pen we’ll have tons of investment. At best we’ll hit the target, have cheap energy and get to end energy subsidies, at worst we’ll have jobs and a lot of good viable alternatives for energy – without the government picking winners.

TangoMan July 7, 2011 at 3:10 pm

economic growth and its adjunct, employment growth, have been more phlegmatic than they should have been and should be going into the future.

Getting beyond the ideological wrangling and the obvious exceptional issues with our healthcare and financial systems, what should we be doing?

Economic and employment growth are functions of other factors in our society so to get the needle moving in the desired direction and with the desired velocity of growth we need to address the factors that influence economic and employment growth. Every policy maker and shaper restricts their focus to the traditional levers and they’re no longer as effective as they once were. The completely ignored levers are probably key factors now when they were of more negligible influence back in the day. When our economy a.) relied on industrial might and b.) when most of the world couldn’t match out institutional infrastructure, then the quality of our human capital didn’t matter so much for the other effects overshadowed the influence of human capital on economic and employment growth. Today both factors a and b are not so dominant for more of our national wealth is generated through activities which rely on more than brawn or industrial might and yet our policies encourage the importation of people with low skill and intelligence levels.

Secondly, national identity is being weakened and this gives cover to CEOs to prefer the importation of guest workers in the aerospace engineering field while American aerospace engineers are jobless. This is a cultural issue which overlaps into law. In days past the CEO would identify more with American workers than with the imported foreign guest workers. He wouldn’t have entertained the notion of agitating for the law to allow him to import workers for that would have been a shameful and unpatriotic act.

The ethos of internationalism enables the growth of dysfunctional (from the perspective of national interest) policies like guest workers and open borders.

The chickens are coming home to roost. The effects of this worldview are now strong enough that they have influence on national outcomes that match and may in fact overwhelm the traditional factors that influence economic and employment growth.

Dave Schuler July 7, 2011 at 3:18 pm

Nonetheless I believe it is better to light one candle than to curse the darkness. That’s why I’m suggesting a few candles that we might light.

Icepick July 7, 2011 at 3:51 pm

Nonetheless I believe it is better to light one candle than to curse the darkness. That’s why I’m suggesting a few candles that we might light.

Yeah, but the problem is you are trying to light candles out in the open as the wind is picking up. Gale force winds will be here really soon, and then what good are the damned candles anyway?

I’m going to drop the analogy now. (Simile? Something else? I never bother to keep those terms straight.) The problem is this: You can’t do points 1, 3 or 4 without the approval and active participation of the nation’s elites. And doing 1, 3 or 4 are all expressly NOT in the interests of the current elite class running the country. Each would require the upsetting of old entrenched power structures, and that is who the elite are, for the most part. Immelt and Pickens might like to discuss “alternate energy”, but when it comes down to it Immelt is mostly interested in getting government contracts, and Pickens will make more off oil and water (thanks to insanely stupid Texas laws) than off wind farms.

Government is firmly entrenched with ag-subsidies, utilities and education. Changing those institutions requires a lot of people loosing their jobs, and I don’t see how that happens with the current leadership class. Yes, I realize that the ideas mentioned above would also create jobs, but it is unlikely that the losers in one area would become the winners in the new and improved areas. Not only do those folks represent constituencies, they represent powerful constituencies that have inordinate influence on who gets put in charge of the political arm of society.

I just don’t see how you expect any fundamental change when we have few if any advocates for true fundamental change in the country’s elite.

john personna July 8, 2011 at 4:40 am

For a fuller treatment,

1. My gut says “dream.” There is too much of a world market, with too many independent players, for anyone to be leaving cheap energy on the table.

2. It’s happening, but it’s not a sure deal that it will lead to employment gains. It depends on a cultural choice, whether a greater variety of things means that we should own more things.

3. This one has genuine government and policy potential, though I’d prefer just to remove subsidies and see what happens. The comparative advantage may still tip the other way. There may be large portions of Kansas that should be fallow.

4. Needs serious reinvention. Christensen seems to be saying that for-profits will fail in mission but prove the concepts. We’ll see.

john personna July 8, 2011 at 5:53 am

Interesting tidbit from the advanced fabrication and cognitive surplus crowd:

Why Every Maker Should Learn Chinese

Dave Schuler July 8, 2011 at 7:02 am

It’s not objectionable but I think he’s wasting his time. To be really literate in Chinese you’ve got to know at least 2,500 characters (compared to his 300). Specialist reading will require more.

Most Chinese aren’t literate in Chinese. The government statistics boost the literacy rate by defining literacy down for most of the people to being able to read traffic signs and the like.

I’ve been watching some kung fu pictures lately and my very rusty Chinese is starting to come back to me. I’m at the point where I’m half listening, half reading the subtitles.

Eddie July 8, 2011 at 7:17 am

Just for kicks, a mix of short and long-term ideas:

1. Reform the tax code (with a temporary 5-7 year flat tax or its equivalent)…. no breaks for anybody. Let corps bring their overseas profits back into America and tax them at that new level. This is a huge part of the structural problem b/c the incentives are all out of whack and are promoting the evisceration of the middle class with outsourcing, automation, and the relentless pursuit of ever more efficient business models requiring fewer employees.

2. For those in a state of spatial mismatch, institute migration loans at a 2-3% interest rate for any citizen who needs the extra push to give up their home in AZ, FL, etc. to move to where jobs are in Nebraska, SD, elsewhere. We have to reverse the drop in personal/job migration or we will make “the New Normal” that much worse for the next 15-20 years.

3. As part of #2, take a long, hard look at a way to help people with job offers across the country get out from under upside-down mortgages. Can we institute something that has them accept a 10-15% loss at most? This is a long-term problem.. the planning world has been abuzz with conservative predictions of a 15-20 year recovery period for housing prices, if ever.

4. Immediately tie federal education funding at the university level to new degree requirements for 4-6 math/statistics classes for incoming freshman. I attend a decent public uni that ridiculously requires 4 foreign language classes for its Arts & Sciences College while only requiring 1 math class. Are we kidding here on STEM’s importance? We have enough talent (especially among the unemployed elderly and late-middle aged) to hire many, many more tutors to fix deficiencies if need be.

5. Claw back the billions stolen from the taxpayer by contractors in Iraq and Afghanistan and give the proceeds to community colleges, which are the true gateway to saving the lower middle class that is in danger of falling into something approximating poverty or a slim notch above. We have enormous skills mismatch issues in this country and CC’s are the best bet to fix that in time, as well as creating new vocational secondary schools.

6. Reverse the policy and tax incentives that are encouraging businesses to heavily invest in AI and robotics at the expense of human jobs. Economists can claim technology creates jobs, but in the near to mid-term automation is taking a brutal toll on those not lucky or skilled enough to save or create their own job. McDonald’s and Burger King have just tested automated ordering systems (the Pepper Lunch system in Japan/Asia remains top-notch in my mind) that once tweaked will eliminate a good 20% of fast food jobs.
Google just getting the AI-driven car law passed in NV is only the tip of the iceberg in this regard as well. I’m not saying we can/should stop automation, but we have to start taking it seriously for the future of the economy.

7. Make E-Verify required of every employer in America. Spend the money to grow the ICE and IRS (sunset labor contracts for 7-10 years) to verify employers and individuals are following the law and paying all proper taxes and fees. As a country we lose nearly 350 billion a year in uncollected taxes and that doesn’t count illegal immigrant employment.

8. WPA now. Hell, in GA, Gov. Deal is basically creating it with parolees and non-violent prisoners as a way to assuage the fury of farmers and landscapers who lost their illegals with the new immigration bill. The longer people stay unemployed, the worse off their future employment, social and health outcomes are. We have to get people to work somehow right now or we will have a social problem that lasts 30-40 years, especially with the 40-somethings & above who have been relentlessly targeted for downsizing.

9. Follow Gov. Daniels and find a way to recalibrate the EPA environmental impact policies that have dramatically increased the cost of infrastructure (along with affirmative action incubated front companies that drive up prices). A 20 year investment in massive infrastructure repair and building would do wonders to help heal the gaping hole in the construction industry and its workers, many of whom are unskilled and would be the most difficult to retrain for new jobs.

michael reynolds July 8, 2011 at 9:12 am

Look through those four points and see how many have rested in part at least on a national prejudice in favor of largeness: Big energy, big industry, big agriculture, big education. That’s why Netherlands is such an interesting example: the country thinks small. On more than one occasion I’ve had a Dutch person shrug and say, “We are a small country.”

Our agriculture rests on an assumption of abundant, cheap land and essentially free water. Obviously we’ve realized that’s not quite accurate but the realization came too late to change the pattern.

Echoing Icepick, above, I just drove up the 5 through central California yesterday. It’s agriculture in the middle of a desert. You see lush green fields, and an inch outside the irrigation it might as well be the Mojave. This entire vast area was built on an assumption of free or nearly free water. . . in a place where it’s 107 degrees.

That’s a combination of private industry and government both acting in a short-sighted way. I’m reminded of the old Sam Kinison bit where he proposes we stop shipping food to starving people and instead send them U-Hauls and suitcases: so they can move to where the food is. “See this? It’s sand. You’re in the desert! Nothing grows there!”

michael reynolds July 8, 2011 at 9:24 am

And that’s probably not happening unless you get a better electorate.

Yes. But that brings us back to education, and to the part of education that does not involved ROI. We need a population sufficiently educated to wield power. That doesn’t just mean math and especially statistics, although both would be great, wish I had some. It also means some history and at least a little science, and although people laugh at me when I suggest this: some basic philosophy, like ethics, logic, basic epistemology. Because if people don’t know how to think — and I sense we could form consensus on that pretty quickly — no amount of fixed-point education will help. They have got to know how to understand change, and to adapt to it, and what must be retained, and what can be sacrificed. And they have to have some capacity to differentiate between truth and lies. Otherwise they remain the tools of those with the ruthlessness to use them.

john personna July 8, 2011 at 1:49 pm

Agriculture in a desert, with piped water, works really well … as long as you’ve got the water.

Icepick July 9, 2011 at 11:40 am

Because if people don’t know how to think — and I sense we could form consensus on that pretty quickly — no amount of fixed-point education will help.

Uh, the only problem with that is that most people lack the intellectual capacity to think well.

john personna July 10, 2011 at 2:05 am

Bring back High School, I say. That’s what it’s for. To graduate citizens.

Icepick July 10, 2011 at 4:12 pm

Bring back High School, I say. That’s what it’s for. To graduate citizens.

A novel concept! But the people running the country don’t want citizens, they want subjects. That’s why our educational system has gone to Hell despite all the money and attention focused on it, and it’s also why they’re importing millions and millions of Third World peasants. The ultimate goal is to make citizenship meaningless. We’ve pretty much already arrived at that point.

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