How Not to Subsidize Innovation

George Will writes favorably about the Endless Frontier Act in his most recent Washington Post column:

To increase society’s supply of pickles, increase monetary demand for them. Increasing the supply of America’s most important product — innovation — is more complicated. It involves money that fertilizes a culture that nurtures talented individuals.

Solving the complexities of this is one purpose of the Endless Frontier Act (EFA), which aims to disburse $100 billion over five years for the purpose of finding and supporting those who will shape the future of science. This is, inevitably, a process of a few spectacular hits among many misses.

The EFA is a perhaps unintentional homage to one source of American dynamism, immigration, because it implicitly embraces an insight of an immigrant from Austria, the economist Joseph Schumpeter, who in 1932 came to Harvard. His theory was that the principal drivers of social dynamism are not workers (as Marx thought) or various impersonal economic forces (as many economists thought) but innovators — inventors of new things and companies. Thomas Edison, working in his Menlo Park, N.J., “invention factory” — he eventually held 1,093 patents — was one. Others include Henry Ford, Thomas Watson, Bill Gates and Steve Jobs.

and, based on this description, I think he can safely be added to the list of people who drawn the wrong lessons from the Manhattan Project:

The template for successful government-fueled innovation began in September 1942 when the government purchased 58,575 acres of eastern Tennessee wilderness and created the town of Oak Ridge with state-of-the-art physics facilities. Thirty-four months later, an atomic blast lit the New Mexico desert. The Manhattan Project had a narrow focus: the problem of releasing and weaponizing the atom’s explosive energy.

I would also challenge to some degree his list of innovators. Edison’s primary innovation was organizational rather technological. He invented the industrial laboratory. The reason his name is on so many patents is that he insisted on it—that list is actually the work of dozens of “muckers” as he called them. There’s a similar pattern for all of those he mentions with the possible exception of Steve Jobs. In Jobs’s case the innovations of the company he founded slowed to a crawl after his death. Which brings me to my next point.

Individuals innovate. Companies and in particular large companies elaborate. If you want innovation you’ve got to break up the big companies to leave room for the actual innovators.

Third, open-ended funding of R&D by the federal government does not have that great a track record at least not from a ROI standpoint. The projects that have had great ROI include the Manhattan Project and the Mercury-Apollo Project. These are what I’m referring to as “mass engineering projects”: projects with limited, well-defined objectives that we are confident can be achieved.

Fourth, greenfield developments are more likely to result in innovation.

Fifth, don’t compete with the private sector. Doing that will crowd out innovation rather than foster it.

Finally, to encourage individuals to become real innovators there must be real, long-term jobs and career paths for doing it. Letting the wages of engineers and scientists rise will produce a lot more innovation than importing engineers and scientists to push wages down.