Innovation in Real Places
Strategies for Prosperity in an Unforgiving World
DAN BREZNITZ
3
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Library of Congress Cataloging-in-Publication Data Names: Breznitz, Dan, author.
Title: Innovation in real places : strategies for prosperity in an unforgiving world / Dan Breznitz.
Description: New York, NY : Oxford University Press, [2021] | Includes bibliographical references and index. | Identifiers: LCCN 2020050294 (print) | LCCN 2020050295 (ebook) | ISBN 9780197508114 (hardback) | ISBN 9780197508138 (epub) | ISBN 9780197508145
Subjects: LCSH: Technological innovations—Economic aspects. | Technological innovations—Government policy. | Industrial capacity—Economic aspects. | Industrial policy. | Community development. | Economic development. | Globalization. Classification: LCC HC79.T 4 B695 2021 (print) | LCC HC79.T 4 (ebook) | DDC 338.9—dc23
LC record available at https://lccn.loc.gov/2020050294
LC ebook record available at https://lccn.loc.gov/2020050295
DOI: 10.1093/oso/9780197508114.001.0001 1 3 5 7 9 8 6 4 2
Printed by LSC Communications, United States of America
To Shiri: two kids, three decades, four continents, and I still dream of you.
Acknowledgments
This book took me the longest to write, by far. This experience also taught me a very valuable lesson: it is one thing to conduct research and write it for scientists, and a completely different task to explain what it means to daily life. As a result, I developed a whole new appreciation for scholars who not only try to think about the implications of their research, but also go on to write about them in a way everyone can relate to.
This book is also a diary of a very long journey of studying, researching, and being involved in the development of, and experimentation in, innovation policies. This was not a journey I took alone. Accordingly, this book could not have been written without the many friends who shared this road with me. Many a time they had to save me from getting lost; always, though, they shared with me insights and beautiful examples of human ingenuity I would have never known otherwise.
Standing tall among them are Amos Zehavi, who literally traveled with me over three continents and also shared the very painful experience of being PhD students together so many years ago that we both find it difficult to count them. Further, after all of that, he very patiently waited for me to (finally, with great delay) finish this book, so we can also finish our joint one. Michael Murphree, who started as my student, turned into an employee and then back to being my student, before transitioning into a partner in crime, all the while being an amazing friend. Without you I would have never gotten to know China and walked so many of its alleys. John Zysman, who for no apparent good reason took me under his wing at Berkeley when, as a young stressed-out freshly minted PhD, I spent a year in what he calls the Junior College on the peninsula. Since those early days of 2006, we have worked so closely together on so many projects that I lost count. Martin Kenney, with whom I have been constantly sharing ideas as they evolve and form in our minds. Darius Ornston, a friend, a colleague, and a shy genius, with whom I have been writing what I think are some of my best papers (the same ones he probably views as, at best, reasonable drafts). Zak Taylor, who, like Amos, should be thanked, if only because he still talks to me even after knowing me since we were all PhD students, but much more so for our valuable and
constant brainstorming, and the fact that he somehow kept me sane in Atlanta. Aldo Geuna, for friendship, arranging the opportunity to spend first a year and then many more months throughout the years in Turin, and many intellectual endeavors since. Giulio Buciuni, for showing me the amazing stories of innovation in northeastern Italy, and for far too many craft beers (yes Giulio, unlike coffee, red wine, whiskey, and Armagnac, there is such a thing as too many beers). Gilles Rabin has opened my eyes to the many facets of innovation in France and Europe, giving me companionship along the road. Thanks to you, my friend, I now go and explore the main public transportation terminals in every city I visit around the world. In Finland, Petri Rouvinen gave me a crash course in Finnish innovation and economic policies, while introducing me to everyone, everywhere. Serving with you on the committee to evaluate the Finnish Innovation System was one of the most valued educational and public service experiences of my life. More importantly, however, was your help in fulfilling my childhood dream, and hooking my children up to the best stories in the world—the Moomins.
In the fair city of Atlanta, Georgia Tech has been a wonderful home for eight years, shaping me as a scholar and letting me wonder wider and wilder than many other universities would allow young assistant professors. I will forever be grateful to William Long and Diana Hicks for their instrumental role in bringing me there, and the many friends in the Sam Nunn School and the School of Public Policy who made it a home for the first five years. Special thanks are owed to Kirk Bowman, who taught me how to think outside the box. I’m looking forward to many more opportunities to do so together in all of the Americas, and to Brian Woodall, Sy Goodman, Adam Stulberg, and Michael Best for making us feel at home and making the Sam Nunn School such an interesting place to be. Doug Noonan, Hans Klein, John Walsh, Phil Shapira (in both Atlanta and Manchester, UK), Aaron Levine, and last, outsmiling them all, Paul Baker did the same in the School of Public Policy, demonstrating that friendly intellectual competition does wonders for everybody involved.
Jerry and Marie Thursby hold a special place of honor, together with the strategy group they built and ran at the Scheller College of Business at Georgia Tech. The intellectual vibrancy and camaraderie I enjoyed during my three years there were second to none. I still miss our weekly seminars. If you ever get bored with retirement, you are always welcome to come to Toronto for a week, a month, or a few years. In the strategy groups, having daily discussions with Matt Higgins, Alex Oettl, Marco Ceccagnoli, and
Annamaria Conti defiantly shaped my thinking. Just as important were the interactions with PhD students in all three schools, especially Vincenzo Palermo. Stu Graham should be thanked for giving me his office while he was seconded as the very first Chief Economist of the US Patent Office. Last, but certainly not least, having Chris Forman around the corner to work with was an immense pleasure, which continues even after we both moved North.
Georgia Tech is also a magical place for the many activities it does in economic development throughout the state, led by truly exceptional people. The amount of help in developing, and experimenting with what can only be called whacky innovation policy ideas is a unique experience I am not sure many other assistant professors have anywhere else in the world. Standing tall among them are Robert Lann, Stephen Fleming, and Greg Laudeman. Being able to call Stephen Cross a friend, mentor, and my VP Research all at the same time was both a true honor and enormous help. I will forever be in debt to Georgia Tech and its people; it is a blessing to call so many of them friends.
Janice Stein and Joe Wong are both good friends and scholars, but here they should be thanked for orchestrating our move to Toronto. Once we arrived, Ron Levi, Mark Manger, Randall Hansen, Sarah Namer, and the magical Margaret McKone helped us feel at home. At the Munk School, the thrill of working together with David Wolfe in expanding and co-directing the Innovation Policy Lab (IPL) has been a true intellectual joy. David’s leadership of The Social Sciences and Humanities Research Council (SSHRC) collaborative project on creating digital opportunities served as the best platform one can have as an introduction to and embeddedness into Canadian public policy. At the IPL I had the unique fortune to meet Peter Warrian, who soon became a friend on the road both physically and intellectually in multiple continents of soil and spirit. Co-directing the IPL also allowed me to get back in touch with another former MITer, Dan Munro, who has since made sure I consider ethics when I think about innovation and growth. The members of the IPL, including our post-docs throughout the years, helped me to transit the focus of my research to explore more deeply the societal outcomes of innovation. Steven Samford not only turned into a partner for the road, but into a good friend as well. All my post-docs from now on will have to live in your shadow. Kristen Pue was a star PhD student and an invaluable research assistant. Nicolas Conserva did heroic work on the history of Cleveland. Alix Jansen and Prashant Rayaprolu did the same on the question of workers and skills, with Prashant being sent as an advance scout every
time I had a new idea. In the final stages, as I was gasping without breath, Reuben Aboye calmly stepped in and masterfully took all the dispersed data collected, arranged it, and . . . suddenly it made sense. Also, once in Canada, interactions with The Centre for International Governance Innovation (CIGI), under the tutelage of my friend Rohinton P. Medhora, kept me engaged, enraged, and sharp on the issues of innovation and growth. The third part of this book owes a lot to those interactions.
As I transitioned to thinking more and more about distribution and innovation, and not just growth and profits, my dear friend and mentor Peter Cowhey at UC San Diego asked me to join him in organizing an eye-opening project on innovation and production in the United States. We could not have done it without the Connect Innovation Institute under the leadership of the late Duane Roth and the very much alive and active Mary Walshock. Here I had the immeasurable opportunity to work together with Susan Helper, William Lazonick, Erica Fuchs, Josh Whitford, Elisabeth Reynolds, and Jenny Kuan, and to collaborate in disseminating our findings with Mark Muro, Howard Wial, and Bruce Katz. Luckily for me, at the exact same time my main mentor and dear friend at MIT, Suzanne Berger, was also working on the same issues. Thus, I just sat at the perfect structural hole gobbling up knowledge for two years. Thanks to Suzanne, I was also introduced to William Bonvillian, who urged me to continue with this line of work whenever I faltered.
All of this came together when the impressive, resolute, and tenacious Rachel Parker convinced me to organize a scholarly network to think about the questions of innovation, equity, and the future of prosperity, and apply to the Canadian Institute for Advanced Research (CIFAR)’s global competition. Feeling emboldened with Susan Helper and Amos Zehavi at my side, we did. After which the (far smarter than I) fellows and advisers of the Innovation, Equity and the Future of Prosperity (IEP) network became the perfect invisible college.
Some of the most important people for this book, many of them now friends, work in numerous innovation agencies and development banks across the world. Without them this book would never have been written, and my life would have been a pale, uninteresting shadow of itself. Many of them prefer to stay anonymous, but of those that do not, special thanks are owed to Yevgeny Kuznetsov at the World Bank; Alexander Lehmann at the European Bank for Reconstruction and Development (now at Bruegel); Claudia Suaznabar, Pablo Angelelli, and Facundo Luna of the Inter-American
Development Bank; and Kirsten Bound and Alex Glennie of Nesta, UK. In Chile, Pablo Catalan was a friend and a wise guide, in both Concepción and Santiago, and the people of Corporación de Fomento de la Producción de Chile (CORFO) and its many programs were a constant source of information and ideas. In Panama, Victor Sánchez of SENACYT has become our wise and gentle friend, protector, and partner in designing innovation policies. Here also, Julio Escobar, Eli Faskha, and the people of CAPTEC formed an amazing team of friends, thinkers, and doers to work with. Taiwan is filled with friends; of them, Otto Lin was especially helpful (also in Hong Kong and China). In Argentina, Miguel Lengyel was instrumental in introducing me to doing innovation policies in times of (repeated) national turmoil. In China, there are hundreds of people to thank, the most courageous of whom has been Xielin Liu of the Chinese Academy of Science. In Poland, my friend Andrzej Sławiński was the perfect host, and under his directorship the research unit of the national bank was a home away from home. In Canada, the list of amazing civil servants I need to thank is too long to fit in one book; it is also not clear to me that they wish their names to appear in this book. Hence for all of you in the Ontario, Newfoundland, and Labrador, Alberta, Quebec, and the federal public and civil service (IRAP included), especially CL and BK, keep on doing what you know should be done.
One of the most important experiences in helping me formulate this book was the advanced experimental and experiential MGA course I co-taught with different international innovation agencies at the Munk School. Over five years we immersed ourselves in the strategic concerns of some of those organizations, working with their directors on devising new policies on issues they always wanted to touch, but never had the time. In Ireland, Seán Coughlan, being the amazing person he is, agreed to make himself and the remarkable organization he co-founded, Social Entrepreneurs Ireland, be the first guinea pig for me and my MGA students. In Mexico, Ruy Cervantes, and the team of the Ministry of Science Technology and Innovation, proved invaluable as we expanded on this approach. In Israel, our partner was the Office of the Chief Scientist, just as it restructured itself during our three years of joint work in the Israeli Innovation Authority. Here Uri Gabai was our guardian angel, with Sagi Dagan playing the sage mentor and Aharon, the IIA’s CEO, welcoming us in. Uri was also partner to many voyages to different countries, always trusting (one does wonder why) that he really should come with me to this out-of-the-way-place to interact with local innovation policymakers. The openness of those innovation agencies to working with
my students, and the impact the students’ work had on those agencies policies, demonstrated the amazing potential of human resourcefulness. They also demonstrated how those agencies are ahead of the curve and how fortunate I am to work in the Munk School and the University of Toronto, which not only allows those educational experiments, but encourages them.
Then there is, and always will be, Cobalt. Seán Fran and Vivian Eyolfson are the heroes here, when everything else failed, and when the computer just refused to write this book for me, they took me up north, put me in their house near Cobalt, and told me not to come back until I finished the first two chapters. Since then I have found that all roads do lead to Cobalt. You should go there yourself; there is no place in which to think like the Tri-Towns. Go to Bass Lake to enjoy a day, or stroll down White Wood Avenue in New Liskeard, and go for a coffee or board game in Chat Noir, after which have a bite to eat in the Country Kitchen, and go talk to Tom as you buy the best steaks and summer sausages in the world at Quality Meats. Just remember they are Mennonites, so the store is open only on Friday and Saturday. Go to Mowat Landing, rent a boat, and try to convince Trevor to sell you one of the last copies of the Tri-City Monopoly edition. If even that does not help, then rent a canoe and more from Smoothwater on Temagami Lake, and get lost in crown land wilderness; if you are lucky and determined enough you will be the only human you will see for two weeks.
There is also a gallant set of special people, without whom this book would have never been written, since I would not have had the courage to even start it. Daniel Isenberg was the first to set me down this road, after reading my first two books and admonishing me for not writing in forms and forums that can influence public debate. Dan also introduced me to the marvelous Andrew O’Connell, editor supreme and a friend, who guided me into the art of translating social science into writing for HBR and the educated public. Without knowing that Andy was on call, always willing to help when my writing veered off course, I would have never started this book. William and Weslie Janeway, through many talks, convinced me that there is a need for such a book. When I dithered with uncertainty when they housed me in Maine, Weslie just looked at me and said, “Why do you not just call it the Little Beige Book of Innovation-Based Growth and start writing?” I sat down and did just that. Also, in New York, David Adler, once he heard that I was thinking about writing such a book, proved to be a good friend and fellow traveler down the path of asking how all communities in America can enjoy prosperity. I am not quite so sure I helped him find the answers he
was looking for, but he certainly helped me find some of the answers I was looking for. At a critical moment in writing this book, Dane Stangler, then still at the Kauffman Foundation, stepped in, told me this book should be written, and arranged the critical support I needed to keep going.
One of the best things that happened after our move to Canada was meeting Jim Balsillie and Neve Peric. Not only did they become good friends and mentors, but even more importantly they made sure that I never forgot the debt to the public that social scientists working in a public university have. This book would have never happened without Jim’s constant (and surprisingly gentle) push and encouragement to find my public voice, and Neve’s wise counsel on how to do it. May we share many bottles of wine together late into the night, in Paris, Toronto, or anywhere our paths take us my friends!
Dave McBride has been my heroic editor at Oxford University Press; he is everything an author can wish for. The team at OUP, led by Dave’s assistant Holly Mitchell, is owed more thanks that there is space to put them. As the book went into production, Liz Davey, Peter Jaskowiak, Kathrin Unger and Bríd Nowlan made sure it was copy-edited, indexed, proofread, and reached production on time, even with me acting as the sand in their welloiled machine.
I also wish to thank the financial (and moral) support of a number of organizations. First and foremost is the Kauffman Foundation, whose directors of policy research, first Dane and then Jason Wiens, not only supported this book at the most critical early point, but also had more patience then anyone should have as they shepherded me through the extremely long process of writing. At their side, Tammy Flores was my personal saint. The Lupina Foundation supplied much more then financial support and became a partner for the road as I wrote this book. The continued support of the Collegio Carlo Alberto, the Department of Economics and Statistics S. Cognetti de Martiis, and The Compagnia di San Paolo in Turin has been priceless. In Venice it was Università Ca’ Foscari and my host Vladi Finotto who supported me for a crucial summer of research. I also gladly acknowledge the financial and scholarly support of the Canadian Friends of Tel Aviv University, where thanks for going over and above the call of duty are owed to Jonathan Hausman, the Brookfield Institute, the Munk School, and the Munk Chair of Innovation Studies.
Last, but certainly not least, thanks and gratitude are owed to my children Mika and Tom, not only for reminding me daily why I was writing this, but
also for supporting me in doing this even when it meant that I was off to a random far-away part of the world. Best were the times when you joined me in those travels. Mika was also a diligent editor of parts of this book. Shiri, my wife and partner for the regular and scholarly world, this book is dedicated to you; as I said before, you are my dream.
Introduction
“Tell me something about yourself and the country you came from,” said the Scarecrow, when she had finished her dinner. So she told him all about Kansas, and how gray everything was there, and how the cyclone had carried her to this queer Land of Oz.
The Scarecrow listened carefully, and said, “I cannot understand why you should wish to leave this beautiful country and go back to the dry, gray place you call Kansas.”
“That is because you have no brains” answered the girl. “No matter how dreary and gray our homes are, we people of flesh and blood would rather live there than in any other country, be it ever so beautiful. There is no place like home.”
The Scarecrow sighed.
“Of course I cannot understand it,” he said. “If your heads were stuffed with straw, like mine, you would probably all live in the beautiful places, and then Kansas would have no people at all. It is fortunate for Kansas that you have brains.”
L. Frank Baum, The Wonderful Wizard of Oz
It took me too many years to write this book.
In the end I left everything and went up north to hide near a small lake to disconnect from the world and start writing. I found myself near Cobalt, Ontario, at a site that, coincidentally, reinforced my motivation for writing about innovation and growth.
The discovery of rich silver deposits in 1903 created Cobalt overnight and set off a mining boom. Between 1905 and 1914, millions of people—more than the entire population of Canada at the time—traveled by train to Cobalt. The town became ultra-rich. At its peak, Cobalt had several theaters and some of the world’s most impressive murals. Cobalt was, literally, Canada’s economy. But it all ended as quickly as it had started. Today Cobalt has barely
1,100 inhabitants, one grocery store, one pub, and one diner. The train does not stop in Cobalt anymore.
The mining rush affected more than just the town of Cobalt, though. It also transformed another small, sleepy Ontario town: Toronto. The silver boom needed sophisticated venture financing, a stock market, and a trading center, all of which took root on the Lake Ontario shore 300 miles to the south. The silver of Cobalt built Toronto’s financial hub of Bay Street. That is the difference between a growth bubble based on the newest shiny thing and sustained development based on innovation and knowledge. Those who live by the bubble die by it; those who create knowledge have a chance to continue to prosper. Mining has moved on from Cobalt, but Toronto is still a global center for sophisticated financing.1
So the friendly, kind, smart people around Cobalt, as well as the abandoned mineshafts that dot the scenery of lakes, cliffs, and forests, formed an evocative backdrop as I wrote. They were a constant reminder of the risks of misguided development, and of the hope that underlies my efforts.
As I have watched communities struggle to generate sustained development through innovation-based growth, I have become convinced that it is my obligation, as a scholar who bridges economics and politics, to assemble the latest knowledge in the most accessible form possible so that it can be widely appreciated. This task became more urgent with the current COVID19-induced economic crisis. We have a unique opportunity and an urgent need to rekindle sustained economic growth, as numerous communities are desperately looking for ways to gain sustained prosperity. My hope is that people from all walks of life—anyone who cares about their community— will use this book to gain a pragmatic understanding of the nature of innovation and growth. My dream is that this understanding will translate into better, more-far-reaching decisions, and, ultimately, that my own children will have a better future.
Where This Book Will Take You
This book is a journey—across history, countries, businesses, and into research, both mine and that of my colleagues. It is structured to provide answers to crucial questions about innovation-based growth: Which development path is best? How can communities follow through on their chosen routes and bring about change? How can public policies and institutions help
(or hinder) communities reach the hoped-for results? How do crises such as COVID-19 and the recent political upheavals factor into the equation? Do they signal a moment of opportunity in which old battle lines are disrupted and fresh thinking can gain ground?
What this book does not do is offer cookbook-style recipes for growth. Such books do exist, of course. They purport to show how to create hightechnology clusters wherever and whenever you want, if you just follow their five simple steps. These books are of questionable value. Apart from the impracticality of trying to follow simple steps in today’s highly complex economic environment, the main problem with these books is that they rely on generally accepted views of innovation, which contain a number of myths.
One is that an eagerly ambitious region outside the established start-up hubs might have a reasonable shot at combining high-concept tech ideas with venture capital (VC) to become the “next Silicon Valley.” Another is that beyond trying to become the next Silicon Valley, the growth choices are extremely limited. Both of these myths stem from an even more pervasive misconception: that innovation equals high-tech industries, new businesses, and/or new gadgets.
Innovation is not just the invention of new shiny things. If it was, it would have a feeble effect on economic growth and welfare. We should care about innovation, because it is the only way to ensure sustained long-term economic and human-welfare growth, not because it is new or cool.
So what is innovation?
Innovation is the complete process of taking new ideas and devising new or improved products and services. It comes in all stages from the first vision, design, development, production, sale, and usage, to the after-sale aspects of products and services. The true impact of innovation was not in the invention of the internal combustion engine, nor even the invention of the first automobile. The true impact of innovation is represented by the continuous stream of implementation of large and small inventions to make the car a better and cheaper product, to improve the way it is produced, and to continuously find ingenious ways to sell, market, and service cars. If innovation was invention, there would be no continued progress and growth in welfare. For example, without innovation, there would be no smartphones, since a phone would still be a very large wooden box with a rotating dial, and it would take about a minute to even attempt a call.
In technical terms, invention is the process of coming up with a truly novel idea, while innovation is the process of using ideas to offer new or improved
products and services at the same factor cost. This is the reason why the most effective innovation agency in the world in the last half century, the Israeli Office of the Chief Scientist (now the Israel Innovation Authority, or IIA), had one clear and simple core mission statement: the maximization of private-sector R&D activities.
However, we now live in the world of fake news and misconceptions, and too many people and organizations make too much money by selling myths about innovation. We are going to find that the purveyors of these myths—the religious believers of techno-fetishism—have a feeble understanding of the big picture of global production and innovation. For example, they have not noticed—or will not tell you—that there is a significant obstacle to creating the next VC hub in Oklahoma or Ohio or Bouches-du-Rhone in France or Emilia-Romagna in Italy: namely, the overwhelming power of the real hubs, which siphon up vast amounts of talent and money.
The misconception-mongers also seem unaware of the research showing that promoting VC-backed high-tech startups can end up widening the gulf between rich and poor, and that a region can therefore waste a lot of time, money, and energy trying to improve its economic health by shopping for high-calorie, low-protein, and low-fiber start-ups. Those start-ups might indeed make their founders and funders rich, but they will not supply the wider employment and growth benefits that the regions seek. In todays’ world of globally fragmented production and dominating high-tech clusters, not all boats are raised when high-tech start-ups succeed.
And as development efforts along these lines falter, citizens, funders, and elected officials become frustrated. Lack of growth sets off waves of gloom and depression. Weaknesses in demand and supply spur each other to everlower lows. Workers drop out of the job market. Hope that the future will be better for their children is lost, people call their elected officials bad names, and demagogic candidates with divisive, unproductive ideas find it easier and easier to seize people’s imaginations. This dynamic is particularly problematic with regards to innovation. This is because innovation always has both winners and losers. Accordingly, as Mark Zachary Taylor has demonstrated in his excellent book The Politics of Innovation, societies that ensure that innovation’s positive benefits are widely distributed, while its negative impacts are contained, continue to innovate and grow. On the other hand, those that do not do this fade into cycles of stagnation and poverty—even societies that once ruled the world.2
There Is More Than One Road to Rome
As we will see, the greatest opportunities for growth lie in communities’ recognizing their own advantages, then fostering forms of specialized innovation that rely on those advantages.
The opportunities include raising the growth trajectories of existing small and medium-size enterprises, figuring out specific sets of activities within the global production networks that dominate our world, and attracting start-ups that are outside of information technologies and biotech, in fields as diverse as agro-tech and textiles.
At the same time, communities must encourage the development of public institutions to provide critical support, including fostering sources of what is known as “patient” capital, a set of “shared” assets that provide unique competitive advantages, and collaborative public spaces, where isolated businesses and individuals find ways to become part of cohesive ecosystems. Certain areas of the globe have become production powerhouses by following this approach.
We should also remember and be proud of what we, humanity, have achieved in the last few decades. Since the 1980s, as part of globalization, more people have been lifted out abject poverty then any time before, infant mortality is decreasing, and life expectancy is on the rise. Further, human welfare and the choices we have as consumers have never been so high, affordable, and rich. A smart girl in Africa, with a computer and an Internet connection, can take some of the best courses at the best universities. If for me, born in Jerusalem in 1970, MIT was a distant dream of a fabulous place that existed over the rainbow—a palace of knowledge I was finally allowed to join twenty-seven years later, and only by physically moving to Cambridge, Massachusetts—for hundreds of millions today it is just another website they use to get a great education while staying in their homes, tightly woven in their communities.
Overall, humanity has never had it so good. I am aware, of course, that people live in well-defined communities, and that while they might cheer for other communities, their main concern is for their own. The good people of Alabama might very well feel proud about the innovations and economic achievements of New York City and Silicon Valley, and hardworking Manitobans might be brimming with delight over Toronto’s growing stature in the world, and both might share a deep delight in the amazing wealth that has accompanied the rise of hundreds of millions
of people out of poverty in China and India. Nevertheless, their actions and their disposition toward the future are firmly anchored in what happens in Manitoba and Alabama, perhaps even specifically in Dauphin or Huntsville.
Therefore, while this book is intended to appeal to people seeking a broad understanding of what makes the innovation-based world go round, it also focuses on micro-level behavior. It argues that the growth policy that truly matters to people will not be decided in Brussels, Beijing, or Washington, but on the ground, by people from both the public and private sectors who work together daily to ensure that their communities prosper. This book views the world from, and sympathizes with, the perspective of communities, looking at both the issues they face and the tools at their disposal.
The opportunities are long-term—I will be up front about that. In this book I do not put forth any solutions that could come to fruition next month or even next year. But the solutions are real and practical, and they can have a big impact. After all, economic growth is the goose that lays the golden eggs. When the economy is growing, people feel confident that their quality of life, as well as their children’s quality of life, will improve, and consequently they make choices that lead to increases in both demand and supply, which in turn brings further growth. People’s faith in government and business rises, and would-be demagogues remain at bay.
Cynicism Can Be Beautiful
Throughout this journey I will also provide a few other need-to-know economic details that can help in maximizing the chances of creating innovation-based growth.
These include the ugly facts about our broken intellectual-property (IP) system, which shows no signs of getting any less ugly or any less broken as countries and deep-pocketed interest groups squabble over patent rules, copyrights, trademarks, technology standards, trade secrets, and trade deals. In fact, this book will show how local leaders, working to benefit their communities, can strategize to “game” the IP system. It will also show how to utilize other gaps between economists’ “efficient market” assumptions and the messy realities of human-made regulations. Purists and moralists may accuse me of being cynical in showing how growth can be optimized in specific contexts. As an academic, shouldn’t I be illuminating the path toward a
generalizable economic utopia where all of humanity can finally sit next to the campfire holding hands and singing Kumbaya?
My response comes back to my sense of obligation. Social science has accumulated a great deal of knowledge about economic growth. Academics, especially those of us working in public universities, have a duty to make this knowledge available to people seeking to understand the economic workings of the world. We also have a duty to offer tools that people of action can use to improve lives—even if that sometimes entails advising them to take advantage of flaws in the economic system.
As a hopeful cynic, I would also argue that putting the best minds to work figuring out the flaws is the best way to optimize complex systems. As a cynical political economist, I would also remark that there is nothing like a dosage of competition to shake comfortable oligopolies out of their stranglehold on power.
