Acemoglu on Innovation

When evaluating policy, the American public focuses on its potential job creation, economists focus on potential improvements in productivity.  In The Myth of the Rational Voter: Why Democracies Choose Bad Policies, Bryan Caplan assumes economists know better than non-economists on economic issues and refers to this difference as make-work bias.
Daron Acemoglu, an MIT economics professor, describes his solution to the debt ceiling, the recent credit rating downgrade, unemployment in “The Real Solution Is Growth” which is quoted in part below.  I recommend the entire article.

We should not take our eye off the really important ball: economic growth and the innovation process that underpins it.
Though the U.S. economy has tremendous innovative capacity, even in the depths of the current recession, this means neither that policies to encourage high-value innovation are not possible nor that we should ignore the danger of significantly damaging this capacity.
Here are the dangers.

• Patent protection is becoming a more bureaucratic, red-tape-ridden, and uncertain process…
• The explosion of salaries on Wall Street has attracted many of the talented individuals who otherwise would have gone into research, design, and engineering occupations…
• Markets will not generate enough innovation.
• Innovation also relies on the political infrastructure of society…

And here are some positive measures for fostering innovation.

• Encourage skilled foreign workers to work and settle in the United States…
• Foster the commercialization of innovation. Much more can be done to facilitate this process. The Bayh-Dole Act of 1980 was only a small step toward encouraging commercialization of academic research…
• Focus on green technology, the next area that has the best promise of creating a platform for more innovation…

Different economists might emphasize different policy measures to secure productivity through innovation but Acemoglu’s list is a good place to start.  This week, Mit Romney will present his economic platform, the Republican presidential candidates will debate and President Obama will deliver his jobs program.  I listen for policies that will improve productivity as candidates propose solutions to the economic malaise.