I recently engaged in a discussion with David Zetland, a former economics professor of mine, on the value of public investment in technology (NB: I feel authorized to re-publish his and my comments because they were originally published on his public blog). It's worth noting that his blog, Aguanomics, is spectacular and I enjoy reading it every day.

Compelled by his assertion that the Solyndra case proved government investment is a failure, I pointed out that without government investment in technological innovation, we wouldn't have jet engines, cell phones, the Internet, any major forms of energy generation, and many other game-changing technologies as they exist today. He gave a thorough response, which I will summarize by pulling out this key quote:

Govt shouldn't take my $ to invest. Ever.

The whole exchange is available here. I was left to assume he was unaware of the DARPA investment that made the Internet possible, without which he could not have made that comment on his blog. He also uses Blogger, which is owned and operated by Google, whose founders benefitted from an NSF grant for the creation of their original algorithm. His rebuttal, that since the Defense Department didn't know that the Internet would be the result of their investment, doesn't really hold much water -- he is essentially saying that because they weren't planned, the huge (read: f'ing HUGE) benefits from this particular investment don't count.

What struck me most, however, was not his strange assertion that government should never invest money, but the fact that he seems to be in the majority. There is widespread unawareness of the role of the federal government plays in driving technological innovation and investment, an unawareness that is perhaps a contributing factor in the anger over Solyndra's failure. Several scholars have taken up the job of diagnosing this phenomenon.

  • In State of Innovation, a recent (an excellent) compilation of case studies, Fred Block and Matthew Keller demonstrate that "for many technologies, it has not been Adam Smith's invisible hand, but the hand of government has proven decisive in their development." They refer to the Hidden Developmental State, finding that "because these programs [DARPA, SBIR, etc.] contradict the market fundamentalist ideology that celebrates private enterprise and denigrates the public sector, they have remained largely  unknown to the public." Throughout the rest of their book, Block, Keller, and their colleagues discuss the role of the state in the development of solar technology, biotech, nanotech, and microelectronics.

  • In a journal article (PDF) for "Perspectives on Politics," Suzanne Mettler discusses the political difficulties in restoring faith in a government polices which most people aren't aware of.  "Such policies have shrouded the state's role, making it largely invisible to most ordinary citizens, even beneficiaries of existing policies." She proceeds to walk through a strategy for "reconstituting the Submerged State."

  • I've already mentioned Mariana Mazzucato's new pamphlet "The Entrepreneurial State" on this blog before, but it's well worth bringing up again. As she writes, "Many of the problems being faced today by the Obama administration are indeed due to the fact that US taxpayers are virtually unaware of how their taxes foster innovation and growth in the USA, and that corporations that have made money from innovations that has been supported by the government are neither returning a significant portion of the profits to the government nor investing in new innovation." Her work is particularly illuminating on the subject of DARPA, the SBIR, the pharmaceutical industry, patents, the and British innovation system (or lack thereof).

Photo by scottchan.