In a Planet Money show about whether Super Bowls help host cities, a sports economist named Victor Matheson, a professor at College of the Holy Cross, described himself and other sports economists:
We’re economists. And we’re concerned about equity and we’re concerned about efficiency. And what most economists see . . . “
He didn’t say “We’re concerned about innovation”. The way he ignores innovation reflects the whole field of economics. Here’s the same thing from Christine Romer. In an editorial about whether manufacturing deserves special treatment, she considers only productivity and equity:
It might be better to enact policies that will make all American businesses and workers more productive and successful. . . Today, we face a profound shortfall of demand. . . .We need actions that raise overall demand. [She doesn’t say we are in a period of profound stagnation in most industries, which is also true.] . . . More aggressive monetary policy that lowered the price of the dollar would stimulate all our exports . . . Moving is very costly for dislocated workers with ties to their communities. . . Manufacturing jobs are seen as one of the few sources of well-paying jobs for less-educated workers. . . . Public policy . . . should be based on hard evidence of market failures, and reliable data on the proposals’ impact on jobs and income inequality.
As if innovation (and lack of it) don’t exist. Here’s an example from Robert Reich, in a post “rebut[ing] the seven biggest economic lies”:
Shrinking government generates more jobs. Wrong again. It means fewer government workers – everyone from teachers, fire fighters, police officers, and social workers at the state and local levels to safety inspectors and military personnel at the federal. And fewer government contractors, who would employ fewer private-sector workers. According to Moody’s economist Mark Zandi (a campaign advisor to John McCain), the $61 billion in spending cuts proposed by the House GOP will cost the economy 700,000 jobs this year and next.
Nothing about the effect of shrinking government on innovation. Many types of innovation increase jobs.
This is like doctors ignoring the immune system. Ignoring the effect of this or that policy on innovation is likely to lead to decisions that reduce innovation in favor of something easier to measure or defend, such as productivity or equity. The cumulative effect of ignoring innovation is stagnation and decline, caused by problems that got worse and worse as, due to lack of innovation, they failed to be solved.
Tyler Cowen (The Great Stagnation) and Alex Tabarrok (Launching the Innovation Renaissance) are absolutely right to focus on innovation and the lack of it. The obesity epidemic is 30 years old — a good example of a problem that has gotten worse and worse. Judging by Tara Parker-Pope’s reporting, mainstream weight researchers don’t have a clue — in the form of empirical results — how to solve it. Outside mainstream academia, the dominant weight-loss idea is a low-carb diet. That idea is a hundred years old (Banting). How little innovation there has been. That Parker-Pope failed to criticize researchers for their lack of progress shows how deep the problem is. She appears not to grasp the possibility.