How to Make the United States Innovative Again

Yesterday I suggested that maybe the United States isn't as innovative as we like to think. (It wasn't my idea. It was Michael Mandel's.) But Mandel's piece didn't seem to answer the big question: What are innovators doing wrong? And how do you design a macroeconomic policy to unleash ideas? Today, I have answers, and they range from rescuing engineers from the clutches of the military, to hosting a big national innovation contest, to changing the way we tax companies.

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Free the Innovators!
Spurred by my open question, commenters immediately lept into emancipation mode. Commenter Mgoodfel suggested that the defense budget was eating up our engineering talent, and that chopping up the military could free up some techies. Kevin K identified another potential suck-hole for scientists and engineers: Wall Street. Hedge funds pay more than biotech labs, so the future's math and science genius could be stuck being today's derivatives quant. Taken together, perhaps America does have significant innovative power, but short-term financial incentives have lured them away from the science and technology realm.

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Design New Incentives
Yesterday, I mentioned government-sponsored contests (a la McCain's $300 million prize for a working electric car battery), or special tax credits for biotech companies. Little did I know, BusinessWeek was all over this area. One idea was graduated credits for research and development of products, so the more a company spends on R&D, the more money they save, freeing them from the short-term bottom-line calculus that can strangle company innovation. Or what about innovation awards? Nothing says "we value innovation" like making up prestige out of thin air, and waiting for companies to be lured by the shiny prizes. Or, if we wanted to get really crazy, we could simply end the corporate income tax altogether.

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Invent a Cabinet Position
There are a lot of people who think that innovation promotion is important enough to create an innovation secretary or, sigh, innovation czar. My first instinct is that the best way to encourage private sector innovation is not to create a new Cabinet-level overseer of R&D efforts, but in a way, it sounds like the Obama campaign is already preparing for greater public-private cooperation in the cybersecurity realm. Obama's cybersecurity plan that he set out last week promises "making major investments in our information infrastructure," which could be a boon for both established companies and start-ups looking for seed capital.

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Focus on Education
On the subject of cybersecurity, Obama has already stated an interest in spending even more money in math and science education. The point that American students have fallen way behind in math and science is a well-beaten horse. Basically every study demonstrates that Americans fall behind most developed countries in international standardized M/S tests. And yet, we spend huge amounts of money per student, by international standards. So the trick, again, is making the incentives clear. After No Child Left Behind, many states pared down their science education to raise test scores on the two biggies: math and English. What if the federal government set national guidelines for science, even technology knowledge at an early level? It would at least communicate to students that 21st century education values extend beyond reading comprehension.

And again, more ideas (and criticism) welcome!