The future of the American worker depends on research and innovation.
Innovation is the engine that sustains the American economy and its workforce. Over the past three decades, traditional manufacturing employment has collapsed, while employment in innovative industries has skyrocketed. But the United States is not investing enough in research and innovation. As a consequence, our salaries and our jobs are not growing at the rate they should.
At the heart of the problem, there is a serious failure in the market for knowledge. It stems from the fact that the creators of new ideas are not always fully compensated for their efforts, as some of the benefit of their research inevitably accrues to others in the same industry.
Consider, for example, the introduction of the iPad. Because the product was completely new, nobody really knew its market potential. Apple carried substantial risks, because it had invested significant resources in the iPad's development. Indeed, when Steve Jobs unveiled the device in front of a select group of journalists and opinion leaders in San Francisco in 2010, many industry analysts were skeptical, arguing that the iPad was just an expensive gadget and therefore destined to remain a niche product. Some ridiculed it as an out-sized iPhone without the phone, and predicted that it would generate little interest. After the launch, however, it became clear that the iPad was going to be an international sensation, and many competitors -- including Samsung -- immediately started developing their own versions. Essentially, those competitors benefited from the information generated by Apple's risk-taking.