The two biggest problems facing our country today are a stagnant economy and an exploding national debt. Faster economic growth would help pay our bills by bringing in more tax revenue. It would also create more jobs and give a boost to stagnant wages. One of the causes of this stagnation is that our economy has become less entrepreneurial over time as shown by this often cited chart from the Brookings Institution.
A very interesting new book by James Bessen, “Learning by Doing: the real connection between innovation, wages and wealth.” looks at both our economic history and our current economy to understand how society can best meet the challenges posed by new technology. Mr. Bessen identifies the basic problems as follows:
- Funds have been shifted away from vocational education and community colleges at a time when large numbers of workers could acquire valuable skills at these institutions.
- The rapid growth of occupational licensing restricts training and jobs open to mid-skill workers and, in many cases, limits their use of technology.
- Military procurement favors large defense contractors over start-up firms, while heightened secrecy requirements limit the development of open standards and the broad sharing of knowledge.
- Job mobility has declined, limiting knowledge sharing and weakening labor markets.
- Abusive patent litigation has exploded, making it harder for startups and small firms to develop new technology.
Mr. Bessen concludes:“The practical skills of ordinary people have been a wellspring of widely shared wealth for 200 years, and the economic power of mighty nations rests on the technical knowledge of the humble. Provide the means for ordinary workers to acquire the skills and knowledge to implement new technology today and the economic bounty will not only grow, it will be widely shared.”
What are the roadblocks to implementing Mr. Bessen’s recommendations? I will return to this question later.