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Picking Winners?

Mark Marich on April 08, 2010 Source: Policy Dialogue on Entrepreneurship

Can and should the government pick “winners”? That was the question driving the debate hosted today by the Information Technology and Innovation Foundation (ITIF).  

James Fallow (National Correspondent, The Atlantic) moderated the debate which had Rob Atkinson (President, ITIF) and Clyde Prestowitz (President,
Economic Strategy Institute) arguing in support of the proposition and Robert Lawrence (Professor, Harvard University) and Claude Bartfield (Resident Scholar, AEI) arguing against the proposition.

Against

Lawrence and Bartfield argued that although not perfect, the market is far better than the government in allocating resources, and thus rejected the idea that the government can let alone should picking winners.

Reacting to the other side of the debate’s discussion of criteria for picking winners (high-end job creation, entrepreneurialism, innovation, etc), Lawrence argued that instead of using technology as an instrument, other, more specific policy instruments can target those benefits, such as subsidizing employment to create more jobs.

Lawrence also argued that changing administrations means that the government is unable to operate strategically and creates uncertainty, which deters investors from pursuing picked technologies. This contrasts Taiwan and China, where the political system is set to keep experts in place.

Both respondents on this side of the debate also pointed out that industrial policy implies trade protectionism.

In favor

Atkinson and Prestowitz highlighted the role that the government played in the creation and success of pursuits from steelmaking to the Internet, as well as the lessons the U.S. has gained from failed attempts.

Atkinson also stressed that technology development is important not only because it has spill-over effects and job creation benefits, but because it is a goal in itself due to the economic advancement it generates. 

Counter-arguing the point of the other side that the technology innovation process is just too politicized to correctly pick winners, Atkinson pointed to the fact that all regulation, including tax policy, is highly politicized, and should not deter efforts to pursue next generation technologies.

Market failures are not discrete, so correction mechanisms must be systemic in scope, suggested Atkinson, who advocates a national innovation system. “Price alone doesn’t get you innovation,” said Atkinson, citing the example of Europe, where the costs of gas pollution to the individual have not led to the creation of European electric cars- only smaller cars.

Atkinson and Prestowitz also added that aversion to government intervention comes at a cost as major competitors around the world adopt national innovation policies and ramp up government research and development in emerging technologies.

The audience

The effect of this thought-provoking discussion changed some attendees’ minds, with those who agree that the U.S. government can and should pick winners increasing from 48% of the audience before the debate to 60% at the end. The percentage of “unsures” dropped from 24% to 15% at the end of the debate, according to the event’s electronic polling.

Category:  General  Tags:  itif, prestovitz, atlkinson, lawrence, bartfield

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