Jumpstarting America: How Breakthrough Science Can Revive Economic Growth and the American Dream

“an important and interesting book about the future of the United States.”

While Americans think of think of technology and technology companies, companies like Amazon, Apple, and Google usually come to mind. And because innovation at these companies is thriving most Americans think that United States must be doing pretty well when it comes to innovation.

Thus, it might come as a shock for most people to hear that there are serious problems in the American innovation economy, but MIT professors Jonathan Gruber and Simon Johnson argue that there are.

In Jump-Starting America, Gruber and Johnson assert that America faces two big and interrelated challenges when it comes to innovation. The first is that the overall rate of innovation has slowed, and this is reflected in the very slow rate of labor productivity growth over the last decade. Increasing labor productivity—the amount workers produce per hour of work—is the single most important driver of future economic wellbeing, for it determines growth in GDP per-capita levels.

Gruber and Johnson paint a compelling picture that much of this growth this is due to lagging innovation. Why has innovation lagged? Simple: Starting in the late 1980s as the Cold War was winding down the federal government dramatically cut back on its investments in science and research.

In essence, the federal government decided it could dramatically scrimp on the innovation fertilizer needed grow a thriving innovation economy. The result is that the federal government spends vastly less on research and development (R&D) as a share of GDP now than it did in the 1960s to 1980s. 

And just as the results in declining crop yield would be obvious for a farmer that cuts back on fertilize, the results are obvious to the U.S. economy: anemic productivity growth rates that make it difficult to raise real wages.

To remedy this, the authors rightly argue that “To really improve the performance of the American economy—and to raise incomes across the board—we need to invest heavily in the underlying science of computing, human health, clean energy, and more.”

The first part of Jump-Starting America is an interesting walk through the last 70 years of federal support R&D that played a key role in transforming America into the wealthiest and most powerful nation on earth. From WWII funding of radar in Boston, to the national panic over Sputnik and the massive government funding response, to NASA (which gave us much more than Tang), to the central role of the federal government in enabling the current computer and Internet revolution, to the unlocking of the human genome, federal R&D has paid huge dividends.

Yet it’s easy for most people, including some experts, to underestimate this role. An example of this was a few years ago at a Washington, DC, salon dinner discussion of the future of telecommunications technology. A scholar from a prominent free market think tank declared: “We don’t need the government funding research, after all we got the internet from the private sector.” Given the central role of the Defense Department and later the National Science Foundation in enabling the Internet, one would not be sure to have laughed or cried.

Along these lines the middle part of the books provides compelling arguments and examples for why it would be a mistake to rely only on the private sector for innovation, as important as that is. Gruber and Johnson lay out an array of market failures which lead business to invest less in R&D than is societally optimal, and provide compelling examples of how federal funding of basic and applied research paved the way for important innovations that benefit all Americans.

The last half of the book delves into a second major problem with the U.S. innovation economy and that is growing regional imbalance when it comes to innovation. They refer to successful innovation regions as superstar places—think Austin, Boston, Seattle, and Silicon Valley. These and a handful of other superstar places are booming, enjoying a positive cycle of more innovation leading to more startups to more innovation and on and on.

At the same time, whole swaths of the nation, especially areas not on the coasts, are not doing as well when it comes to innovation and the good jobs that come from it. They note that seven of the ten highest-earning metropolitan areas are in states that are in the top ten in terms of per capita public R&D. None of the top ten—or even the top twenty—highest-paying MSAs are in states that are in the bottom half of spending on public R&D per capita.

That’s a problem, they argue, for two reasons. First, because innovation industries pay the highest wages and experience the fastest growth, regions without many of these firms can be left behind. And as we saw in the 2016 presidential election, voters in these places are more sympathetic to populist messages.

But the authors also argue that is if a big swath of the nation does not benefit as much from innovation or federal R&D, they are less likely to tell their elected officials to prioritize innovation broadly and federal funding for R&D specifically. As a result, they lay out a compelling case and agenda for a national strategy to help spread the innovation economy to more places.

Notwithstanding the excellent coverage and important arguments and ideas, there are a few places where one could argue that authors get it wrong. The first is that the authors sometimes default to embracing what the linear model of science, which holds that government should fund science that scientists choose and then sit back and wait for wonderful things that happen. But one can make a compelling point that many of the most important innovations—radar, drugs, jet engines, advanced computing and the Internet—came from “strategic research” in which researchers were trying to solve problems related to societal needs.

As such, big areas to fund would not be ocean research, as they recommend, but rather electrical and mechanical engineering related to robots, which if it pays off would lead to a major boost in living standards.

They also unfortunately repeat the canard that the falling share of labor income is due to a growing share going to capital (actually it’s because a growing share is going to rent). But these are minor quibbles in what otherwise is an important and interesting book about the future of the United States.