To Break Out of National Productivity Rut, ITIF Calls for Sea Change in Economic Policy

ITIF released a new e-book arguing for a sea change in thinking that would make productivity growth the principal goal of economic policy.

May 4, 2016

WASHINGTON—Against the backdrop of a stubbornly bleak productivity picture in the United States, the Information Technology and Innovation Foundation (ITIF), a leading technology policy think tank, today released a new e-book (also available as PDF) arguing for a sea change in thinking that would make productivity growth the principal goal of economic policy.

Bucking the received wisdom of conventional economics, the book explains why policymakers in the United States and other advanced nations should adopt comprehensive productivity strategies, and it provides a detailed roadmap for them to accelerate productivity by 1 percent or more. In the United States, ITIF estimates such an increase would make the economy $2.3 trillion bigger than it is otherwise projected to be in 10 years while shrinking the federal budget deficit by more than $400 billion.

“Economists all agree that productivity is the key to improving people’s living standards,” said ITIF President Robert D. Atkinson, the book’s author. “But few believe governments can do much about it. They are wrong to be so skeptical. Policymakers can and must craft national strategies that accelerate productivity. In fact, this should be the principal goal of economic policy. Today’s announcement of a 1 percent drop in productivity for the first quarter of 2016 underscores that America is in a deep productivity rut. It is past time that we focus on getting out of it.”

Atkinson’s book upends a heated series of debates among economists about the future prospects for productivity growth and about its relative benefits or harms for workers. The book rejects the views of both productivity pessimists such as Northwestern University’s Robert Gordon and productivity Pollyannas such as MIT’s Erik Brynjolfsson, arguing instead that the United States could enjoy a significant pickup in productivity growth—but only if it adopts a coherent national productivity strategy. The book also marshals data to refute the notion that such progress would come at workers’ expense.

“All too often, productivity is portrayed as a boogeyman that kills jobs, undermines incomes, and exacerbates inequality,” said Atkinson. “These views are not just utterly wrong, but also dangerous, because they can undermine political support for putting the productivity pedal to the metal.”

The book explains that a core reason productivity has lagged in the United States is that industries have failed to adopt the best new tools in the best possible ways. Neoclassical economic theory holds that organizations have plenty of incentives to boost productivity on their own, and government should not proactively encourage greater productivity because it would only distort the marketplace. But Atkinson refutes this notion. Rather than conceiving of economies as large markets in which self-interested actors respond to price signals, Atkinson argues it is more accurate to think of economies as large, integrated enterprises that work best when countries enact comprehensive productivity strategies that, among other things, support activities that individual enterprises cannot or will not undertake effectively on their own.

Atkinson writes that to boost productivity nations need to get beyond the passive, conventional advice that governments should merely establish the right market frameworks and instead embrace an array of policies that promote greater productivity in all organizations. He outlines a detailed framework to guide policymakers as they craft national productivity strategies. It includes the following elements:

  • Making higher productivity the principal goal of economic policy; 

  • Eliminating preferences for small firms over larger firms, because small businesses are generally less productive; 

  • Increasing capital investment by raising the price of labor (with higher minimum wages, less low-skill immigration, etc.) and lowering the price of capital equipment (with investment tax credits, etc.); 

  • Reforming corporate governance to provide better incentives for investing in long-term capital projects; 

  • Expanding science and technology research targeted specifically toward the development of productivity-enhancing and labor-displacing technologies; 

  • Analyzing opportunities and constraints facing every major industry, and developing sector-specific productivity policies; and 

  • Developing a dedicated productivity agency to develop and coordinate a sophisticated productivity agenda. 

“Without productivity growth, sustained income growth is impossible,” Atkinson concluded. “We have to go beyond the standard counsel from conventional economists that it is enough for policymakers simply to get market conditions and factor inputs right. It is not. Nations need smart, analysis-based productivity strategies, and they must find the political will and bureaucratic means to implement them effectively. If the United States does this right, then it could benefit from a much-needed acceleration in productivity growth to the tune of $2.3 trillion more in GDP by 2026.”

Read the e-book (also available as PDF).

Read the executive summary.

See highlights at a glance.

US Must Up Its Game or Risk Being Surpassed in Supercomputing Race by China, Japan & EU, New ITIF Report Finds

ITIF urges U.S. policymakers to take decisive steps to ensure the United States continues to be a world leader in high-performance computing.

April 28, 2016

WASHINGTON—The Information Technology and Innovation Foundation (ITIF), a leading technology policy think tank, today in a new report urged U.S. policymakers to take decisive steps to ensure the United States continues to be a world leader in high-performance computing. Otherwise, it risks being surpassed by China, Japan, and the European Union at the expense of its economic competitiveness and national security.

“From efficiently designing next-generation products, to empowering scientific discovery, to ensuring the nation’s security, high-performance computing undergirds America’s defense and industrial competitiveness,” said Stephen Ezell, ITIF vice president for global innovation policy and coauthor of the new report. “The U.S. is home to three of the five fastest supercomputers in the world, but China is home to the global frontrunner and plans to launch an even faster supercomputer this year. Japan and the EU have also introduced concerted national programs to achieve high-performance computing leadership. While America is still the world leader, other nations are gaining on us, so the U.S. cannot afford to rest on its laurels. It is important for policymakers to build on efforts the Obama administration has undertaken to ensure the U.S. does not get out paced.”

High-performance computing—using “supercomputers” and massively parallel processing techniques to solve complex computational problems through modeling, simulation, and data analysis—is critical to scientific leadership and national security, the report explains. Commercial innovators also leverage high-performance computing to achieve breakthroughs in a wide range of applications, including in manufacturing, life sciences, chemical engineering, electron­ics, and energy. The report details new areas of potential discovery for manufacturing and industrial applications, as well as health-care and scientific research.

Yet the report shows how competition for global leadership in this area is intensifying. For example, while the United States today is home to 199 of the world’s 500 most powerful supercomputers, this number is down 14 percent from the previous year and represents the fewest number of supercomputers the United States has placed in the Top 500 since the list’s inception in 1993. This drop is occurring while other nations are simultaneously building up their own national strategies to strengthen their high-performance computing ecosystems with the goal of edging out the United States.

Recognizing the heightening competition, President Barack Obama announced the U.S. National Strategic Computing Initiative (NSCI) in July 2015. To build on this program, ITIF offers the following policy recommendations:

  • Congress should hold hearings on the NSCI and the intensifying race for global high-performance computing leadership.
  • Congress should authorize and appropriate funding levels for the NSCI as requested in the Obama administration’s FY 2017 budget.
  • Congress and the administration should reform export control regulations to match the reality of current high-performance computing systems.
  • The administration should continue to make technology transfer and commercialization activities a priority focus of America’s network of national laboratories.
  • The administration should emphasize high-performance computing in federal worker training and retraining programs and in relevant Manufacturing Extension Partnership engagements.

“This isn’t just about making sure U.S. vendors are competitive,” said ITIF President Robert D. Atkinson, coauthor of the report. “This is about building a robust U.S. high-performance computing ecosystem focused on adoption and use, not just production. This will entail broadening knowledge and training and encouraging government agencies to use supercomputers for specific purposes like defense, renewable energy, weather forecasting, and more. Federal R&D investment in frontier technologies has been a catalyst for U.S. development of world-leading technology industries, and it will continue to be critical for leadership in high-performance computing as well.”

Read the report.

ITIF Welcomes House Passage of Long Overdue ECPA Reforms to Safeguard Privacy and Fourth Amendment Protections

Americans expect that their data will receive Fourth Amendment protections regardless of the means used to store it, and this legislation will help bridge that divide.

April 27, 2016

WASHINGTON—The Information Technology and Innovation Foundation (ITIF), a technology policy think tank, today released the following statement from Daniel Castro, ITIF vice president, commending passage of the Email Privacy Act in the U.S. House of Representatives:

This legislation is a long overdue remedy to the loopholes in the Electronic Communications Privacy Act (ECPA) that treat data stored in the cloud differently than data stored on a local computer. Americans expect that their data will receive Fourth Amendment protections regardless of the means used to store it, and this legislation will help bridge that divide.

We are pleased to see the House of Representatives taking this bipartisan step to safeguard the privacy and Fourth Amendment protections of Americans without compromising law enforcement’s ability to prosecute and solve crimes. We hope the Senate will follow suit.