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Technology drives the economy. Strictly speaking, technology is any improvement to the status quo. Economic production functions display economic growth as driven by technology, or in more common terms, innovation.
Throughout the world and throughout time, innovation is not solely the responsibility of the private sector. A common misconception is that privately owned corporations, through research and development, propel innovation. Yes, Google (a private company) is touted as the leader in innovation and Facebook, Microsoft, and Apple are all private firms on the cutting edge of technology and innovation, but the government has and should continue to provide both protection and incentive for innovation. In a time when the loudest voices are calling for smaller government as a solution to economic woes, government activism focused on innovation is the solution.
Governments drive innovation and technology, which subsequently drive economic growth in two major ways. The first is to protect intellectual property and the subsequent profits through the patent system, which provides value to ideas. If a patent is granted in The United States, the owner of the patent is granted a monopoly over the innovation for a set number of years (roughly 20 years). Currently, many rival companies are purchasing patents and creating legal troubles for their competitors (mostly wasting resources: time and money).
The current patent law is dated and does not facilitate innovation growth as intended. There is a distinct difference in ideas as inventions and ideas that are methods. The former deserve protection; a patent on a new drug provides incentive for the development of the drug and new programs (Microsoft’s Windows or Office computer programs) will only be created if financial protection exists. But methods and processes should be allowed to flourish and facilitate more growth, not be held back by court proceedings. In the words of President Obama:
“Through patent reform, we can cut the red tape that stops too many inventors and entrepreneurs from quickly turning new ideas into thriving businesses — which holds our whole economy back.”
Along with financial protection through patents, the government can directly sponsor innovation. There would be no Google, Microsoft, Apple, or Facebook without the government’s Defense Advanced Research Projects Agency (DARPA)… they were responsible for the internet. Check out what DARPA is currently working on.
Government intervention to create innovation is nothing new. Never mind the advances of government agencies such as DARPA and NASA, consider the eighteenth century problem of determining a ship’s longitude at sea (the North Star took care of Latitude). The problem had been around even before Columbus thought he landed in India, but in the mid 1700s, “the rulers of Spain, Holland, and Britain offered large monetary prizes for the solution. [The problem was solved] by a poorly educated but eminently skilled clockmaker.” He used the chronometer (from a watch) to set two watches: one to Greenwich Time and one to noon on the ship when the sun was directly overhead. Nevertheless, government sponsored financial incentive was the means of innovation. (Anecdote from Charles Jones’ “Economic Growth”)
This primitive version of “crowd sourcing” should be replicated today. We have problems in this country… too many to name, but the government should provide a means for entrepreneurs and innovators to find solutions and reap financial rewards.
A year ago, the LA Times published a ranking of over 5 thousand third through fifth grade teachers based on their value added scores. If you are not familiar with Value Added Ratings, they are a statistical technique that measures how much a teacher’s students improve on a standardized test over the year the teacher works with those students. These ratings are very controversial, especially as a means to evaluate teachers. To a parent reading these rankings in the LA Times, they seem like a say all end all evaluation of their child’s teacher, prompting calls to change classes and fire teachers. In May the LA Times released value-added ratings for over eleven thousand more teachers without addressing the intricacies of the data.
Last winter, I analyzed Value-Added Ratings, specifically as a way of evaluating teachers. Here is a link to my paper (see pages 3-6 for a literature review on the subject and p. 6-8 for a look at the economic model, while p. 9-17 are a critique of the method).
Here is a summary of that paper:
Economists and educational researchers studying student achievement return consistent results about teachers: they matter. While researchers agree that educational achievement depends on a quality teacher, disagreement among both economists and educational researchers occurs when considering what constitutes teacher quality. Clearly, one of a teacher’s specific duties is to improve student performance and value added statistical methods do measure student progress, but the issue arises when that progress or lack of progress is considered completely the effect of the teacher.
This paper concludes that if school administrators only evaluate teachers on student progress, then they may not be measuring the teacher’s total value to students. The review shows that many factors, both observed and unobserved, can affect student achievement and that teachers have the ability to impact their students in ways that standardized tests cannot measure.
In a 2008 New Yorker essay, Malcolm Gladwell compared hiring a new teacher to drafting an NFL quarterback. In both professions observable characteristics do not translate to production, whether on the field or in the classroom. In the NFL, coaches can examine statistics that their quarterback directly controls and that are easily observed: completions, yards, and touchdowns, but observations from college games do not translate to NFL success. Meanwhile, school administrators only evaluate teachers on observable characteristics such as experience, highest degree, undergraduate university attended, and in a recent number of cases Value Added Ratings.
Just as a quarterback’s college statistics do not directly indicate NFL performance, easily measured or observable characteristics of teachers are not always correlated with student success. Value added scores vary significantly from year to year and only measure student improvement on standardized tests, not necessarily learning. If, over a ten or fifteen year period a teacher’s Value added score was consistently higher or lower than average, then the scores can tell nus something about the teacher. But looking at one score from one year and publishing that as an all encompassing value of a teacher is unfair.
Many factors, both observed and unobserved, can affect student achievement; teachers have the ability and responsibility to impact their students in ways that standardized tests cannot measure. If school administrators only evaluate teachers on student progress on a standardized test, then they are not necessarily measuring the teacher’s total value added to their students.
One week ago, the cornerback position was a major weakness for the Philadelphia Eagles. Now, it is a major strength and many fans and pundits are waiting for the Eagles to deplete their depth by trading Asante Samuel. Unless they receive a significant return on Samuel, I think the Eagles should stand pat with three shut down corners; here’s two reasons why:
First, security against an injury. Defensive players are consistently missing games and plays due to minor injuries, tweaks, etc. How many times do you see a deep ball to the opponents top receiver and wonder why the third string corner is covering him? Other teams see the substitutions and attack the weakness. With three top corners, the Eagles will not have this issue.
Second, the NFL is a pass first league, period. Look at the projected top teams in the NFL: Green Bay, Atlanta, and New England. Each of these teams feature predominately receiver heavy sets and in the playoffs, the Eagles will consistently need their three corners in the same defensive set. Pundits are saying that the Eagles should use more nickel packages because of their glut of talent at corner. While their conclusion is right, their reasoning is wrong. The Eagles will be forced to use more nickel packages by their opponents, especially in the playoffs.
While it seems that a deal is in place to raise the debt ceiling so that our country can pay its bills, we are missing the real problem facing our country: ECONOMIC GROWTH. The debate and ultimate compromise only focuses on a symptom and ignores the real problem that our country is not growing and shows no significant indicators that it will change its course.
If the United States grew its GDP by 1% more over the next 3 years (than current projections), we would not have to worry about our spending on Social Security or other entitlement programs. Significant economic growth combined with a decrease in our presence and subsequent funding for the wars in Iraq and Afghanistan would allow our country to pay for our commitments (social security, etc.) and a new stimulus (to improve our infrastructure, increase our human capital, and promote employment).
Stabilizing our economy for long-term growth should be our main concern. The first step is always to acknowledge the problem and I have not heard our politicians in Washington or any of the 2012 candidates recognize that our main concern should be economic growth, not symptoms such as debt, health care, taxes, or entitlement programs. Once our fiscal house is in order, solutions to our symptoms will fall into place.