An Introduction to Case Studies in American Innovation

The following is the introduction to the Breakthrough Institute report, Case Studies in American Innovation: A New Look at Government Involvement in Technological Innovation. You can download the full report here or read more excerpts from the document here.

"It is not an exaggeration to claim that the future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply."

-International Energy Agency (World Energy Outlook 2008)

Summary

Technology is a cornerstone of American prosperity, the primary source of our economic competitiveness, and a constant presence in our everyday lives. From the 19th century's advances in manufacturing and transportation to today's cutting-edge developments in biotechnology and computer science, Americans have been world leaders in creating, producing, and deploying innovative technology. Nobel Laureate Robert Solow's classic 1956 economic model of productivity growth demonstrated that technological progress drove at least 80% of economic growth in the United States between 1909 to 19491, and innovation continues to be perhaps the most powerful engine of our prosperity.

Today, America and the world are in energy crisis. Energy prices are escalating, foreign energy dependency is increasing, global warming continues unabated, and all across the world there are billions of people who continue to live without access to energy. The single greatest solution to these crises is to once again harness America's forces of innovation to make clean energy technology both cheap and abundant.

But to harness this solution we must take a new look at the process of innovation and determine the best mechanisms to catalyze and accelerate technology development. This requires looking beyond both the mythos of the lone American inventor and the market fundamentalist ideology that has dominated American politics in recent decades. Instead, we must look closely at several key American technologies and unearth the historic and seemingly ubiquitous government investments that fueled their development.

This document therefore presents seven historic case studies of American innovation, ranging from the rise of railroads and commercial flight to more recent developments in personal computing and the Internet. It also presents three shorter case studies spotlighting recent developments in energy technology and two international examples of public-sector support for clean energy development. In each example, government support was critical at one or more stages in the development and deployment of these technologies, many of which Americans now take for granted as constant facets of their everyday lives.


Myths, Facts, and Today's Energy Innovation Challenge

The energy supplies of America and the world are currently dominated by outdated and dirty technologies - chief among them the combustion of coal and oil using technologies initially developed in the 19th century.

The environmental consequences of this dependence on fossil fuels are well known; burning these fuels is the leading cause of greenhouse gas emissions and air pollution, leading to global warming and climate destabilization as well as health impacts like asthma.

However, environmental risks are only the tip of the iceberg. Reliance on fossil fuels exposes our economy to volatile energy prices and fosters dependence on a dwindling fuel supply that drives prices ever higher. Rising energy prices act as a dead weight on the American economy and contributed to the current economic crisis. And foreign oil and gas dependency is resulting in the largest wealth transfer in human history, propping up petro-dictatorships and funding the spread of radical Islam.

Meanwhile, from China to Brazil and India to Nigeria, billions of global citizens are hungry for affordable fuels to power their economic development. Without ready alternatives, they too will depend on fossil fuels, exacerbating each of these problems.

It's no wonder the world's chief energy watchdog, the International Energy Agency, considers today's global energy trends "patently unsustainable."2 From economic, national security, and environmental perspectives alike, our society's addiction to fossil fuels is dangerous and irresponsible. New, clean, affordable and secure energy technologies are needed to replace the aging global energy system and power a sustainable, prosperous, and safe 21st century.

Despite this clear imperative, the energy industry is one of our economy's least innovative sectors, and new energy sources such as wind, solar, biomass, and even nuclear compose a small percentage of total energy production. Bringing clean energy sources to significant scale at affordable prices poses numerous and enormous technological challenges, from the improvement and refinement of existing energy sources to the invention of entirely new technologies.

New public policies are needed to ignite the next era of American innovation and catalyze the rapid development and deployment of critical clean energy technologies. Yet to date, most of the energy and climate policy debate has centered on mechanisms to regulate and price carbon emissions and increase the cost of dirty fuels rather than strategies to promote technological innovation and deployment and drive down the costs of clean energy sources.

Carbon pricing advocates argue that by putting a price on carbon emissions - and in turn making carbon-intensive fuels such as coal and oil more expensive - policies like carbon taxation or carbon "cap-and-trade" will stimulate demand for alternatives to fossil fuels and in turn encourage innovation by the private sector. Carbon pricing thus proposes an elegant solution to the innovation challenge: change the price signal, and the gates of innovation will burst open, driving private businesses and entrepreneurs to develop new technologies and industries.

In this account, the government is notably absent from the innovation process. Echoing the market fundamentalist ideology that has dominated the American political right, and indeed much of the mainstream political discourse for the past several decades, carbon pricing advocates often cite the inefficiency and corruption that government intervention supposedly entails. They accordingly argue that the state should only set carbon prices and 'let the market work.'

The carbon pricing narrative also dovetails neatly with the dominant mythology of American innovation, in which great advances in technology have come through the independent efforts of lone inventors and captains of industry tinkering in garage workshops and private labs. Benjamin Franklin and Alexander Graham Bell, Steve Jobs and Bill Gates - these are the heroes of the American mythos of invention.

These stories of the lone inventor and the garage genius are compelling. Ultimately however, whether spun by history textbooks or proponents of laissez-faire economics, these stories are largely myth. To be sure, proper price signals and the individual genius of American inventors and entrepreneurs are critical to technological development. But behind so many great advances in American technology lies an often-silent and neglected force: public investment.

Technologies ranging from rail transport to nuclear energy and from microchips to the Internet were all invented by government-supported researchers, developed with public funding or first deployed through government purchasing and incentives; likewise, public investments routinely trained the high-caliber human capital or built the enabling infrastructures required for the widespread deployment of many of these technologies. Far from being a hindrance to innovation, the state historically has been one of its greatest drivers, playing a critical role in the development of many of the technologies and industries that now form the bedrock of modern society.

While academics and some policymakers have long realized the importance of government investment in stimulating technological change, such awareness has been conspicuously absent from the mainstream energy and climate debate. This document is meant to reintroduce the importance of public investment to that debate. The case studies that follow offer but a few examples of how government action has directly led to many of the key technologies we take for granted in our modern lives. These case studies demonstrate that strong and targeted government investment can and must play a powerful role in the critical effort to overcome the energy innovation challenge and build a 21st century, clean energy economy.


You can download the full report, Case Studies in American Innovation here or read more excerpts from the document here.