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Politics : View from the Center and Left
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To: Steve Lokness who wrote (142207)8/8/2010 8:09:17 PM
From: JohnM  Read Replies (1) of 542026
 
The Economy Needs a Bit of Ingenuity
By EDMUND S. PHELPS

Nice piece. Very interesting argument. I've seen it in other places so it's not new. At least not to me.

My overall take is that the first part makes the most sense to me. Down to the part at which he offers his program. And much of that is sensible. I have two quarrels with the argument, however. One that I see Allen has already noted.

1. Phelps asserts that:

Furthermore, innovation creates jobs across the economy, for entrepreneurs, marketers and buyers. State-led technology projects do not.

And the largest counter case that leaps to mind is the internet. Massive is hardly the right word for the employment changes that resulted from the innovation it was and the myriad of innovations it fostered. And which we are still experiencing.

2. He argues that demand is not the problem but fixing the structural features he enumerates is. I fail to see the either/or character of the argument. His list of structural issues is reasonably good. But so long as there is a serious lag in demand for goods, we aren't going anywhere. And that demand grows from employment, whether public or private in its source.

Well, having typed two problems with his argument, I've thought of a third. His proposal for a First National Bank of Innovation is one of the screwiest things I've heard in a very long time. A "state sponsored network of merchant banks that invest in and lend to innovative projects." Much, much ambiguity there. How does it get funded? What role does the government pay in oversight, regulation? What of the profits from the innovations? Etc.

Definitely not very clear thinking there.
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