Issue 02 - August 6, 2019

“For a number of reasons, there is no broad-based intellectual movement focused on understanding the dynamics of progress, or targeting the deeper goal of speeding it up.”

— Patrick Collison and Tyler Cowen

An essay in The Atlantic by Patrick Collison and Tyler Cowen caused quite a stir last week for proposing the inauguration of “Progress Studies” — an interdisciplinary approach to studying the “successful people, organizations, institutions, policies, and cultures” that give rise to scientific and technological progress.

The response from the Twitter commentariat was as predictable as it was sad; along the lines of “Um, haven’t you heard of... history?” Needless to say, the essay pointed to antecedent areas of study in at least nine separate paragraphs. The authors simply suggested those various lines of research, covering history, sociology, management theory, engineering, economics, and everything in between, unite to deepen our understanding of the conditions that give rise to progress.

Consider that everything we associate with the Florentine renaissance — Michelangelo, da Vinci, Botticelli — emerged from a self-governing city state with a population of about 60,000. Florence was not just home to the world’s best artists, but the best scientists, the best textile industry, the best masons, and the best banking system. It’s improbable that their success across this cross section of activities didn’t have some common cultural or institutional factors that, beyond historical curiosity, might be brought to bear in the present. Was it their guild system? The role of patronage and apprenticeships? A humanistic, commercial culture? And what, if anything, might the answers to these questions tell us about, say, our contemporary educational and grant-making organizations?

Importantly, unlike existing disciplines, “when viewed through the lens of Progress Studies,” write Collison and Cowen, “the implicit question is how scientists (or funders or evaluators of scientists) should be acting … In that sense, Progress Studies is closer to medicine than biology: The goal is to treat, not merely to understand.”

If this sounds familiar, it’s because it echoes Marx’s famous thesis that “the philosophers have only interpreted the world; the point is to change it.” Progress Studies thus harkens back to the original idea behind Critical Theory in the tradition of the Frankfurt School, defined by Max Horkheimer as an integrated social science guided by a normative commitment to human emancipation. 

Unfortunately, “In the late 20th century,” notes the philosopher Joseph Heath, “critical theorists became increasingly preoccupied with the so-called ‘normative foundations of social criticism.’ Rather than doing critical theory, they spent most of their time worrying about how a critical theory of society might even be possible.” In that sense, Progress Studies is a call to get back on track; to quit the post-modern naval gazing, and apply the totality of social science to criticism and reform of whatever’s holding progress back.
 

Expanding Horizons of Possibility

I was recently asked why I use the term “industrial policy” in my work, rather than something more innocuous like “innovation policy.” One reason is industrial policy’s connotation as a historical and system-level approach to economic development. It encompasses more than deregulation and R&D tax credits to include path dependencies and the broader institutional context. The questions of what created Renaissance Florence, for example, directly parallels Brad Delong’s concept of “communities of engineering excellence.” Progress seems indelibly linked to the existence of creative ecosystems rather than, say, a low cost of capital. Studies of industrial policy are thus invariably studies of comparative political economy, rather than this or that discrete reform. This is particularly needed in the American context, where a sense of exceptionalism tends to preclude such comparisons, closing horizons of possibility. 

A second reason is that industrial policy makes the normative dimension of public policy explicit, rejecting the conceit of neutrality offered by advocates of pure laissez faire. This point was elegantly made by Oren Cass in his debate with Richard Reinsch at last month’s National Conservatism conference (Resolved: That America Should Adopt an Industrial Policy):

Why do we care about the economy’s composition? For one thing, it has serious distributional consequences. If we only care about consumption, we might believe we can remedy those with redistribution—let the wealth get created by people working in tech or finance in just a few cities, then collect taxes from them and mail checks to everyone else. But if we value, as we should, the ability of individuals, their families, and their communities to participate as productive contributors to society, then our economy needs to generate good opportunities for workers of different aptitudes in different places.

Cass ended up winning the debate by audience vote, 99 to 51. Talk about realignment! You can read my full review of the conference here. A taste: 

The National Conservatism conference was rife with these and other internal contradictions. But in the end, the conversations felt genuinely refreshing, if only because participants were liberated to critique the mistakes of movement conservatism and rethink issues of economics, federalism, and culture from the ground up.

Small Business Reform

Meanwhile, in the critical spirit of doing rather than merely debating, the reauthorization of the Small Business Administration (SBA) has hit a temporary impasse. 

For background, the SBA is a federal agency that guarantees loans to small businesses. Under Chairman Marco Rubio (R-FL), the Senate Small Business Committee has embarked on its first reauthorization in 20 years. The full details of the overhaul are available here (pdf), but the legislation, in short, reorients the SBA’s programs to the industries of the future, like advanced manufacturing and businesses in the R&D-commercialization pipeline.  

As discussed at the Struggling Regions Initiative, the SBA is long overdue for reform, and with this bill, has the potential to become something like a development bank for high-tech infant industries. Consider the proposed Innovation Growth Loan program, which would allow small businesses in R&D-intensive manufacturing sectors (along with past SBIR/STTR awardees and companies blocked from receiving foreign investment for national security reasons) to borrow up to $50 million towards significant capital investments. Drawing on lessons from Israeli industrial policy, the loans are released in tranches, and conditioned on the businesses meeting revenue growth benchmarks, lest they face discipline in the form of an increase in principal.

Speaking of comparative political economy, check out this excerpt from the bill's section-by-section:

Supporting innovation is necessarily experimental – not every venture will succeed. There must be a mechanism to clearly define success and prevent the entrenchment of unsuccessful ventures, and to promote successful ones. The examples of other nations, for example the “Asian miracle” economies of Taiwan, Japan, Hong Kong, and South Korea, indicate clearly that holding firms accountable for performance when they benefit from public policy is critical to building and sustaining a strong advanced manufacturing base. The SBA must therefore measure performance beyond simply gauging risk ... SBA must insist on strong accountability, demand performance discipline, and expect results.

The Niskanen Center led a coalition letter supporting the reauthorization with our friends at the Information Technology and Innovation Foundation (ITIF). You can read it here. 

We were expecting the reauthorization to move out of committee before the Senate left for August recess. Unfortunately, at the last minute Ranking Member Cardin (D-MD) stopped the mark-up, citing opposition to the bill’s regulatory reforms. At issue is a provision allowing the SBA to request an OIRA / OMB flexibility analysis of proposed regulations that might significantly impact small businesses. It’s a fairly modest reform, and given the bipartisan nature of the reauthorization, I’m hopeful the impasse will lift when Congress returns in September.

— Samuel Hammond
Director Poverty and Welfare Policy
Niskanen Center

Assorted Links

Does the US suffer from Dutch Disease? Maybe, yet this is not the answer.

Lessons from the East Asian Economic Miracle 

Mark Muro on the rise of “wealth work.” The new servant class?

Joseph Heath reviews Tyler Cowen’s “Stubborn Attachments”

Scott Alexander defends billionaire philanthropy. Renaissance patronage 2.0?

The Realignment — New podcast of note from the Hudson Institute.