We like to think of ourselves as an innovation nation but our government is a warfare-welfare state. To build an economy for the 21st century we need to increase the rate of innovation and to do that we need to put innovation at the center of our national vision. Innovation, however, is not a priority of our massive federal government.

Nearly two-thirds of the U.S. federal budget, $2.2 trillion annually, is spent on just the four biggest warfare and welfare programs, Medicaid, Medicare, Defense and Social Security. In contrast the National Institutes of Health, which funds medical research, spends $31 billion annually, and the National Science Foundation spends just $7 billion.

That’s me writing at The Atlantic drawing on Launching the Innovation Renaissance. Here is one more bit:

Our ancestors were bold and industrious–they built a significant portion of our energy and road infrastructure more than half a century ago. It would be almost impossible to build that system today. Could we build the Hoover Dam today? We have the technology but do we have the will? Unfortunately, we cannot rely on the infrastructure of our past to travel to our future. Airports, an electricity smart grid that doesn’t throw millions into the dark every few years, ubiquitous Wi-Fi — these are among the important infrastructures of the 21st century, and they are caught in the regulatory thicket.

Putting innovation at the center of the national vision is not simply about spending more, it’s about how we approach all problems. Read the whole thing for more discussion of regulation and other issues.

Here is the link to his book on Amazon. Now, if we are going to have a government, I certainly would advocate one that is more in line with what Tabarrok implies. I would strongly, and I mean strongly, caution everyone that the most likely scenario that will come out of the work of Tabarrok is that the big tall bars on the right side of that chart will remain the same, and political and interest group pressure will be to ramp up the bars on the left – with no true reforms of the tax code, welfare state, or the educational or health systems. I put my odds at any meaningful increase in innovation funding at 10%, and I put my odds at doing it right at 0.1%.

First, you would be surprised by what I call the compressed spring effect. Before I ask questions like this (I can tell you about others soon), imagine a student’s thoughts to lie on a compressed spring. As soon as I ask the question, it’s like letting go of each of the ends of the springs and their thoughts instantly get violently tossed to each end of the spring. In this case, when I ask them to think about how our public lands are managed, they immediately think that I am asking if they prefer 100% government ownership and operation versus 100% private ownership and operation. Not only that, the particular type of private ownership and operation seems to be soul-less profit-hungry recreational firms, sort of a MMA blended with a casino blended with Walt Disney World.

The world, and the question I am asking, has a lot of interesting stuff in between. For example, one might imagine an effective way to preserve our national treasures is to ask, “well, what forces threaten them today, and what institutional arrangements are best set-up to improve that?” For example, on many public lands, the agencies who collect fees do not actually get to keep them (this is slowly changing as some National Parks like Bryce are now in “test” phases of allowing them to keep a portion.). Instead, the dollars generated by campsides, admissions areas, and the like all make their way into the sloppy stew of Washington, DC’s bank account, and then the agencies have to wait for a political process to determine their annual appropriations. Most of you probably can figure out how and why this is a problem. Who wants our national treasures to be subject to political whims? Who wants the stewards of these resources to gain nothing by actually stewarding them well? Who wants to prevent them from being able to prepare for down times and to make investments looking many years out in the future? Who wants to prevent entrepreneurial ideas from being rapidly tested and adopted if successful and rejected  if failed? Who wants to have people in DC guess what the right mix of recreational values, wilderness values, conservation values, extraction values, etc. is? Do we even think under the most optimistic of ethical and special interest situations that any of them have the knowledge to know what is best? Or even close to best?

In any case, there are lots of agencies — public, quasi-public and private that have particular advantages in dealing with some or all of these questions. Private recreation companies are surely better equipped to staff, clean, maintain, upgrade the parts of parks dealing with campgrounds, concessions and otherwise populous aspects of the park. Voluntary trail maintenance and hiking/outdoor organizations are obviously skilled at maintaining particular recreational or natural areas of parks. Local governments and state governments are certainly more attuned to the interests, problems and needs of park visitors, nearby communities and farmers, etc. than public officials in the nation’s capital. And major conservation organizations, legal organizations and research organizations are particularly well suited to handling easements, purchases, preservation, piecing large parcels together, etc. and so forth. In each of these cases, the default view prevails.

But based on the record of each of those other types of organizations, on what basis can people possibly hold the default view? The three outdoor/environmental groups I support the most are the Nature Conservancy, the Adirondack Mountain Club and the Cornell Lab of Ornithology. Interested readers may visit their sites and learn about what they do and don’t do. It will be clear why I support them, and hopefully why you might be interested in similar organizations.

I don’t want to write an essay on my vision for the future of America’s treasured lands — maybe one day I’ll do it. Rather, given the view from above, I think there are three economic observations of importance here.

1. When people fantasize about “private park ownership” they have in mind the Ken Burns depiction that all national park lands would be trampled and turned into playgrounds and amusement parks, much like Niagara Falls. I respect this possibility, I really do — especially since those sorts of places do exist already (although mostly in places without such natural splendor). But doesn’t this argument reflect an argument from intimidation? Isn’t it begging the question. You see, it just assumes as plain as day that any and all “Niagara-Falls-ization” of our natural treasures is desecration. It’s bad. And clearly no one really wants that. As an economist, let me offer up the possibility that some people do want this. In fact, let me offer up the possibility that a lot more than some people would want this. And just as putting a motel at the base of Niagara Falls would irrevocably change the Niagara Falls experience, so too does NOT putting a hotel there irrevocably change the experience. It behooves one to come up with a way to know what the right use is. Maybe it would be great to have McDonalds suspended across the Grand Canyon?
2. I’m trying to get you to sneer at me of course. But how about this? Is any tradeoff reasonable in the realm of our National Parks? Some private agencies, such as the National Audubon Society have allowed gas drilling on its lands – the revenues from which could be used to preserve even more land. The Wisconsin Nature Conservancy once allowed (managed) development of a beachfront property it held in order to complete the purchase of a parcel of land in Wisconsin. Given the funding “Crisis” and generally thought to be decrepid state of our National Parks, would it be completely unreasonable to ask the question of whether turning one wondrous amenity into WallyWorld might enable us to protect and conserve, in perpetuity perhaps, the remaining gems scattered about the nation?  To even ask these questions often has one removed from polite company. But I would be seriously moved by any proposal that held out the chance for permanent park protection. Of course, that is not the only way to get there, but my sense is that this is as likely as actually getting management policy right. And of course, this idea wouldn’t exactly work as planned – it would require the funds generated from the sale and operation of WallyWorld actually be used properly. I don’t believe they ever would, so this is a mere mental indulgence of mine.
3. I have enjoyed far more peace and tranquility in some of my local Monroe County and even Perinton Town parks than on some visits to National Parks. My point? The way we manage and designate parks today is not entirely unlike “Niagara-falls-ization” of the parks anyway? Is there any difference between fighting tens of thousands of cars for a slice of nature than having a massive resort and spa located somewhere near the wondrous amenity we are all scratching and clawing to see? The last two trips I took I ended up spending more time outside the wondrous amenity than near it – to actually get the solitude and wildlife that one might expect to have inside the amenity. Once again, to suggest that the National Parks and other monuments have certain aspects of this “commercialization” is heresy among the default view crowd. But I encourage my readers to spend a mid-August weekend up in Acadia and then reflect for a moment on this post.

When it did the research on this fuel, it was not the result of the diktat of some all-knowing energy czar in Albany or Washington, DC, despite the fact that the prices of whale oil for illumination had been increasing at “alarming” rates for some time. But what is most important is the way that Gesner advertised his wonder product. He ran pieces demonstrating that his kerosene was one-seventh the price of sperm whale oil.

And for all the pomp and circumstance surrounding the new green energy economy, we never hear a single peep about radical changes like this. Stop and think for a minute – how would your life change if the cost of using energy fell by a factor of 7! For example, in the winter our home energy bill runs about $300 per month, and something like $150 the rest of the year. For argument’s sake, call it $250 per month. So we spend $3,000 per year on electricity and gas for our home. And we probably spend about $4,000 per year to fuel up our two cars. And this is leaving out the embedded cost of energy in many of the other things we consume. We spend at least $7,000 each year on energy and related costs. What would a decrease in prices by a factor of 7 mean to us?

Well, it would mean that instead of spending $7,000 per year on energy, we’d only have to spend $1,000 per year. We’d have $6,000 per year, every year, of extra income that we did not have before. We sure as heck know what we would do if we had $6,000 of extra income, and it would be great … if only … if only.

Reflect for a moment on the way that “cost-cutters” are treated in today’s world. It’s 100% contempt 100% of the time. Walmart is the king of recognizing efficiencies in its supply chain and it is the symbol of everything that is wrong with the world. Forget for the time being that its existence reduces the cost of goods by something on the order of $2,000 per year each year for the poorest families in America. Or think of how we caricature Henry Ford’s ruthless cost saving or Andrew Carnegie’s miserly cost consciousness (did’t he famously sweep up iron and steel filings off the factory floor each day and put them back into his production process?) or consider that Rockefeller and his evil oil company figured out that there are over 200 products that can be generated from a barrel of oil. 200! And all of that came about because each and every one of these “evil” people cared very much about lowering costs.

What the modern environmental movement desperately needs is “Windmart.” We need a renewable energy madman, whose sole goal is to deliver us energy for 10 times lower the cost as we are currently getting it today. We need a madman who refuses to see a single cent of effort or materials wasted in an effort to deliver the next form of energy to us. But we aren’t likely to see this guy anytime soon. He’s Gone Galt. And why has he gone Galt? Because the ruthless cost-cutter is seen as the devil, as everything that is wrong with our semi-capitalist world and few people recognize that the switch to Wind power or flower power or whatever power is coming next just ain’t gonna happen by diktat – it’s gonna happen when we get a breakthrough so incredible that it blows the cost doors off of our current options.

Our modern “E”nvironmental movement should be ashamed. It really should be. We are fed a constant drone of platitudes about shared sacrifice and about how we simply cannot continue living like we are today without wrecking the planet. We are fed time and time again the sorry and tired idea that we need to spend more for energy and less for everything else. That’s the new American way. We’ve descended from a world of Horatio Alger-like ambition to Pittsburgh Pirates’-like resignation. If I were the “mouthpiece” of the new “E”nvironmental movement, I would be spending all of my time ginning up excitement at the prospect of energy that is a factor of 7 cheaper than what we use today. Is it easy? No. Am I predicting that it will happen? Of course not. But no one in the past was able to predict energy transitions and few could have imagined that energy technologies would become so inexpensive as to utterly change the world in ways we could never envision. Cheap and safe electric power was a game changer over using charcoal, coal and wood. I sure hope that someone like Sam Walton is lurking in the green energy sector obsessing about ways to make those turbines last a little bit longer, use a little less material, and so on. You know, the American way – there’s those old ideas popping up again.

p73 in my peak oil notes

Keep that in mind when you see that the government cannot even manage to rid itself of one of the worst “investments” it has ever made in its history, and a small amount at that. Here, we learn that:

The spending levels in the bill complied almost precisely with the debt-ceiling deal agreed by both parties and the White House last month. Senate Democrats objected in part because they want about $7 billion in disaster relief, but their larger complaint is that the House bill contains $1.1 billion of offset savings from “clean-energy” programs.

Given the scandal at Solyndra, which may cost taxpayers more than $500 million in loan guarantees gone bad, this would seem to be an ideal place to cut. About $100 million of the savings would come from the solar energy loan program that financed Solyndra, whose executives invoked their Fifth Amendment right against self incrimination at a House hearing yesterday. Another $1 billion or so would come from de-funding a vehicle fuel efficiency program that the auto industry and technology companies ought to be able to finance themselves.

Apparently these green subsidy programs have become sacrosanct for Democrats, even if they don’t create any “green jobs” and even when they lose money for taxpayers.

In “fairness” if you changed the topic from Green Jobs to Farm Subsidies, which are an order of magnitude larger, you can replace Democrat with Republican.

Modern research on teacher quality makes clear that the factors used to determine a teacher’s compensation tell us little to nothing about how well the teacher will perform in the classroom. That consistent finding has (or should have) enormous implications for the future of the current system. The results of an employment policy based entirely on credentials uncorrelated to student achievement are obvious: we see wide variation in the quality of public school teachers.

The structure of the current system is simply indefensible, given modern research findings. There is nothing inherently wrong with relying on proxies for effectiveness when making employment decisions. However, when those proxies fail to differentiate meaningfully between the most and the least productive workers, they should be jettisoned. This is certainly the case with our public schools, where wide variation in teacher quality persists among those who have passed through the usual screens and earned the recommended degrees.

Just how much does teacher quality vary? An early study by Stanford University economist Eric Hanushek estimated that the difference between being assigned to one of the system’s best teachers and one of its worst is about an additional grade level’s worth of proficiency at the end of the school year.[6] Similar variations in teacher quality have been found in Tennessee,[7] New Jersey,[8] Chicago,[9] Florida,[10] and other unnamed school districts across the country.

Most parents, teachers, and school administrators surely won’t find it surprising that teachers are not identically effective. What to do?

The findings of our research and other studies suggest that public schools should revise their employment systems so that they prioritize measures of the teacher’s actual effectiveness in the classroom. School systems should develop comprehensive evaluation systems that utilize quantitative (e.g., test scores) as well as qualitative (e.g., classroom observation) measures of teacher effectiveness. The results of these evaluations should be used to determine which teachers are retained in the classroom, how much a teacher is paid, and whether the teacher receives job protections in the form of tenure.

I am 100% sure that the folks in the education schools not only understand this, but use it to motivate themselves to become better teachers and find innovative ways to get the job done. Yup, 100% sure.

One nit to pick, but it has irked me for sometime in this “debate.” Notice the author’s suggestion for what his results imply: that public schools need to tweak their compensation structure and also to better measure what quality teaching really is. That’s not at all how I interpret this. And even public school supporters should be alarmed at least a little. For supporters of public schools, do we really want “the system” to figure out “THE” way to compensate teachers and “THE” way to evaluate them? Is it at all clear that there is one or two or even ten best ways? Not to me, especially if you think about the many different objectives not only of different schools, but within different classes within schools.

Finally, the way that I interpret these results is pretty simple: this is what you get when there is not one iota of competition in the sector. You don’t even have to walk the path that I want to walk to get this. While I want the end of public schooling, does this result not imply that perhaps introducing more private competition would be worth trying?

K12 education. It’s a vital sector that has been dominated by government for a century and a half. It is widely understood to exacerbate (or certainly not to reduce) inequality. It is widely thought to be failing the very students who need it the most. It is widely known to be lagging behind education systems in other countries. It is widely understood to be underpreparing students for college achievement. It is widely understood to be run incredibly inefficiently. And more. 90% of K12 students attend public schools. Not even the government itself is as dominated by governmental control. Ponder that, ponder it for a long time. Do we just need to get the government involved to fix the sector? Do we just need to get the right people? Do we just need to spend some more money? What is it folks, really?

Seems to make sense. But we are not “running out of” farms. Nor are we running out of food. For example, we grow three times as much grain today than we did 50 years ago … and do it in roughly the same amount of land. Here is Matt Ridley’s pretty graphic on it:

And of course, the share of disposable income dedicated to food in the U.S. is now less than 10% – making America the place in time and space that has the most abundant food in history. This is even in the presence of food becoming a leisure and luxury item for many of us (e.g. have any of you watched the Food Channel, or Top Chef?) Even as the number of farms continue to decline, we continue to remain, quite literally, the land of (inexpensive) milk and honey. In a future post, we’ll show you what the Doomsdayers had to say about this a few years ago.

Happy New Year!