Another Economic History of the US

At the Breakthrough Dialogue 2012 later this week I'll be giving a response to Michael Lind, of the New American Foundation and author of the recent book, Land of Promise: An Economic History of the United States with a focus on innovation.

I liked Land of Promise, but I will offer two critiques. One is that while history provides an unbroken narrative structure to economics, it can mask changes that make one era incomparable with another. This is illustrated in the slide above from my presentation.

It shows that in 1800 the size of the entire US economy (GDP in 2005 dollars) was the same size as the GDP of Pascagoula, Mississippi in 2005. (Data from here and here.) By 1850 the US economy had grown to the size of Rhode Island's 2005 GDP, by 1900 it was Virginia, and 1950 it was the size of California's 2005 GDP.

While I am sure that Robbie Maxwell, current mayor of Pascagoula, has some fine ideas on economic development, they probably don't carry the authority of invoking George Washington. Yet, both public officials manage(d) economies of comparable size. So I do have some issues with applying lessons from economic history to innovation-focused policies of the 21st Century.

That said, I do agree with Lind's bottom line:

"Industrial policy is not alien to the American tradition. It is the American tradition." (p. 465)

The bulk of my response will focus on explaining the mythology of the so-called "linear model of innovation" (discussed here in PDF by Godin) which surrounds Vannevar Bush and post-War US science policy -- which Lind accepts far too uncritically.  The linear model, married to a convenient misreading of economics theory, has restricted our view of innovation policy for decades.

Land of Promise is a stimulating book. Despite these issues, I enjoyed it a great deal. (See also David Douglas here).