“Moving Forward: The Challenge of the Future”

Sep 8, 2014   //   by PlanSmart NJ   //   2014 NJ Regional Planning Summit, Changing Economy, Changing Land Use, Economic Development, Infrastructure, New Jersey, NJ, Opinion, PlanSmart NJ, Policy, Redevelopment, Speaks Out Blog  //  Comments Off on “Moving Forward: The Challenge of the Future”

innovation_economics_book-cover2-196x300Ezell PhotoSummary of Afternoon Keynote: Stephen Ezell, Senior Analyst

Powerpoint available here.

Stephen Ezell is a Senior Analyst with the Information Technology and Innovation Foundation (ITIF), a Washington, D.C.-based technology and economic policy think tank, where he focuses on science, technology, and innovation policy as well as international competitiveness, trade, and manufacturing issues. He is the co-author with Dr. Robert Atkinson of Innovation Economics: The Race for Global Advantage (http://www.innovationeconomics.org).

Innovation economics is a new field that challenges neo-classical economic theories in which economics is about allocating resources, by claiming that society, i.e. government policy, can improve “dynamic efficiency” through public-private partnerships to drive sustainable economic growth. Key systems supporting an Innovation Economy are Technology, Talent, Tax, and Trade.

Innovation drives long term economic growth. Two-thirds of economic growth in the United States since World War II is attributable to innovation. Innovation also accounts for 90 percent of per capita income growth worldwide. But this is not news. Today, every nation and region in the world competes for innovation. All companies “shop the world” and all countries are no longer price makers, but price takers. Since 2000, foreign investment per dollar invested by manufacturers in the United States has more than doubled from 33 cents per dollar to 71 cents per dollar.

Innovation is not just about new products. It is about new ways of doing business, customer experiences, constituent experiences. “The best way to predict the future is to create it.”

While the United States still ranks high among nations for global competitiveness and innovation, this may be short lived as our nation is ranked near the bottom in improving our capacity for innovation. Five key areas best capture what is new about the New Economy: knowledge jobs, globalization, economic dynamism, the digital economy, and innovation capacity.

Based on ITIF’s newly released 2014 State New Economy Index (http://www.itif.org/publications/2014-state-new-economy-index ), New Jersey scores best at:

• Foreign Direct Investment (5th)
• Fast-Growing Firms (5th)
• Patents (per Worker) (6th)
• Broadband Telecommunications Adoption (6th)
• Industry Investment in R&D (7th)

New Jersey scores weakest at:

• Non-industry Investment in R&D (40th)
• Manufacturing Value Added (39th)
• Entrepreneurial Activity (37th)
• Health IT (37th)
• E-government (31st)

Overall, New Jersey ranks 10th among states nationwide—this is a decline from 2nd as recently as 2007.
To improve, New Jersey should embrace policies that:

• support public-private partnerships spurring higher productivity and greater innovation,
• adopt innovation policies based on:

o Inspiration — Set ambitious goals
o Insight — Learn from the best practices of others
o Intention — Commit to specific actions
o Investment — Increase funding for innovation and productivity
o Incentives — Incentivize desired firm and individual behaviors
o Institutions — Do new things in new ways
o Information Technology — Employ Information and communications technology as an innovation platform
o International — Bolster traded-sector competitiveness

• balance business, regulatory, and innovation policy environments in an innovation ecosystem.
In addition to entrepreneurship training, incentive programs, and other policies, regulations that are stable, certain, predictable, and transparent are critical to supporting innovation. Land use regulation in which development applications that are fully compliant with regulations take months or years to approve undermine New Jersey’s ability to compete. 120 days to register a new business discourages entrepreneurship, particularly when other nations process such applications within an hour.
Six regulatory principles for an innovation economy include:
• Anticipate innovation in production processes and product mixes in regulatory rulemaking.
• Embrace transparency to avoid major missteps.
• Trust the consumer, as accurate and public information about both the costs and benefits of different products and how companies operate will usually put more pressure on companies than will agency regulations.
• Emphasize removing Type 1 errors, overregulating that inhibits beneficial innovation.
• Adhere to cost/benefit analysis that forces agencies to explicitly state their assumptions and reasoning in a way that other parties can respond to.
• Concentrate on facilitating metagoals instead of micromanagement.
Manufacturing remains important in an innovation economy. New Jersey has a high potential based on its industrial history together with its strong logistics and education sectors. Policies such as New Jersey’s transit hub tax credit are helpful. New Jersey has its greatest opportunities to improve its innovation economy by expanding its deployment of information and communications technologies through systems such as e-government (including zoning ordinances and permit processes) and health IT.

In today’s innovation economy, collaboration at the regional level is essential, more important than competition in advancing economic growth. The competition is less likely to be in the next town or city, but half a world away. PlanSmart NJ is an invaluable asset for this region in its ability to bring together key stakeholders to collaborate, and to put together concrete solutions to drive innovation-based economic growth in this region.

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