05 November 2010

iPods and Federal Innovation Policy

Neal Lane, of Rice University former science advisor to President Bill Clinton, showed the slide above in a recent talk at the University of Colorado (which he provided to me today, Thanks Neal!).  It shows a number of technologies somehow connected to federal innovation investments and their relationship to the iPod, discussed in an earlier post today.

This was even recognized by George W. Bush during his presidency:
Apple has long boasted of its culture of innovation, and how this led to such products as the original Mac and the iPod. However, it turns out that, at least in the case of the iPod, Apple had a hidden ally: the US government. During a speech at Tuskegee University, President (and iPod user) George W. Bush told his audience, "the government funded research in microdrive storage, electrochemistry and signal compression. They did so for one reason: It turned out that those were the key ingredients for the development of the iPod." While we have to gratefully acknowledge the efforts of government agencies such as DARPA in some of the fields mentioned by the President, we also feel obligated to point out the accomplishments of private companies in the US and abroad, including IBM, Hitachi and Toshiba -- not to mention the Fraunhofer Institute, which developed the original MP3 codec, and codeveloped (with Sony, AT&T and others) the AAC format used by Apple in the iPod.
Innovation does not work in linear fashion from basic research ----> application. W. Patrick McCay, who I cited in the previous post on this subject, explains that the story of the iPod and the federal government is far more complex than the linear model suggests:
The full story, of course, was much more complex, revealing the interplay among basic science, instrumentation, federal policy, industrial research, and commercial goals. One cannot help but conclude that the “simple” linear model, when examined closely enough, is anything but.
Our discussions and debates about energy policy need to be better informed by how innovation actually occurs, and not through overly simplistic ideological lens about the role of government in some idealized sense.


  1. Roger,

    Why are ignoring the multiple posters that point out the difference between funding R&D that might lead to something like an iPod and subsidizing the purchases of iPods?

    The distinction is extremely important and I think you are completely misrepresenting Rand Pauls anti-subsidy argument.

    Can you please make your own position on subsidies for power production clear?

  2. As others have already pointed out, there is a big difference between conducting research and actually subsidizing production (although government can play a role in providing initial demand). One adds to the knowledge base that the economy has to draw from and one severely distorts the price signal and leads to the misallocation of resources.

  3. I think it is fair enough to suggest that the government has some legitimate role to play in funding research for new energy technologies. At the same time, I think it is necessary to recognize that getting the government involved with funding technologies presents a host of problems.
    When government funds research, funds are often dispersed based on politics rather than objective scientific criteria.
    Two quick examples come to mind. The government spends enormous amounts of money subsidizing ethanol production, even though I think the case is convincing that ethanol does very little, if anything, to reduce total carbon emissions or our dependence of foreign oil. Nevertheless, it is difficult, if not impossible, to eliminate this subsidy because entrenched special interests effectively lobby the government to continue it.
    A second example is AIDS research. The funding devoted to AIDS research is very disproportionate to the number of people effected by the disease. Funding for AIDS research competes with and diverts money from research concerning other diseases that kill far more people. The funding decisions appear to be based on political power rather than any type of objective criteria concerning where research money can save the most lives.
    These problems are similar to the types of problems that arise when the military attempts to shut down bases that are no longer needed. Special interests override objective decision making.
    There are no doubt examples where government has funded research that has provided a significant economic pay offs. On the other hand, there are also many examples where the goverment has and continues to either waste money (ethanol subidies) or channel money inefficiently (AIDS research).
    It seems to me that these problems are inherent in government funding and that there are not any easy fixes to them.

  4. Beyond the point made by the first two posters, I don't recall the government investing in research into portable music players. The iPod is more an example of serendipity in research than of any kind of directed research program.

    Regarding the third post above - HIV was - and is in many places in the world - the single most dangerous infectious disease of our time. Money was slow in coming, and when it did come, it was and is well spent.

    If you want an example of politically-directed medical research investment, look to breast cancer. When Congress mandated more money to breast cancer research, breast cancer was already getting its fair share of the financial pie.

  5. I don't get it Roger.

    That figure in fact highlights that it was ***basic*** research funded by the government that was adopted by corporations and quickly commercialized. Just because they didn't find their way right to the iPod doesn't mean they were sitting around in a dust bin waiting for Steve Jobs.

    It's as if you didn't even read the comments in the previous post.

  6. -1-Raven

    Thanks for your comment, please know that I am not ignoring any comments, but am offline most of today. I promise to address your concerns, and please make sure I do, but it won't be today.

    And no, I don't think that I am misrepresenting Paul's statement in the slightest. And yes, the issue of production subsidies is also a nuanced one, as we should think differently about different technologies, such as wind turbines, jet engines, aids drugs, shipping containers, Saturn Vs and so on. You'll find that I am not a big fan of subsidies that do not contribute to innovation, but I am of those that do -- and being able to tell the difference is an important question for innovation policies.

    More next week ... Thanks for your patience.

  7. There's also a difference between providing demand for a defined product and partially underwriting ALL commercial demand for that product. The government providing initial demand in industries with chicken/egg problems can be invaluable; it becomes economically distorting when that demand support becomes open ended.

  8. We didn't get a nationwide system of railroads because government supported railroad research. We got it because government had disgusting and corrupt subsidies of the actual production of those rail lines. And in the end, it still helped grow the country.

    Which isn't to say that we shouldn't try to do it better than that. Just that you don't have to be - and can't be - perfect. Wrong choices will be made, in the private sector and in govt. You need to keep trying.

  9. I have always regarded Apple as a design/style/fashion company who make technically inferior (computer) products and who's innovation can be traced to other companies or indeed government research.

    Microsoft is a company who takes other people's ideas and develops a superior interface. Not vastly different in fact.

  10. So what would make a good energy-innovation program?

    Do you know of successful innovation programs in the energy sector or in a sector more like energy than consumer products? What do history and experience teach us?

  11. eric44:I'm not an Apple owner but I can still see they have technological superiority too. Have a look under the hood of an Apple and a Winbox when you get a chance and marvel at the difference. Good design leads to good technology! Microsoft also often seem to take other peoples ideas and manage to make them worse. Their success has been due to business shrewdness and our collective desire for standardisation, not superior products by any stretch of the imagination. Oh how I lament the demise of all those truly superior ideas that were crushed underfoot.

    That's the reality of the market; it isn't the best product that wins, quite often the mediocre product does for as banale a reason as just not being there when IBM comes calling or allowing your inferior product to be easy copied and the market is then swamped with clones: crap but standard. The Atari/Amiga/Acorn were all better, never mind the Mac.

    I get fed up hearing about the free market selecting the best product: Very often it makes the worst. eg why use a qwerty keyboard on a phone? - or anywhere for that matter?

  12. Interestingly there was a recent documentary (might have been on the bbc, that wonderful goverment-funded institution) that chronicled the story of the UK national grid. Apparently electricity was expensive thanks to too many private power operators with little to no way of getting the product to the public. The huge government effort to build a grid meant cheaper electricity for homes and businesses long before private cartels would have done it.

    Taking that lesson, how low would our mobile telephone costs be if they had done the same for mobile networks and just abandoned the copper system? Instead of that they went all businesslike and auctioned off 3G rights, thusly causing all our calls to be more expensive as the mobile companies paid off their consequently huge debts. And just where did those billions raised from these 3G auctions go anyway? Why it was spent propping up ideologues who said government subsidies were always a bad idea - until they needed to go cap in hand for their own subsidy that is.

  13. Spot on. Also check out The Rational Optimist, where the author shows that many inventions and discoveries preceded the scientific understanding of how they work, for instance it was the invention of the steam engine, largely by Newcomen, Watt, Trevithik, and Stephenson that led to the theory of vacuum and the laws of thermodynamics, not the other way around, and sailors knew that citrus prevented scurvy for centuries before scientists understood vitamin C.

  14. -14-A Few Comments on Rand Paul's Energy Statement

    A few people have asked me to take a look at Mr. Paul's energy statement, suggesting that I had misinterpreted it in this and the previous post. So I did.


    I find it to be (a) hypocritical that Mr. Paul highlights certain subsidies and not others. What about fossil fuel subsidies? , (b) misleading that Mr. Paul neglects to mention the wide range of federal subsidies that enabled a product like the iPod.

    I don't know much about Mr. Paul. For a guy advertised as a principled libertarian, such principles don't leap out from his energy statement.

  15. -10-Jonathan

    This is a great question, and if we had spent as much time on this question as on designing cap-and-trade, we'd be much further ahead -- woulda, shoulda, coulda.

    My advice would be to look at innovation in DOD, global agriculture and health as models. I will spend more time on this subject on this blog. Thanks.

  16. Roger,

    Fossil fuel subsidies are red herring since the dollars per BTU are tiny compared to the dollars per BTU being showered on renewables. That said, I suspect Rand Paul would agree that they should go too if someone asked him about it.

    In any cse, many activists like to exagerrate the extend of fossil fuel subsidies by including tax credits which are available to all companies no matter what they do. This confuses the issue whenever someone talks about fossil fuel subsidies.

    More importantly, Rand makes it very clear he is talking about production subsidies in his statement. We have no idea what he might think on direct R&D funding. I think you are wrong to infer that he is against R&D funding.

  17. Jonathan Gilligan said... 10

    "So what would make a good energy-innovation program?"

    I nominate 'necessity'. Unfortunately, the case of 'necessity' in the US is not as strong as elsewhere given our coal and natural gas resources.

  18. The best innovation and most effective subsidy would be to clear the way for a massive build up in nuclear power plant construction and to bring them on line as fast as possible. Nuclear power is the only alternative source deserving of the name 'alternative'.

  19. re: 15, Roger Pielke Jr.

    "My advice would be to look at innovation in DOD, global agriculture and health as models."

    Why can't we look to the Department of Energy, established over 30 years ago with the objective to reduce the USA's reliance on imported hydrocarbons. I think we'll see nothing that has been developed, engineered, and implemented. It's a blank page.

    At the same time we'll see lots of attempts at innovation, all of which have crashed and burned. Billions have been spent. And USA labs are not the only place; many laboratories in many countries.

    Comparison of a consumer product with providing better ways to produce and distribute electricity to individual customers is comparing apples and lemons. And you continue to overlook the very significant investments by private companies that are always necessary to develop and engineer innovations into a viable, in the marketplace, product. Almost always, the innovations have been of a general nature and not directed toward a specific product.

    Not to mention that in the case of the iPod, you have focused on several unrelated innovations that were pulled together after decades of time to make an iPod. For what products can such a connection with government innovation not be made given a sufficiently long time span and a large number of break-throughs. Wars, and preparation for wars, have proven to be Mothers of invention.

    Production of electricity for 100s of millions of individual consumers remains one of those for which government innovation has been a complete failure.

  20. "I find it to be (a) hypocritical that Mr. Paul highlights certain subsidies and not others."

    "Hypocritical?" I think you need to look the word up.

    Per Wikipedia: "Hypocrisy is the act of persistently pretending to hold beliefs, opinions, virtues, feelings, qualities, or standards that one does not actually hold. Hypocrisy is thus a kind of lie."

    There's no evidence of which I'm aware that Rand Paul does not sincerely oppose subsidies for energy sources.

    For example, can you point to even a single instance where Rand Paul has defended subsidies for fossil fuels?

    "What about fossil fuel subsidies?"

    What about fossil fuel subsidies? Again, where has Rand Paul ever defended fossil fuel subsidies? If he never has, why would you assume he is therefore "hypocritical" and supports fossil fuel subsidies?

    "Our discussions and debates about energy policy need to be better informed by how innovation actually occurs,..."

    That's a curious statement coming from a man who just wrote that we should "thank DOD" for the "iPhone" and "iPad," and then links to an article that discusses giant magnetoresistance, even though the iPhone and iPad have flash memory, rather than hard drives. And the research for giant magnetoresistance was conducted in *Europe*, to boot!