Not that Romer, who teaches at the University of California, Berkeley, has anything against investment. But investing in more of what we already have, he says, won’t make us richer for long. Real wealth creation comes from innovation, be it minor improvements in soybeans or major new inventions like the computer chip. The most important policies government can pursue don’t have to do with taxes or spending, but with speeding the pace of innovation.
That may sound good to conservatives–so far. But Romer is no blind advocate of letting the markets rule. “A pure laissez-faire system is not likely to be the best system of innovation,” he says. To the contrary, he contends, there’s plenty government can do. The land-grant colleges created by Congress in the 1800s to advance farming are a favorite example. Promoting training is high on his list, too. In some cases, Romer says, it’s important to strengthen patent protection; in others, it may be best for government to give ideas away. The details of what government does, Romer adds. are more important than the broad lines, That may not cheer politicians searching for sound bites. But after decades of grand slogans, “Watch the details” may be just the economic advice we need.
