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Archive for the ‘Stimulus’ Category

Oh technology policy, how could I ever leave you?

Posted by Evan Herrnstadt on April 28, 2009

I’m checking in (but don’t call it a comeback*) because there was a big announcement by Obama at the National Academy of Sciences yesterday.  By now you all should know I can’t resist a good R&D policy post:

The president laid out an ambitious plan to invigorate the country’s pipeline for innovation, from grade-school classrooms to corporate, government and academic research laboratories.

Mr. Obama’s plan includes fulfilling commitments dating from the Bush administration to double the budgets of the National Science Foundation, the science office of the Department of Energy and the National Institute of Standards and Technology.

But he is also seeking increases in direct federal investment in medical and energy research, and he would make permanent what has been a sporadic research and experimentation tax credit offered to companies that push beyond the quest for quarterly profits to pursue breakthroughs.

Obviously the increased NSF, DOE, and NIST budgets are really important.  I’ve discussed in the past that some of that money will probably go to increasing the incomes of R&D labor, and today N-Greg-Mankiw cites a kind of quick and dirty paper by Goolsbee to poo-poo this).  This is due to the extremely inelastic supply of highly-skilled labor.  You can’t just see increased salaries and decide to be a particle physicist.  At the same time, at least some of the extra funding is going to go toward funding research that was shelved to lack of money and also toward equipment to increase the quantity of quality-adjusted R&D.  In addition, Ryoo and Rosen (JPE 2004, sorry but it’s gated) find that the choice of an engineering career path is plausibly a combination of static (cobweb) and rational expectations models.  The decision to become an engineer is determined jointly by current career prospects, and tempered by the assumption that others will behave similarly.   That is, a spike in engineering income will result in more freshman choosing engineering, but this enrollment surge will be dampened by the subtle understanding that more of their classmates will also choose engineering and drive down wages in the future.  I would guess, however, that the first-order effect will dominate due to its notably lower informational demands.  Thus, we can expect that of the youths who are deciding between studying physics and a field likely unaffected by the income shock, say ethnic studies, this short-term income spike associated with new NSF/DOE/NIST $$$$ will likely draw some of them toward the hard sciences.

So beyond the fun in the skilled labor market, I think that Obama’s decision to pursue a permanent R&E tax credit is outstanding.  Certainty is always really important for firms and organizations.  There’s just the whole planning/budgeting aspect that yearns for a more reliable policy.  However, it’s also important because a tax credit can grant firms the ability to maintain an unambiguously higher rate of R&D.  Of course, some firms will substitute away (i.e. R&D is cheaper, so do the same amount or slightly more and shift the money saved into other parts of your business), but the income effect will stand as well.  In general it is often forgotten that you can’t just decide to do a bunch of R&D one day.  There is capital that must be invested to expand R&D, whether in terms of facilities, equipment, support staff, or skilled R&D labor.  Thus, knowing for sure that you’ll be able to count on tax credits for R&D done in the future, you’re more likely to invest in the fixed costs necessary to carry out a higher level.

So yeah.  Obama.  R&D $.  Woo!


Posted in Stimulus, Technology Policy | 3 Comments »

Hot off the press

Posted by Rich Sweeney on January 2, 2009

From the inbox:

January 7, 2009
Senate Majority Leader Harry Reid
Senate Minority Leader Mitch McConnell
Speaker of the House Nancy Pelosi
House Majority Leader Steny Hoyer
House Minority Leader John Boehner
Dear …
We, the undersigned sustainable energy and environmental organizations, businesses, and individual advocates, are writing to urge that you support provisions in the proposed stimulus bill that will promote sustainable energy technologies and create “green jobs.”
More specifically, funding should be targeted at those energy efficiency and renewable energy projects that can be brought on line quickly, will maximize job creation, will curb greenhouse gases and energy imports, and have the least adverse social and environmental impacts.
Nuclear power and fossil fuel technologies should not be included among those supported by the stimulus bill. These technologies cannot be brought on line quickly, entail unacceptable environmental hazards, and produce far fewer jobs per dollar invested.
Rather, emphasis should be given to “shovel-ready” projects that can be deployed in the very near term (i.e., preferably within 6-24 months) either to reduce wasteful energy use or to produce renewable energy as well as create jobs. Longer-term investments in sustainable energy research and development merit federal support but should be addressed in the regular annual appropriations bills rather than in this stimulus legislation.
The most attractive investments in terms of cost-effectiveness, jobs creation, carbon-reduction, and time-frame may well be those designed to reduce energy use in residential, commercial, public and other buildings. Accordingly, a high priority should be funding aimed at the permanent weatherization of older buildings and the replacement energy-inefficient lighting, appliances, and HVAC systems. Likewise, investments in advanced meter and demand-response programs are warranted.
In the transportation sector, emphasis should be given to lower-carbon options such as expansion of bike trails and pedestrian walkways, acquisition of more energy-efficient government vehicles including municipal buses, construction or expansion of light-rail and other mass transit systems, and repair of existing roads, tunnels, and bridges. However, funding the construction of new roads would tend – in many, if not most, instances – to encourage increased fuel use and oil imports and result in greater greenhouse gas emissions. Therefore, such proposals should be closely scrutinized and probably given very low priority.
Investments in renewable energy projects should support the broad range of technologies (i.e., wind, water, solar, geothermal, biomass/biofuels) with funding directed at smaller, distributed, and off-grid systems as well as larger, grid-connected, central station projects. Investments to upgrade existing transmission systems or create new “intelligent” ones to bring renewable electricity from remote locations to urban areas may also be justified. However, priority should be given to those projects and technologies that can be brought on line most quickly, have the lowest environmental or social impacts, create the largest number of jobs, are most cost-effective, and produce the most energy.
We appreciate your consideration of these views.
cc. Members, Senate Committee on Appropriations
Members, House Committee on Appropriations
Couple of quick thoughts:
1. I love how politicians attempt to subvert criticism of their decisions by including the obvious downsides as “priorities”. Money should be spent as quickly as possible, but also wisely. We should create the most jobs, but also spend funds cost effectively. Blah, blah, blah…..
2. I’m a staunch proponent of the Smart Grid, but remain skeptical of plans to get the ball rolling by installing a toothless advanced meter in everyone’s house. Reminds me of the car shell idea, and thus of 5 year plans.
3. I’m obviously happy to see transmission in there. However, even absent any siting and permitting holdups, I don’t see how this fits the 6-24 month criteria.
4. Bike trails – Werd.

Posted in Government Policy, Green Collar Jobs, Stimulus | 1 Comment »