Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream

Policy Punchline

Simon Johnson is the Ronald A. Kurtz Professor of Entrepreneurship at the MIT Sloan School of Management, where he is also head of the Global Economics and Management group. Prior to teaching, Professor Simon Johnson worked as the Chief Economist and Director of the Research Department at the IMF from 2007 to 2008. This interview discusses his most recent book "Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream," which raises awareness of the need to continue investments in the U.S. and analyzes the impact of the recent decline of investments in innovation. We trace back the history of public investments in America, like how MIT scientist Vannevar Bush’s bold vision helped start the National Defense Research Committee (NDRC) before WWII, which became central to allowing the U.S. leap in military tech and eventually win the War. The post-WWII era in the U.S. saw corroborations between the private sector, federal government, and universities. This led to 2% of our GDP to go into research and development projects, but that number today is 0.7%. When did we start to witness the decline of the government’s tendency to fund science? Prof. Johnson wrote that we can trace it back to the anti-fluoridation messages of the John Birch Society founded in 1958, Senator Barry Goldwater’s election campaign in 1964 that advocated for small government, Senate Majority Leader Michael Mansfield’s criticism of the military due to the Vietnam War, and budgetary pressures arising from the Vietnam War and the Great Society. Prof. Johnson also talked about how scientists have moved to the left and the political spectrum has shifted to the right – in ways not favorable to supporting unfettered scientific research and its implications. How have the political views of scientists influenced policy decisions for public investments? Shouldn’t this be a non-political, non-partisan process? One particular example we discussed is the story of the Human Genome Project (you may see our interview with its co-founder George Church on our website). The HGP began in 1990 and cost $3 billion dollars in federal funding. By 2004, the total stock market value of the genomics sector was $28 billion dollars. The project laid important groundwork for the genomic and biotechnology revolution. We also discuss the limitations of private funding driven by VC firms. Prof. Johnson especially listed the short investment time horizon problem. Is the private sector incentivized to work on the most urgent problems confronting our world rather than simply distributing profits to shareholders? Hard problems like climate change and inequality that require complex, nuanced solutions and not some big “catch-all.” It seems that the inherent incentive structure is such that PE/VC funds need returns 5-7 years, and that means investing in SaaS, consumer goods, and social media rather than nuclear tech / renewables / rethinking capitalism… Are we wasting huge amounts of human and monetary capital into “meaningless” innovations that churn profits but are not helpful to society? Is the only solution channel through the public sector? Prof. Johnson’s answer is that it’s about complementarity: use the public sector to bring in innovations that can help spur more innovations in private sectors; and then the public sector should step in to regulate the private sector when needed. Since Prof. Johnson was a Chief Economist at the IMF during the financial crisis, we also ask his thoughts on economic policymaking today and whether massive fiscal stimulus would be urgently needed to get us out of the Covid crisis. He believes that we should prioritize poverty reduction and getting the economy back on track first before worrying about the deficit.