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Idea Incubators and Economic Growth

Jun 28, 2010 • Businesses, Economic History, Innovation, Macroeconomic Measurement • 174 Views    No Comments

It is so tempting to assume that we get the best results when we tell people what to do. If we want to use less oil, then pass laws that encourage us to invent better batteries. Yes?

Using Selman Waksman as an example, retired Harvard professor David S. Landes, would probably answer, “No.” Waksman’s story starts in 1910, when, as a 22 year old Russian immigrant, he arrives in Philadelphia. The tale reaches its climax when he receives the 1952 Nobel Prize in Chemistry and Medicine for developing streptomycin. Waksman’s talents flourished in the United States because of the education he accessed, the mentors who supported him, and the businesses and federal government who gave him research money.  

Summarized by Landes, Waksman was successful because of 1) “Contact and exchange” which resulted from “multiple points of intellectual entry” where ideas are nurtured, developed, and shared 2) Individual ambition, drive, and intelligence 3) Luck 4) An ongoing stream of new tools and technology. The result is technological progress, a key ingredient of economic growth.

All of this takes me to a recent NY Times article about “idea incubators” and the convergence of academia, private business and (sometimes) government. With a program at M.I.T. as the article’s focus, an “entity” is described through which academic researchers can access business funding for their work at the idea stage. Fostering the potential of ideas, the concept is innovative because most seed money has been available at the development stage, after a good or service has materialized.

The Economic Lesson

Illustrating our economic growth, graphs with the bowed out lines called production possibilities frontiers will move to the right when we optimize opportunities for innovation. Economic growth is the best way to solve our current fiscal and financial problems.

I recommend Dr. Landes’s book, The Wealth and Poverty of Nations: Why Are Some Nations Rich and Others So Poor?

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