VCs have a clear choice in the upcoming U.S. presidential elections, according to a report published on Monday, but they should push the next administration to take a fresh look at the economics of innovation.
If they subscribe to a strict market economy, VCs are likely to support Republican Sen. John McCain, who plans to stimulate innovation through tax incentives.
If they believe government should partner with the private sector in setting an innovation agenda, then they are likely to support Democratic Sen. Barack Obama.
“Innovation is central to the productivity and growth of all sectors of the U.S. economy, even in static, low-performing industries like construction,” said Robert, Atkinson, president of the Information Technology and Innovation Foundation, the Washington, DC-based think tank that produced the report.
Mr. Atkinson believes that a number of industries, including healthcare and construction, are ripe for industry-inspired transformation but that both major parties have approached the economics of innovation as a partisan, religious debate.
“Sen. McCain is right that we need to expand R&D tax credits, and Sen. Obama is right that we need activist policies from government in areas such as healthcare, IT, and energy R&D,” he said.
And while the next administration needs to blend the checklists of both parties, it also needs to adopt “innovation economics” -- an economic doctrine that views innovation as the main driver of overall economic growth.
“None of the various economic doctrines people subscribe to in Washington say anything about innovation, and we need to change that,” Mr. Atkinson said.
Conservative economists frame the overall policy debate through the lens of lower taxes for the wealthy, according to Mr. Atkinson, while the Keynesians want to increase spending for the middle class, and the “Rubinomics” group wants to run budget surpluses.
“But these are all outdated 20th century doctrines, so we want to see the next administration take a fresh look at innovation and the economy,” he said.
Sen. McCain’s policies for the most part allow market forces to drive innovation and will only have the government intervene in cases of market failure.
Sen. Obama would like to see the government intervene and shape policies in critical areas where the market is failing such as in nationwide access to broadband.
Sen. McCain does not stress innovation as an overarching theme in his campaign, while Sen. Obama does.
ITIF’s position paper on innovation economics can be found here.