The State Dept View of Entrepreneurship

Jeff Cornwall has a funny post about an email he recieved from the U.S. Department of State, which reflects, in part, how government thinks about entrepreneurship policy. Jeff is too hard on Josh Lerner, who's done great work on innovation policy, but otherwise it's something to keep in the back of your mind as the President prepares to kick off his Summit on Entrepreneurship.

Say's Law

What is Say's Law? It doesn't matter, Say's Law is Dead. Or maybe it isn't? This should give you a sense for why microeconomists don't much care for macroeconomics.

Randomized Control Trials

Since Professor Duflo is known mostly for her innovative field experiments, perhaps a backgrounder is timely. Interested readers might like to check out, "In Pursuit of Balance: Randomization in Practice in Development Field Experiments," by Bruhn and McKenzie. The article was published in the AEA Journal in Applied Economics last October. The link will take you to an ungated version.

Here is an excellent contrarian take on RCTs.

The 2010 John Bates Clark Award

The winner this year is Esther Duflo, of MIT. Her award is based on her work on randomized control trials. From her bio:

Duflo has been a leader in using randomized field experiments to address important questions concerning public policy in developing countries. In one series of papers, she and various coauthors study the impact of female political leadership on local government spending and attitudes toward women by examining a policy that required one-third of India’s villages, selected at random in each election cycle, to choose a woman as council head. She finds, for example, that villages forced to choose female council heads shift local government spending away from education and towards drinking water and (in some areas) roads. Another series of papers measures the effects of various randomized educational interventions, such as the introduction of teacher aids (local women with some secondary education but no formal teacher training), a computer-assisted math program, reductions in pupil-teacher ratios, ability grouping, various forms of monitoring and incentives to reduce teacher absenteeism, and programs designed to encourage community participation. For example, in work with Abhijit Banerjee, Rukmini Banerji, Rachel Glennerster, and Stuti Khemani, she investigates the effects of three randomly assigned programs targeting community participation. The first informed villagers about opportunities to participate in school governance and monitoring committees, the second trained villagers to use a testing tool, and the third organized literate villagers to hold remedial reading classes for illiterate children. The study concludes that the interventions had no impact on community involvement in the schools, no impact on teacher effort, and no impact on students' achievement in school.

In work with Emmanuel Saez, Duflo has also used field experiments to study issues concerning U.S. pension policy. One article reports the results of a study in which a random sample of employees in some departments of a major university were provided with monetary incentives to attend a benefits fair. The incentives increased attendance of both the targeted employees and employees in the same departments who were not targeted, and significantly raised enrollment in tax deferred accounts for both groups. Thus, the effects of the intervention appear to have been ransmitted through social channels.

Her website is here and her papers are here.

Entrepreneurial Policy

Dane Stangler writes (Growthology):

Policymaking around entrepreneurship is evidently not clear-cut as there is still quite a bit we do not understand regarding startups. In the coming weeks we will try to explore these questions and illuminate the world of startups for policymakers. We’ll start with the lowest-hanging fruit of all, though one that may seem like poison to some in Washington: immigration.

The rest of the post is focused around brain circulation, which deserves more attention than simply talking about brain gain or brain drain. Stay tuned for the rest. Dane, Tim and the other bloggers do a great job with Growthology and it remains one of my favorite blogs.

Searching for Entrepreneurial Solutions

“The people who make all these decisions don’t live like the way I do,” Mr. Mann added, echoing other uninsured people in his income group. “They don’t live like the rest of us.”

From the NYT. This was in reference to the new health care bill, but it immediately reminded me of the Millenium Villages and a professor in New York. From Owen's blog:

O&G: What is it like being a Millennium Village?
Shopkeeper: Very good. We have lots of things.
O&G: Does everything work well?
Shopkeeper: No, not all of it. But we are much better off now.
O&G: Who decides what to change? Do you have a village council, or is there an Elder who decides?
Shopkeeper: It is all decided by a Professor in New York.
O&G: Really? Do you know his name?
Shopkeeper: No. But he is a very famous man

And obviously we can extend this line of reasoning into many different policy areas. It's good there are people out there making the case for entrepreneurs.

C.K. Prahalad

HBR is running a nice page of rememberance for Dr. Prahalad, author of The Fortune at the Bottom of the Pyramid, among other famous works. They provide links to obituaries and to some of his columns for the HBR, many of which are free. Dr. Prahalad passed away last Friday at the very young age of 68.

Wise Words

If solutions are known, need $$. If solutions are knowable, need evaluations. If solutions are evolving, need entrepreneurs.

That's the punchline to an excellent post about Jeff Sach's work, from @auerswald's blog, The Coming Prosperity. He's been promising some new posts on entrepreneurship in connection with the Skoll World Forum, so check over there in the next few days.

The Labor-Leisure Tradeoff

From the Times:

AN overseas holiday used to be thought of as a reward for a year’s hard work. Now Brussels has declared that tourism is a human right and pensioners, youths and those too poor to afford it should have their travel subsidised by the taxpayer.

See the rest of the story. Every day I respect Seymour Martin Lipset a little more that I did the day before.

Handbook of the Economics of Innovation

A handy reference for innovation/entrepreneurship scholars. It is the latest in Elsevier's Handbook Series. The newly released two volume set is packed with great articles, but at almost $250 on Amazon, it's really suited for specialists in the field (those with lots of grant money). But look for it at your nearest university library, if it's not your immediate field and you have an interest.

It is edited by Bronwyn H. Hall and Nathan Rosenberg, two leaders in the field. Check it out.

Digital Learning

According to the Association of American Publishers (pdf), e-book sales accounted for about 1.3 percent of total net sales in 2009. This is basically a rounding error, but what is interesting is how fast this sector is growing. Granted, it's from a small sales base, but the e-book category grew at about a 71 percent compound rate between 2002-2009.

The closest category was Higher Education, which increased 5 percent over the same time period. Even if the growth rates of e-books slow substantially, they look set to overtake sales from book clubs, which are declining in $ output, in just a few years. Some numbers below:

E-books sales: $ value (w/growth rate in parentheses)
2002: $7,337
2003: $19,772 (169.5%)
2004: $30,271 (53.1%)
2005: $43,832 (44.8%)
2006: $54,396 (24.1%)
2007: $67,233 (23.6%)
2008: $113,220 (68.4%)
2009: $313,167 (176.6%)
71.0% (cumulative growth rate)

See the short pdf for a table with the other categories. Additional coverage in the NYT and elsewhere.

The NYT also surveyed the current state of digital learning this weekend, in case you missed it. See here for starters. Lots of big ideas and hopes in this space, but so far I see little entrepreneurship, and what little there is, such as private online edu, seems to garner lots of animosity. It's all fascinating though.

Immigration, Innovation, and the Time to Publish

About two years ago we talked about a new paper by Jennifer Hunt entitled, "How Much Does Immigration Boost Innnovation." That paper has now been published, with a new coauthor, in the AEA journal on Macroeconomics. You can find the abstract here, and you can see our previous post for the ungated working paper version.

Congratulations to Donald Marron

The Tax Policy Center, a joint venture of Brookings and the Urban Institute has hired Donald Marron to be its new director. This is great news for both Donald and the organization. Hopefully Donald will maintain his blog when he assumes his new job duties in May. It is a great source for solid economic analysis. Donald has now served as the director of quite a prestigous list of acronyms here in DC: JEC, CEA, CBO, and now TPC. On a more personal note, you can read about his near brush with Somali pirates on his personal travel blog. Once again, congratulations.

On the Upcoming Nomination to the Supreme Court

Tim Kane wonders why there are no economists on the Supreme Court (Growthology):

There are nine justices, and nowhere in the Constitution does it say that a law degree is a qualification. Yet, what we have now is a monopoly of lawyers on the Court. A monopoly. All I'm suggesting is that a mere one of the nine have an economics degree. And to assuage the fears of the status quo, a nominee with dual degrees would be more than fine. My own colleague, Bob Litan, has a Ph.D. in economics from Yale AND a law degree from Yale.

The problem is even more concentrated than Tim lets on. This morning CQ Today had an article focused on why recent nominations have all been federal appellate court judges. Senate Judiciary Chairman Patrick J. Leahy has been pushing for a bit more competition in the selection process. From the article, which is gated:

In 1960, for example, the court included a former governor, an ex-senator, a law professor, a former U.S. attorney general, a former state judge and a former head of the Securities and Exchange Commission. As recently as 1971, Republican President Richard Nixon nominated a pair of non-judges, Lewis F. Powell and William H. Rehnquist, to the court at the same time.

But the trend toward selecting federal appellate judges, which began under GOP President Dwight D. Eisenhower, has accelerated in the past 30 years, said Lee Epstein, a Northwestern University law professor.

Perhaps Tim is right and we need more competition from other fields, but maybe even a different composition of lawyers would lead to more diversity of thought and perhaps even results that would be more agreeable to economists. The economomic analysis of the law has been around for some 50 years (often dated from Coase/Calabresi in 1960s) and I see no reason why someone with this background should be excluded from the Supreme Court, although I can't say that having vocal ideas on these issues will help anyone get appointed, since we seem to be fairly risk averse these days.

But by the same token there is no reason we shouldn't consider someone with a strong focus on science and technology and innovation policies more broadly. Perhaps the question is why we end up with so many generalists and so few specialists. Anyway, the basic principle is that innovation is generally good, even in non-high tech areas. So maybe Tim's call will get some traction.

The Valley of Death

There are a lot of interesting components to the recent health care bill, once you go looking in the weeds. From FasterCures:

Medical research leaders and patient advocates yesterday participated in a forum that spotlighted the Cures Acceleration Network (CAN) provision of the Patient Protection and Affordable Care Act signed into law by President Obama on March 23, 2010. Speakers and participants were eager to discuss CAN and its potential to transform the medical research enterprise by supporting efforts specifically designed to bridge a gap in the therapeutic development pipeline between basic and clinical research.

Senator Arlen Specter (D-PA) introduced CAN to bridge this gap, often referred to as the “Valley of Death,” where research lies dormant and ideas come to a halt because the necessary next steps to take basic research discoveries and turn it into a safe and effective therapy are not taken. The forum was convened by Parkinson’s Action Network and FasterCures.

Forum on Social Entrepreneurship

McKinsey & Company has a special "What Matters" dedicated to social entrepreneurship. Currently there are six writers and it's expanding. They are all top names. A couple to check out would be Bill Drayton's essay entitled, "Tipping the world: The power of collaborative entrepreneurship," Sally Osberg's piece, "Driving change: It's not just about size," and J. Gregory Dees, "Creating large scale change: Not 'can' but 'how'." But do check out the rest.

Tap Tap

In Praise of Partisanship

Mark Harris writes in praise of partisanship in his latest column for Entertainment Weekly (don't laugh, it's one of Tyler Cowen's favorite magazines). Along the way Harris discovers public choice theory from watching Parks and Recreation. The show's heroine, Leslie Knope, played by Amy Poehler (not yet online) :

[...] loves the idea of elected office; she thinks ambition is cool; she has a bedrock conviction that politics itself is awesome. Sadly, her day-in, day-out decision-making is somewhat hindered by the fact that she has absolutely no coherent ideas or belief in any particular policies except the ones that might allow her to keep her office or make people like her. Leslie occasionally remembers to mouth some garbled syllables about public service and making the world a better place. Mainly though, she's just terrified of losing the gig. Also, she wants to be president.

The idea that politicians are motivated by self-interest and are primarily concerned with their next election, or that they care more about keeping their job than searching for entrepreneurial solutions to challenging problems is often dismissed as a deeply cynical view of the world. It is, however, not so far off, and it's nice to see that the show apparently throws public choice theory front and center.

As a disclaimer I should add that I am not one of the six or seven people that actually watch the show.

Social Entrepreneurship in the Middle East

Just when I write that there are few examples of social entrepreneurship in the Middle East comes this press release about the Acumen Fund working with Saudi Arabia's King Khalid Foundation (MENAFN):

Jeddah, 31 March 2010: Social enterprises -businesses that provide goods and services to undeveloped segments of the society - are increasingly recognized as effective tools against poverty. Saudi Arabia's King Khalid Foundation - a Royal foundation, established in 2001 to make a positive impact in people's lives by providing innovative solutions to critical social and economic challenges in Saudi Arabia - and Acumen Fund - an international not-for-profit venture fund that invests in enterprises delivering critical goods and services to low-income customers - are partnering to recruit a Saudi national for Acumen Fund's Fellows Program. Fellows receive an opportunity to work with high impact social entrepreneurs for one year.

via @auerswald.

Clay Shirky on Incumbency

From Principled Innovation:

Earlier this week at the South by Southwest Interactive (SxSWi) conference in Austin, Here Comes Everybody author Clay Shirky told attendees, “institutions will try to preserve the problem to which they are the solution.” The relevance discussion feels like a reflexive institutional response to the loss of control associations have experienced over the last 20 years as their stakeholders have become less dependent on them for access to information, education and connections. We may say we’re searching for fresh answers, but it is not clear to me that we are willing to ask different questions.