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We’re going to start this article off with a short exercise. Do me a favor and raise your hand if you’re a bit concerned about America’s sharply declining economy.

Alright, well done, now put your hand down, because it’s impossible to look cool with a hand waggling in the air while sitting in front of a computer screen.

You’re not alone in your worries. With our housing crisis, expensive and depleting energy, and competition across the globe, the potential dangers seem overwhelming. To top it all off, both political parties seem to be offering lackluster solutions at best.

There may be a ray of sunshine to cut through the clouds, however. This pillar of light is known as “Innovation Economics”. Economists and leaders in business are coming to the conclusion that innovation is the best, if not the only, way we can crawl out of our economic hole. Coming up with new and improved products that enhance our daily lives may create enough growth to allow Americans to prosper in the long run.

It makes sense on a very basic level, if you take a step back to look at it. Let’s take the example of perhaps refining a metal into a new type of electrical conduit for computer chips. We’d have to create and build machines to refine the metal, and then create machines to build the new computer chips. This ultimately revives our communities with new jobs, renewed power in the trade market, and hopefully a better way of life.

In order to achieve this ideal, however, the jobs need to stay in house. Unfortunately, right now, domestic jobs in the technology industry have stagnated of fallen since 2000. Pharmaceutical and biotech companies are having as many lay offs as they hire. Even the industry category that includes Google has only provided 15,000 jobs since 2003.

I realize this may come across as a “duh” statement, but focusing on innovation and the future of technologies is critical in developing a competitive edge in the world today. Until recently, the main focus of economists has been on traditional topics, such as taxes, government spending, and trade.

The good news is that some of the brightest minds in the field are starting to pay a lot more attention to innovative economists. Daron Acemoglu of Massachusetts Institute of Technology, winner of the 2005 John Bates Clark Medal for top economist under 40, is one such mind. His work now is examining how government and business decisions such as outsourcing can influence the direction of technological change.

Theory is great, but without data to back it up, it’s nothing. Fortunately, government statisticians such as Lynda Carlson of the National Science Foundation are trying to find new ways to quantify innovation and its impact on business. This upcoming January the NSF will be launching a survey of 40,000 companies to find out how much they spend on research and development in the U.S., and overseas. This will open our eyes to how companies benefit from spending their money on invention and improvement of their product, and clue us in to what potential added resources may have.

One thing worth noting is that historically, technological change has been the biggest force behind productivity growth in the U.S. Obviously, YouTube may not have been the best invention for people getting things done while at work, but the numbers don’t lie. The latest figures show that technological changes and improvements in the business process account for 45% of productivity gains between 1987 and 2007. “Ninty-five percent of all economists agree that innovation is the most important thing for long-run growth.” says Acemoglu of MIT.

What’s more, our best shot at keeping the U.S. competitive is banking on promising new ideas. America is still a leader in resources devoted to innovation, as measured by the amount companies invest on R&D and higher education. If you think about it, how else can we stay ahead of the game? We’re not going to beat China, India, or other developing nations on labor costs. It’s equally unlikely we can depend on cheap capitol given the amount of money we borrow from overseas. Thus, the answer seems pretty clear, at least to this writer.

There is a risk involved, as is the case in any form of investment. What if nanotechnology, biotechnology, robotics, and other next level sciences don’t take off? Suddenly billions of dollars of investment go to waste. However, my opinion is it’s impossible for these technologies to fail. Every year our computers get faster and smaller, and we come one step closer to creating a near perfect robot, or reconstructing an arm for a patient. It’s in our nature to find ways to repair, rebuild, and become more efficient in our daily lives. Whoever comes out on top is simply whoever comes up with a way of making it work first. If the U.S. doesn’t figure it out, I guarantee someone else will.

-Dropping off of this plane of existence until the next big news requires an opinion, this is FM Popp(News) Agent Ari G.

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