Innovation and Auto Manufacturing

Democracy: A Journal Of Ideas has an interesting symposium on U.S. innovation. I was struck by this statement, in the context of how too much financial innovation has not contributed much to the U.S. economy:

While it is hard to imagine the downside to too much R&D in, say, auto manufacturing...

I think it's quite easy to conceive a downside to too much investment in auto manufacturing—and with the federal government's newly expanded role in that industry.

President Obama has often talked about the important of America retaining its traditional role as one of the lead car manufacturers around the world, and that Detroit needs to be at the forefront of new green automobile technologies. What's the problem with this competitive mindset? A paper from a few years ago by economists William Butos and Thomas McQuade takes a critical look:

When the Russians threaten to lead the way into space, astronautics and space science is favored in the United States, building up an impressive edifice of research capability and trained scientists ready to push the discipline further. When the Japanese threaten to develop a “fifth-generation” computer, attention in the United States switches to computer science, and space-related science funding becomes insufficient to maintain the talent already developed. When the Japanese are no longer seen as a danger to national prestige, political attention wanders away from computer science, and employment for newer Ph.D. holders in the area of research for which they have been trained is much harder to come by than they had expected it to be. The scenario is one of localized booms and busts—“science cycles”—accompanied by the disruption of individual lives and the waste of talent and resources similar to that characteristic of business cycles.

When the federal government chooses to focus on automobiles, we don't know what other areas of innovation are being neglected due to that focus. We might get semi-affordable electric cars sooner than we otherwise would, but what new luxuries won't we get?