What Economists Don’t Know About Manufacturing

Manufacturing, and especially the initial production of new technologies, must be seen as part of the innovation system. It is an autonomously creative stage in which a new product must evolve through prototyping, product definition, and production design from an idea into both a marketable and produce-able good. This often requires a re-examination of the underlying science behind the innovation. While the innovation leaders of other nations, including Germany, Japan, Korea, Taiwan, and now China, have focused on “manufacturing-led” innovation,3 those in the United States still mostly think that R&D is the only key to innovation, and that all the rest somehow takes care of itself.

It used to, at least relatively speaking, but over time the delinking of innovation from production has put the United States increasingly at a competitive disadvantage. Many other better-known factors play into the problems of the American economy, but the drag that comes from ignoring the innovative power of manufacturing technique has been hugely important, too. Whatever the reasons for the oversight—the biases of classical economics, the path-dependency effects of the post-World War II “pipeline” model that emphasized federally funded research universities and basic research—if we want to recoup our leadership and ensure social comity and peace, we must stop ignoring this critical connection.

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