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Guest Post: The Jobs Plan We'd Get If Leading Innovation Scholars And Growth Economists Weren't Being Volckerized -- Part 1

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Submitted By Frank Ruscica

The Jobs Plan We'd Get If Relevant Innovation Scholars And Growth Economists Weren't Being Volckerized (i.e., Ignored As Volcker Was Until Recently) -- Part 1

The Jobs Plan we'd get would leverage America's advantages to make America the Silicon Valley of the global market for customized education (CE).

Understanding why we'd get this plan starts with knowing that popular online markets for CE can be expected to catalyze the creation of many jobs.

From a November 6, 2009 article in the Wall Street Journal:

"According to the Census Bureau, nearly all net job creation in the U.S. since 1980 occurred in firms less than five years old. A Kauffman Foundation report released yesterday shows that as recently as 2007, two-thirds of the jobs created were in such firms. Put more starkly, without new businesses, job creation in the American economy would have been negative for many years."

From a 2005 report by The Nielsen Company:

"By enabling entrepreneurs to start a business online and immediately reach a market of 157.3 million registered users worldwide, eBay has become the best place to start, grow and operate a small business."

Harvard Business School professor Clayton Christensen is the originator of the canonical Model of Disruptive Innovation, and a co-author of the 2008 book Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns. From Disrupting Class:

"Students need customized pathways and paces to learn.

…The second [phase of the disruption of standardized education] will be the emergence of a user network, whose analogues in other industries would be eBay…"

Stanford economist Paul Romer is the originator of New Growth Theory, which updates growth economics for the information age. From Romer’s entry on Economic Growth in the 2007 edition of The Concise Encyclopedia of Economics:

“The country that takes the lead in the twenty-first century will be the one that implements an innovation that more effectively supports the production of new ideas in the private sector.”

“Perhaps the most important ideas of all are…ideas about how to support the production and transmission of other ideas…North Americans invented the modern research university…As national markets for talent and education merge into unified global markets, opportunities for important policy innovation will surely emerge.”

From The Mystery of Economic Growth, a 2004 book by Harvard economist Elhanan Helpman:

"Interest in growth theory abruptly revived…in the 1980s. The two key papers were by Romer (1986) and Lucas (1988).

…Romer (1990) also initiated the second wave of research on the “new” growth theory.

…A more detailed study of the U.S. economy is provided by Jones (2002). He found that between 1950 and 1993 improvements in educational attainments, which amounted to an increase of four years of schooling on average, explain about 30 percent of growth of output per hour. The remaining 70 percent is attributable to the rise in the stock of ideas that was produced in the United States, France, West Germany, the United Kingdom, and Japan."

So, again, popular CE markets can be expected to catalyze the creation of many jobs.

America is uniquely well suited to become the Silicon Valley of CE.

Understanding why starts with knowing that '1.0' versions of CE markets can be expected to attract many buyers and sellers of corporate training.

From a May 20, 2004 article in The Economist:

"There has been a huge swing to custom programmes,” says Fiona van Haeringen of IESE, who attended a recent annual conference of business-education providers in America…Looking to this year, most saw growth coming mainly from customised education."

From Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change, a 2004 book co-authored by Christensen:

"Modular, customizable corporate training has an advantage that interdependent M.B.A. programs can’t match — a product specifically designed for each employee’s needs.

…In contrast to the leading schools’ integrated structure, the on-the-job management education industry is a disintegrated one. Hundreds of specialized firms develop materials, others design courses, and others produce and teach them."

No other region in the world — more precisely, no other integrated set of regions — comes close to matching the quantity and quality of America’s post-secondary educators.

From The World Is Flat, a 2005 best-seller by Thomas Friedman:

"America has 4,000 colleges and universities…the rest of the world have 7,768."

Sean Gallagher, a senior analyst at Eduventures:

"U.S. education is perceived worldwide as the gold standard in higher education."

If American companies operate and supply popular '1.0' CE markets, America almost certainly will become a magnet for '2.0' CE talent and beyond (e.g., who specialize in serving students (who would otherwise be) in high school or college).

From Clusters of Innovations: Regional foundations of U.S. competitiveness, a 2001 report published by the Council on Competitiveness:

"Regional economies are the building blocks of U.S. competitiveness. The nation’s ability to produce high-value products and services depends on the creation and strengthening of regional clusters of industries that become hubs of innovation…These clusters enhance productivity and spur innovation by bringing together technology, information, specialized talent, competing companies, academic institutions, and other organizations. Close proximity, and the accompanying tight linkages, yield better market insights, more refined research agendas, larger pools of specialized talent, and faster deployment of new knowledge."

From an article in the October 7, 2006 edition of The Economist:

"You might have thought that the advent of the Internet would have eroded the connection between place and talent. In fact, the opposite is happening. Bright people gather in university cities such as Boston and San Francisco, or in technology hubs such as Austin, Texas, or Redmond, Washington, or in rural idylls such as Camden, Maine, and Jackson Hole, Wyoming. They cluster together because they feed off each other’s intellect. Christopher Berry, of the University of Chicago, and Edward Glaeser, of Harvard, have studied the distribution of human capital across American cities. They found that in 1970 about 11% of people over 25 had a college degree, and they were fairly evenly distributed throughout the country. Since then the proportion of Americans with college degrees has more than doubled, but the distribution has become much more uneven."

So, again, America is uniquely well suited to become the Silicon Valley of CE.

Of course, subsidizing CE consumers, suppliers and market operators can expedite the popularization of CE markets.

Two obvious subsidies:

1.  vouchers for consumers (e.g., unemployed workers)
2.  investments on favorable terms for CE suppliers and market operators

To make these investments, Congress and the president can establish a venture capital (VC) firm that is similar in form to In-Q-Tel, a VC firm funded solely by America’s Central Intelligence Agency.

From a 2009 book by Josh Lerner, a professor at Harvard Business School:

"When we look at the regions of the world that are, or are emerging as, the great hubs of entrepreneurial activity – places such as Silicon Valley, Singapore, Tel Aviv, Bangalore, and Guangdong and Zhejiang provinces – the stamp of the public sector is unmistakable. Enlightened government intervention played a key role in creating each of these regions.
…It might be obvious to the reader why governments would want to promote entrepreneurship, but why also the frequent emphasis on venture funds as well? The answer lies in the challenges facing many start-up firms, which often require substantial capital. A firm’s founder may not have sufficient funds to finance projects alone, and therefore must seek outside financing. Entrepreneurial firms that are characterized by significant intangible assets, expect years of negative earnings, and have uncertain prospects are unlikely to receive bank loans or other debt financing. Venture capital – independently managed, dedicated pools of capital that focus on equity or equity-linked investments in privately held, high-growth companies – can help alleviate these problems."

Why, then, is making America the Silicon Valley of CE conspicuously absent from all talk of job creation?

A guess?  In two words? 

Banks, children.

The full thinking behind the guess will be detailed in Part 2, coming ASAP.

Teaser information:

From NurtureShock: New Thinking About Children, a 2009 book that appeared on the New York Times bestseller list for two months:

“When a child gets to choose, they presumably choose activities they’re motivated to do [says Dr. Silvia Bunge, a neuroscientist at the University of California at Berkeley]. Motivation is crucial. Motivation is experienced in the brain as the release of dopamine. It’s not released like other neurotransmitters, into the synapses, but rather it’s sort of spritzed onto large areas of the brain, which enhances the signaling of neurons.” The motivated brain, literally, operates better, signals faster."

From The Sandbox Investment -- The Preschool Movement and Kids-First Politics, a 2007 book by David Kirp, a professor of public policy at the University of California at Berkeley:

"The Seventeenth Congressional District [in Texas]…is among the most lopsidedly Republican in the nation...But in the race for a seat in the U.S. House of Representatives that same year [2004], a Democrat named Chet Edwards bucked long odds and won, running 37 percent ahead of the national ticket.

…Edwards’s opponent [was] Texas state legislator Arlene Wohlgemuth…The conservative establishment went all out to get her elected.

...What undid her were the cuts she’d inflicted on the budget of the Children’s Health Insurance Program, generally known as CHIP — 150,000 youngsters removed from the rolls, half a million denied any dental and eye care, all in the name of lean government. "Children were never my primary concern," she said. It was a remark she grew to regret.

…According to the exit polls, 11 percent of the voters — enough to swing the election — said that Wohlgemuth’s record on children had made up their minds. A quarter of those who supported Edwards said they were thinking foremost of children."

About guest blogger Frank Ruscica:

Set out to become a comedy writer, recognized the need to develop a comic persona, settled on an approach for doing so.  A byproduct of taking said approach: a business plan for establishing a popular CE market.  The plan has been praised by analysts at Microsoft, Amazon.com and top venture capital firm Draper Fisher Jurvetson???  The plan is adapted and expanded on at OpportuniTV.com.

 


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Sat, 02/06/2010 - 13:51 | Link to Comment wang
Sat, 02/06/2010 - 18:15 | Link to Comment TraderMark
TraderMark's picture

In link is an updated chart of all job loss rates in post WW2 recessions, and how awful this one is.  In every 'recovery' at this stage (27 months in) all jobs were recovered except in 2001-2005.  While that recession took longer to recover from the job losses were a fraction of this one.

The fact we are even discussing "flattish" job losses is a sham, at this point in a real recovery we should be discussing whether 250K or 400K jobs were created (we need 125K just to keep up with population growth)

http://www.fundmymutualfund.com/2010/02/job-loss-rates-across-post-ww2.html

Sat, 02/06/2010 - 18:35 | Link to Comment edupreneur
edupreneur's picture

guest-entry-author frank ruscica here.

re: the data at your link

yep, that's the stark reality.

worse still, as is shown in the graphic at the below link, about 50% of job losses in this recession are structural (i.e., the jobs are permanently lost). 

http://www.opportunitv.com/2010/01/29/ny-times-many-jobs-not-coming-back/

imho, this is a primary reason that jobs stimulus should provide ce vouchers to the unemployed...

best,

f

Sat, 02/06/2010 - 14:01 | Link to Comment Anonymous
Sat, 02/06/2010 - 14:10 | Link to Comment louisash
louisash's picture

Interesting collection of references on the emergence of customized education as a growth industry and catalyst for job growth.  The leap from there to promoting government subsidy and intervention is a hugh chasm not justified in the article.  In most cases, government "help" adds bureacracy, inefficiency, and distortion of free enterprise.

Sat, 02/06/2010 - 14:38 | Link to Comment edupreneur
edupreneur's picture

frank ruscica here (author of this guest entry).  much to discuss about your reservations, obviously, but it is interesting to note that paul romer is a big believer in the role of government specific to subsidizing education...

 

 

Sat, 02/06/2010 - 14:11 | Link to Comment jedwards
jedwards's picture

Is the issue at hand going forward really the US jobs situation?  

Or is it the European jobs situation?  It's clear that the US markets are being held by the short-and-curlies by the situation in Europe through the PIGS.  If the employment situation doesn't get better and in fact gets worse, doesn't this increase the chances of a default, thus causing the domino effect that everyone is so concerned about?

Even a recovering US jobs market won't necessarilyl improve the markets and is still vulnerable to getting sideswiped by European contagion, much like the Asian currency crisis sideswiped the entire region.  Except this time it's not regional, it would be based on the relative vulnerability to a financial collapse.

Sat, 02/06/2010 - 14:43 | Link to Comment Anonymous
Sat, 02/06/2010 - 14:49 | Link to Comment Anonymous
Sat, 02/06/2010 - 14:50 | Link to Comment Anonymous
Sat, 02/06/2010 - 15:05 | Link to Comment Anonymous
Sat, 02/06/2010 - 15:35 | Link to Comment Master Bates
Master Bates's picture

Unfortunately, education is not really a public priority in the United States.

While education budgets are being slashed, we spend enough money on wars to give each person who wants to go to college a full ride scholarship to a state school.  (Just the money we spend in Iraq would provide over 4 million full scholarships a year)

Education is marginalized more and more in the media, and post high school education is increasingly ridiculed by the people who want to see our country ignorant.

I agree that we need to export the quality of education to other countries to grow our economy.  Still, it seems like education quality isn't even respected here.

Sat, 02/06/2010 - 15:39 | Link to Comment Anonymous
Sat, 02/06/2010 - 18:07 | Link to Comment edupreneur
edupreneur's picture

guest-post author frank ruscica here.

re: deschooling society

good stuff.  imho, operationalizing this idea largely equates to ushering in the markets-centered model previewed in my zh entry, and that i detail at opportunitv.com

thoughts?

best,

f

Sat, 02/06/2010 - 15:54 | Link to Comment rc
rc's picture

Customized education will require a lot of non-trivial programming if it's going to provide more than just online textbooks. I've been in higher education for 20 years, and I've developed as much "customized education" as anyone. Tell me, who's going to write all the code?

Don't expect anything from faculty. They don't get paid more for "customizing" their educational products. But they can provide what students need - a diploma that is valued in industry. Until companies in the education business can come up with a diploma of equal value, it's going to be hard for them to compete with universities.

Code costs a lot of money to develop. Schools have none to spend. What's the business model?

 

 

Sat, 02/06/2010 - 16:04 | Link to Comment edupreneur
edupreneur's picture

rc, guest-entry author frank ruscica here.  re: a lot of code being required, you are 1000% correct (query optimizer, constraint-solvers, algos for combinatorial auctions, learning algos for bidding agents, and on and on).

see OpportuniTV.com for lots of info re: the biz model.

i'll check back here periodically, if you want to follow up.

best,

f

 

Sat, 02/06/2010 - 15:54 | Link to Comment Anonymous
Sat, 02/06/2010 - 18:02 | Link to Comment edupreneur
edupreneur's picture

guest-entry-author frank ruscica here.

re: a main reason we haven't had ce yet

from an article by harvard education psychologist howard gardner in the may-june 2009 issue of Foreign Policy magazine:

"now for the first time [because of advances in IT] it is possible to individualize education -- to teach each person what he or she needs and wants to know in ways that are most comfortable and efficient."

re: the rest of the world wanting/needing ce

if you review the data at the below url, imho you'll come away thinking that parents everywhere will soon insist on ce for their children.

http://www.opportunitv.com/benefits-for-children/

best,

f

 

Sat, 02/06/2010 - 16:26 | Link to Comment Anonymous
Sat, 02/06/2010 - 16:26 | Link to Comment Charley
Charley's picture

The ultimate product of the 21st Century: Creating social containers that make paid work necessary.

 

Work is dead, Frank. China killed it.

Sat, 02/06/2010 - 16:30 | Link to Comment Anonymous
Sat, 02/06/2010 - 16:58 | Link to Comment JR
JR's picture


In “The Crisis Is Not Over,” Reagan’s assistant secretary of the treasury, Paul Craig Roberts, writes: “Readers ask if the financial crisis is over, if the recovery is for real and, if not, what are Americans’ prospects. The short answer is that the financial crisis is not over, the recovery is not real, and the U.S. faces a far worse crisis than the financial one…"

Says Roberts, “The global crisis is understood as a banking crisis brought on by the mindless deregulation of the U.S. financial arena.” And: “The crisis will not be over until financial regulation is restored."  But, says Roberts, “Wall Street has been able to block re-regulation. Moreover, the response to the crisis has planted seeds for new crises.”

Excerpt from his February 2 column:

…A third crisis is also in place. This crisis will occur when confidence is lost in the U.S. dollar as world reserve currency. This crisis will disrupt the international payments mechanism. It will be especially difficult for the U.S. as the country will lose the ability to pay for its imports with its own currency. U.S. living standards will decline as the ability to import declines.

The financial crisis is essentially a U.S. crisis, spread abroad by the sale of toxic financial instruments. The rest of the world got into trouble by trusting Wall Street. The real American crisis is much worse than the financial crisis. The real American crisis is the offshoring of U.S. manufacturing, industrial, and professional service jobs such as software engineering and information technology.

Jobs offshoring was initiated by Wall Street pressures on corporations for higher earnings and by performance-related bonuses becoming the main form of managerial compensation. Corporate executives increased profits and obtained bonuses by substituting cheaper foreign labor for U.S. labor in the production of goods and services marketed in the U.S.

Jobs offshoring is destroying the ladders of upward mobility that made the U.S. an opportunity society and eroding the value of a university education. For the first decade of the 21st century, the U.S. economy has been able to create net new jobs only in domestic nontradable services, such as waitresses, bartenders, sales, health and social assistance and, prior to the real estate collapse, construction. These jobs are lower paid than the jobs were that have been offshored, and these jobs do not produce goods and services for export.

Jobs offshoring has increased the U.S. trade deficit, putting more pressure on the dollar’s role as reserve currency. When offshored goods and services return to the U.S., they add to imports, thus worsening the trade imbalance.

The policy of jobs offshoring is insane. It is shifting U.S. GDP growth to the offshored locations, such as China, thus halting growth in U.S. consumer incomes. For the past decade, U.S. households substituted an increase in indebtedness for the lack of growth in income in order to continue increasing their consumption. With their home equity refinanced and spent, real estate values down, and credit card debt at unsustainable levels, it is no longer possible for the U.S. economy to base its growth on a rise in consumer debt. This fact is a brake on U.S. economic recovery.

Stimulus packages cannot substitute for the growth in real income. As so many high value-added, high productivity U.S. jobs have been offshored, there is no way to achieve real growth in U.S. personal incomes. Stimulus spending simply adds to government debt and pressure on the dollar, and sows seeds for high inflation.

The U.S. dollar survives as reserve currency because there is no apparent substitute. The euro has its own problems. Moreover, the euro is the currency of a non-existent political entity. National sovereignty continues despite the existence of a common currency on the continent (but not in Great Britain). If the dollar is abandoned, then the result is likely to be bilateral settlements in countries’ own currencies, as Brazil and China now are doing…

The threats to the U.S. economy are extreme. Yet, neither the Obama administration, the Republican opposition, economists, Wall Street, nor the media show any awareness. Instead, the public is provided with spin about recovery and with higher spending on pointless wars that are hastening America’s economic and financial ruin.

http://www.vdare.com/roberts/100202_crisis.htm


That said, if a Jobs Plan "to make American the Silicon Valley of the global market for customized education," ie CE, is so hot, why do we need to subsidize it?

Sat, 02/06/2010 - 17:22 | Link to Comment edupreneur
edupreneur's picture

this-guest-post author frank ruscica here.

of course, the u.s. does not have to provide such subsidies.  but if the issue is "how to get the biggest bang for the jobs-stimulus buck" than, imho, there is a very strong case to be made for subsidizing ce consumers and producers, and operators of ce markets...

best,

f

 

 

 

 

Sat, 02/06/2010 - 18:53 | Link to Comment Anonymous
Sat, 02/06/2010 - 17:10 | Link to Comment Anonymous
Sat, 02/06/2010 - 17:14 | Link to Comment bugs_
bugs_'s picture

More education - while more factories close

and more small businesses close.  More

Americans throwing in the towel.  Stick to

comedy.

Sat, 02/06/2010 - 17:29 | Link to Comment boooyaaaah
boooyaaaah's picture

Obama says "ok give me a solution"

That is the problem

Solutions come from the bottom up not from the top down -- top down solutions lead to tyranny -- which is ok in the Army but not America

All Regan did was cut the government, the regulations, added a tax cut and voila you get a kid named Gates

 

Sat, 02/06/2010 - 18:16 | Link to Comment Anonymous
Sat, 02/06/2010 - 18:51 | Link to Comment Mark Beck
Mark Beck's picture

Interesting point of view. But, perhaps the conclusions are too "academic".

The underlying strength of education is a strong economy.

Let me narrow my comments to the remnants of the middle-class.

Education has become a business, based on the beleive that skills will be marketable.

Forgive my bluntness but; Universities care about one thing, how many bodies they have enrolled. This is key because it represents the schools revenue. How many are enrolled and how many make it to graduation, the number of students in the pipeline. Simple, they have to make their numbers, or rely on donations.

Once the government started subsidizing education through student loans, higher education saw a way to cover increasing costs. Essentially passing the up front costs to the government in the form of student loans. 

What does the school care about, getting paid first, without regard to student or government debt. The problem with this is that the graduating student will have a large debt burden, and without a strong economy, potentially no job prospects.

So worse case, the student spent a lot of time, effort and money (borrowed), to obtain a degree which generates no revenue. The "investment" question comes into play here, because the time and money spent could have been put towards a business venture of some sort. To make sense, the investment must generate some type of return.

No I am not against higher education, but there comes a time when the costs are too high for what you get. School is investment, time and money spent, in the end it must generate a return. Obviously, I am leaving out the more emotional well-being, lets hold hands and sing Kumbaya, aspect of higher education. Which I must admit can be fun, but really doesn't pay the bills.

Everyone talks about the strength of education, Bill Gates (never completed his degree?) and so on, but what is not discussed is that the benefits are rooted in a strong and fair democracy. The structure is what makes education strong, the possibilities for growth and innovation, not the issuance of a diploma.

Mark Beck

Sun, 02/07/2010 - 02:12 | Link to Comment merehuman
merehuman's picture

mark beck. Well said. The better off tend to forget the basics.

Sun, 02/07/2010 - 10:42 | Link to Comment Anonymous
Sun, 02/07/2010 - 04:01 | Link to Comment Anonymous
Sun, 02/07/2010 - 08:31 | Link to Comment Anonymous
Sun, 02/07/2010 - 12:30 | Link to Comment edupreneur
edupreneur's picture

guest-entry-author frank ruscica here.

thanks kindly for your feedback

re: the 3% estimate

history may tell a different story

a good book to examine for an alternative view is The Populist Vision, by charles postel.

an excerpt from the book overview at google books:

"But what did Populism represent? Half a century ago, scholars such as Richard Hofstadter portrayed the Populist movement as an irrational response of backward-looking farmers to the challenges of modernity. Since then, the romantic notion of Populism as the resistance movement of tradition-based and pre-modern communities to a modern and commercial society has prevailed. In a broad, innovative reassessment, based on a deep reading of archival sources, The Populist Vision argues that the Populists understood themselves as--and were in fact--modern people, who pursued an alternate vision for modern America.

Taking into account both the leaders and the led, The Populist Vision uses a wide lens, focusing on the farmers, both black and white, men and women, while also looking at wager workers and bohemian urbanites. From Texas to the Dakotas, from Georgia to California, farmer Populists strove to use the new innovations for their own ends. They sought scientific and technical knowledge, formed highly centralized organizations, launched large-scale cooperative businesses, and pressed for reforms on the model of the nation's most elaborate bureaucracy - the Postal Service. Hundreds of thousands of Populist farm women sought education, employment in schools and offices, and a more modern life. Miners, railroad workers, and other labor Populists joined with farmers to give impetus to the regulatory state."

(unfortunately, text from the book is not available via google books.)

in particular, the book chronicles the extent to which poorly educated amaericans sought out -- and leveraged -- education during the 1880s and 1890s.

that extent is almost impossible to overstate.

another historic episode that may be revealing, via http://en.wikipedia.org/wiki/Bureau_of_Refugees,_Freedmen_and_Abandoned_...

"The Bureau of Refugees, Freedmen, and Abandoned Lands (usually referred to as the Freedmen's Bureau) was a U.S. federal government agency that aided distressed refugees of the American Civil War.

...The most widely recognized among the achievements of the Freedman’s Bureau are its accomplishments in the field of education. Prior to the Civil War, no southern state had a system of universal, state-supported public education. Former slaves wanted such a system while the wealthier whites opposed the idea. Freedmen had a strong desire to learn to read and write and worked hard to establish schools in their communities prior to the advent of the Freedmen's Bureau.

...Overall, the Bureau spent $5 million to set up schools for blacks. By the end of 1865, more than 90,000 former slaves were enrolled as students in public schools. Attendance rates at the new schools for freedmen were between 79 and 82 percent."

thx again.

best,

f

 

Sun, 02/07/2010 - 13:20 | Link to Comment Anonymous
Mon, 02/08/2010 - 02:08 | Link to Comment Anonymous
Mon, 02/08/2010 - 05:52 | Link to Comment Anonymous
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