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Home Publications Blogs Beat the Press Morning Edition Spreads Nonsense on Investment and Innovation

Morning Edition Spreads Nonsense on Investment and Innovation

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Wednesday, 13 July 2011 04:15

Morning Edition spread a bit of nonsense this morning in a segment on innovation. It told listeners that firms are not investing much right now, which it attributed to uncertainty. It's not clear what metric it is using, but investment in equipment and software as a share of GDP is almost back to its pre-recession peak. Given that many sectors on the economy are still operating far below full capacity, this is a fairly high level of investment.

equip_and_software_11894_image001

Source: Bureau of Economic Analysis.

The segment also included the unsupported assertion that Americans used to be the most innovative people in the world, but this is no longer true. It does not give its measure of innovation. The United States trailed most other wealthy countries in productivity growth in the years prior to 1995. Since then, productivity growth has been somewhat more rapid in the U.S. than in other countries, but this reverses the pattern identified in the story. Other countries have more small businesses and self-employed people relative to the size of their workforce, at least in part because they have national health insurance. (Entrepreneurs know that they will still have health care even if their business fails.) It is not clear what measure produces the pattern of innovation described in the segment.

Comments (3)Add Comment
Apples, Oranges, Productivity and Innovation: Baker Right for Wrong Reason
written by izzatzo, July 13, 2011 6:31
The segment also included the unsupported assertion that Americans used to be the most innovative people in the world, but this is no longer true.


Oh contraire, any economist knows this to be true for example in the health care industry since compensation tracks innovation and productivity.

Prices and spending are higher precisely because of superior quality, performance and consumption demand for health care than in other countries.

While innovation and productivity did drive prices down with intense competition aggregate demand was so elastic it pulled them back up again due to compensation and wealth effects from overall productivity increases.

Baker confuses reward for superior performance and rising relative investment and costs that are justifiable under free market capitalism with what amounts to enforced unwanted socialist competition.

Stupid liberals.
D U M spells
written by Downpuppy, July 13, 2011 7:47
Morning Edition was on at breakfast this morning in the kennel. I can usually ignore it, but starting with some woman saying "physical year" it went into a 10 minute section of strange accents & gibberish that left my chin in the shredded wheat.

They have no clue.
Most Media Types know nothing about Economics and are Lazy
written by Ecletic Observer, July 13, 2011 9:24
We have faith-based commentary in this country. For example the following are believed without evidence: The private sector is always better than government regardless of market structure. Business Leaders are Entrepreneurs thus always heroic regardless of the fact that many are just employess even though they may be CEOs. Taxes are bad for the economy, always. Etc.

Trouble is that short statements about economics are almost always wrong. The press buys into short statements as a matter of a keep it simple stupid communication philosophy. Unfortunately, simple is often wrong.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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