Tuesday, August 10, 2010

It's the Toilets

Not finding current data regarding global trade sufficiently depressing, a number of commentators on my weekend post sought discouragement closer to home. One impassioned observer noted that unemployment in the U.S. is now 20%; another got a bit closer to the truth by noting that the most recent broad-based unemployment number (U-6) is 16.5%. All of which seems like U.S. unemployment is getting in the vicinity of The Great Depression peak of 25%.

Well, it's not. The reason is that the 25% number is most closely comparable to today's U-3 unemployment number, which is 10%. If you apply U-6 methods to historical data, you will get an unemployment figure for the peak of The Great Depression much higher than 25%. (One attempt from the blogosphere here.) The conclusion being that...
But the picture for the present--as opposed to 1930s--is even better than would be suggested by looking at the above chart. Recapping earlier blog posts of mine, I added in a comment to my own post:
In the 1930s 1/3 of Americans didn't have a toilet, unemployment peaked at 25% (not 10%, where we are today), and the average life expectancy was about the same as it is in Ghana today. The current recession is not comparable to The Great Depression. Period.
One well-informed reader (thank you dwg) offered this response:
And your statement as regards toilets... I'm not quite sure how to address it. An apples-to-apples comparison is evaluating the drop in real standard of living; no one is saying we've moved back to the income levels of the Great Depression; your argument there would appear either a gross misunderstanding of the terms of the debate or a straw man. Even those of the Great Depression era were better off than a peasant in the Middle Ages by many terms of reference. The issue here is: how many people are suffering a diminishing of their quality of life, proportional to their baseline expectation prior to the downturn?
So to be very clear, the toilet comment isn't a straw man, it's actually a core point here. And that point is that absolute levels do matter.

Look at it this way: Is (evil, Greenwich-CT-dwelling, CDO-trading) hedge fund manager whose income drops from $2 mil/year to $200K really in the same position as the owner of a shuttered auto dealership who was making $200K/year and now is bringing home $20K? I'm sure you'd agree--No. Well, you know what fraction of the world's population makes over $20K/year? In terms of individual-wage earners, about 2%. That's us. We are to the rest of the world what hedge-fund-guy is to us.

These absolutes may not have mattered much in the 20th century but in the 21th century, they do. All those poor schmucks out there in the "developing world" who are still pissing into open sewers are--surprise!--the people who are going to be driving global growth for the next 50 years. That because growth happens where there are unrealized gains to productivity. And those people--people who matter a lot both to America's future and to its recent past (ref. Greenspan's "conundrum")--aren't taking toilets for granted.

So the really big thing Krugman's missing isn't the trend in the global trade data after all. It's the toilets.

Sunday, August 8, 2010

Krugman vs. Reality (Reality Wins)

Here's what Paul Krugman had to say about the Great Recession a year ago: “When it comes to international trade, actually it’s not the Great Depression, it’s worse." Yes, he said that.

Krugman's attempt on that occasion, in his column, and elsewhere to draw comparisons between the magnitude of the Great Depression and the recent recession and were absurd for myriad reasons then as they are now, as I noted at the time here, also more recently here and here.

Now the speculation is over and the extent of Krugman's misread is evident. As The Economist reports this week, global trade and global manufacturing are surging back:
At first, the recession did hit trade hard. Global GDP fell by 0.6% in 2009 while the volume of world exports dropped by 12.2%. But whereas the Depression saw trade decline for at least four years, this time the rebound has been quick, and sharp. By May this year, emerging-economy members of the G20 were importing and exporting around 10% more than their pre-crisis peaks (see chart). Rich-world trade has recovered from the trough too, though it has not yet made up all the ground lost since the credit crunch began.
As it turns out, there is nothing Depressing about current prospects in the global economy...unless, of course, you happen to be Paul Krugman.

At least he's still got his Nobel Prize to keep him company while the rest of us enjoy the good (if not unexpected) news.

ADDENDUM: An response to all the praise for agreeement with comments on this posts.

First, Hooray for Paul Krugman. He is an elegant theoretician of international trade. Hooray again for Paul Krugman.

Now that were done with the hero worship, two additional points:
  • Yes, the quote in the first line above came from remarks Krugman delivered a year ago. My question is this: How many times does Krugman have to compare the current recession to The Great Depression before he becomes accountable for having made that claim? It is clear why Krugman wants to advance this argument ("What Paul? The stimulus package might not have been big enough? You don't say..."). But at some point, if the sky doesn't fall, it is fair to say--sky's not falling, Paul.
  • Along the same lines, but from an analytic vantage point: My 5-year old daughter can look at a chart and say "that line is pointing downwards." My 12-year old daughter can look a chart with two lines and say "Line A is more steeply sloped than Line B." Neither of them has a Nobel Prize (yet). So to say, as David more or less does (below), "He made that statement a year ago. How was he to know that the trend would reverse itself...completely. Invalidating his comparison...entirely." Indeed, how was he to know? Well that is exactly why he is paid the big bucks. That is why he has the big reputation. Because we expect that he can do more than just compare the slopes of two lines.
In scholarship, it's not what you know, it's how you know. Krugman is in a category with other macroeconomists whose projection of certainty goes far beyond the knowledge base on which such certainty can possibly be based. When events point out alleged experts' (potential, conditional even!) deficiencies in fundamental insight, it is worth noting. That is the point of this post.

(And by the way: I am not fundamentally opposed to analytically-based extrapolation based on trends. You just have be straight about what you really know with confidence, and be prepared to accept responsibility for your claims when any speculations made turn out to be wrong.)

Saturday, August 7, 2010

New Growth Theory: Not New, and Not Useful

In a recent article in The Atlantic featuring Stanford University professor Paul Romer, Sebastian Mallaby opens with the following story familiar to all economists:
Starting in the late 1980s, [Paul Romer] produced a series of papers that changed the way his profession thinks about economic growth; his most celebrated contribution, published in 1990, “was one of the best papers in economics in 25 or 30 years,” in the estimation of Charles I. Jones, a colleague of Romer’s at Stanford. Before the Romer revolution, theorists had explained an economy’s growing output by looking at the obvious inputs—the number of hours worked, the skills of the workforce, the quantity of machinery and other physical capital.
But Romer stressed a fourth driver of growth, which he termed simply “ideas,” a category that encompassed everything from the formula for a new drug to the most efficient sequence for stitching 19 pieces of material into a sneaker. In statistical tests, the traditional inputs appeared to account for only half the differences in countries’ output per person, suggesting that ideas might account for the remaining half—and that leaving them out of a growth theory was like leaving the prince out of Hamlet. And whereas the old models had predicted that growth would slow as population expansion put stress on resources, and as new investment in skills and capital yielded diminishing returns, Romer’s New Growth Theory opened the window onto a sunnier worldview: a larger number of affluent people means more ideas, so prosperity and population expansion might cause growth to speed up.
Now, just for the record, this is nonsense. Every year I have to guide one or more doctoral students through the process of unlearning this little bit of mythology--and with it the notion that New Growth Theory constitutes some sort of great breakthrough in the history of ideas (or even just economics for that matter) which we should all applaud.

I'll explain as quickly as possible because the origin of ideas in economics is a topic of almost no interest to anyone, including me. But some clarification, for the record, is in order:

1) The first clarification is that Romer's contribution to the theory of economic growth was very specific and technical: He found out how to make the mathematics of an "endogenous growth model" work. He can rightly be credited with reviving a moribund field (economic growth theory), but it is an exaggeration to claim that he created the field, and simply incorrect to assert (as Mallaby does) that "before the Romer revolution, theorists had explained an economy’s growing output by looking at the obvious inputs—the number of hours worked, the skills of the workforce, the quantity of machinery and other physical capital."

To the contrary, the ideas and a fair share of the modeling behind the model Romer developed (initially for his dissertation and then in a handful of papers on which his fame primarily rests) had been worked out more than twenty years earlier by a group of economists notably including Karl Shell, Hirofumi Uzawa, and the great Kenneth Arrow. Read the work of Schookler, Nelson, Phelps, or many others from 1950 and 1960s (see e.g this classic volume) and earlier still the work of Joseph Schumpeter, and it is evident that, long before Paul Romer was born, scores of economists had written brilliantly on the topic of how ideas create growth and development. (This history is well understood by individuals who are close to the events in question--including Romer himself, obviously--and has been ably chronicled by David Warsh of the Boston Globe here and here [e.g. pp. 155-156]).

2) The second clarification is that, of the two ideas most closely identified with "New Growth Theory," one is wrong and the other is so obvious as to be of no practical use to policy-makers or businessmen.

Let's start with the idea that's wrong, namely, that because ideas are "non-rival" and "non-excludable," economically relevant innovations (Romer actually uses the term "recipes,' as I have in work with Karl Shell and Stuart Kauffman) are characteristically subject to "knowledge spillovers." In plain English "non-rival" means that one person's use of an idea does not keep another person from using the idea; "non-excludable" means that it is impossible to keep a person from using an idea once it is "out in the open;" and "knowledge spillovers" refers to the costless transmission of ideas that are non-rival and non-excludable.

This all sounds well and good, and versions of these few lines have led a generation of economists to buy into the notion that "knowledge spillovers" are somehow the fuel that drives development and growth. But the whole construction only makes sense in the lecture room. In fact, the ideas that actually propel growth and development are overwhelming uncodified, context-dependent, and transferable only at significant cost (econ-speak: tacit knowledge dominates, information asymmetries are the norm, and transactions costs are significant, see here and here). While "knowledge spillovers" of the type celebrated by Romer certainly exist, they are of marginal relevance in the practical work of economic growth and development. (Don't start talking to me about webpages and pirated music videos here--those are a different story altogether from production recipes.) For more, see my prior post on this topic, and also this absolutely brilliant (short and readable!) book by Robert Solow--or for that matter, Schumpeter's Theory of Economic Development.

Now as to the idea at the core of New Growth Theory that is so obvious as to be useless, it is the one featured by Mallaby: "Romer stressed a fourth driver of growth, which he termed simply 'ideas,' a category that encompassed everything from the formula for a new drug to the most efficient sequence for stitching 19 pieces of material into a sneaker."

Let's be real here: Was Paul Romer really the first person to figure out that new ideas don't just fall out of the sky, but actually require effort and investment to develop? Of course not! My guess is that you would have had a very hard time finding a single individual involved in corporate research and development or technology entrepreneurship in 1986--when Romer published his first "seminal" paper-- that believed that the ideas that drove the growth and development of societies just sort of happened on their own. Indeed, consider this observation by Ralph Flanders, co-founder of America's first venture capital firm, written fully 40 years before Romer published his work:
The continued maintenance of prosperity and the continued increase in the general standard of living depend in a large measure in finding financial support for that comparatively small percentage of new ideas and developments which give promise of expanded production and employment and an increased standard of living for the American people. We cannot float along indefinitely on the enterprise and vision of preceding generations. To be confident that we are in an expanding, instead of a static or frozen economy, we must have a reasonably high birth rate of new undertakings.
Is our bar for scholarship so low that ideas obvious to everyone but scholars can constitute great advances in knowledge? I really hope not.

All of this matters because the slavish and uncritical repetition of the New Growth fable (ref. Mallaby article above) has led even the most thoughtful economists to believe that this fable somehow corresponds to reality and the ideas of New Growth Theory are of practical relevance. A recent post by Bill Easterly serves as an illustration:
Response to RT @auerswald People r (Not) Statistical Noise http://bit.ly/bAwtpQ:

on objection that small bursts of creativity can have very large effects. Um, yes, it’s called non rivalry of ideas (and music scores). Many people can simultaneously use the same idea/score. And everyone wants to use the best ones. So the scale effects can be Gigantic. I guess I had noticed I’m not the only one who likes Mozart.
Easterly misses what macroeconomists customarily miss: that the process by which "small bursts of creativity" have large effects has a name, and it is not "non-rivalry".  It is entrepreneurship.

Entrepreneurship involves the search for ideas that are in fact, rivalrous and excludable (at least temporarily) out of which ventures with proprietary value can be created. The impediments to entrepreneurship that matter most are not lack of appropriability of returns (as New Growth Theorists almost invariably preach) but rather the everyday battles involved in communicating ideas, building trust, and making deals (more here and here.)

Of course, the most remarkable achievement on Paul Romer's vita is that he is economist who has also managed to become a successful entrepreneur himself--having founded and sold the online economics teaching company, Aplia, which I have used in my own courses. So Romer certainly knows all this, and can't be held responsible for the creation of fables in which he is a featured player.

But to everyone else: enough with the New Growth Theory already. It wasn't new even 30 years ago, and it's not useful now.

ADDENDUM: Lest my macroeconomist friend--oops, that should "friends"--think me too ungenerous, here are five papers and one book written about economic growth in the past three decades that I do think contain real insights of conceivable value to business strategist or policy-makers:
  • Robert Lucas, "Making a Miracle" because of its integration of insights regarding firm learning curves and its clear articulation of the fact that sustained growth requires the constant innovation of new goods and services
  • James Schmitz, "Imitation, entrepreneurship, and long-run growth," great paper addressing limits to appropriability of knowledge in entpreneurship and implications for growth theory
  • Robert Solow, Learning from Learning by Doing, absolutely brilliant summary of the drivers of growth and how they have been represented by economists (including insightful critiques of the "New Growth" literature)
  • Claudio Michelacci, "Low Returns in R&D Due to the Lack of Entrepreneurial Skills," a rare paper in the growth literature to explicity address the role of entrepreneurs in converting basic science inventions into market-ready innovations (see this for description of the practical realities)
  • & best of all, Martin Weitzman, "Hybridzing Growth Theory" and "Recombinant Growth," for linking combinatoric possibilities (ref. Schumpeter's characterization of entrepreneurship) to growth, and connections to earlier, highly prescient work by Weitzman on the Soviet Economy.
These are but a few among many others, of course.

Friday, August 6, 2010

Non-rival ideas: Great for growth theory, but not for growth practice

This long post is drawn in part from prior work of mine on entrepreneurship and economic growth including "The Simple Economics of Technology Entrepreneurship: Market Failure Revisited."I was prompted to write it by this article in The Atlantic, which put me over the limit of exasperation with uncritical views of the actual contribution to the study of development made by "new growth theory." 
If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea… He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature…
—Thomas Jefferson, Letter to Isaac McPherson, August 13, 1813

As anyone who has been within a mile of a macroeconomics course in the past two decades is well aware, the big idea in growth theory in the past 20 years is something called endogenous growth. This is the insight that economic growth to technological and organizational innovation doesn't come out of nowhere. It actually requires work and investment.

Yes, that's the big insight.

Anyhow, the device that allows societies to escape the inevitable boundedness of any given project or set of projects and grow far into the future is something call "increasing returns to scale." This property allows some outputs of human intiative--notably, new ideas--to add more to economic outcomes than it takes to produce them. Ideas are particularly interesting because they are, in technical parlance, "non-rival": one person's use of an idea does not diminish its usefulness to someone else. As Thomas Jefferson noted two centuries ago (see above): "He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me." Credit for this insight usually goes to Stanford economist Romer, on the based of set of more-or-less papers based on his dissertation that he published between 1986 and 1994.

This concept of non-rival ideas is intuitively obvious and seemingly interesting--even if it wasn't really Romer's. (Ref. the work of Karl Shell.) Only one problem: In it's usual application to growth, it's mostly wrong.

Here's why: While codified knowledge (books, published patents) may be non-rivalrous, in most cases it is either excludable (patents, documents protected by trade secret) or not directly applicable to production (basic research papers). The exceptional cases of published, unprotected "designs" are for obvious reasons, not likely to offer significant opportunities for entrepreneurs--unless combined with other information in novel and not easily imitable ways. (The phenomenon of "orphan drugs" is illustrative.)

Furthermore, patent protection is available to innovators in all industries, yet significant inter-industry differences exist in the extent to which patents allow persistence of profits. The differentiation is due to ease of imitability, which in turn relates to technological complexity. As MIT economist Rebecca Henderson and colleagues noted in a paper a decade ago:
[R]apid imitation of new drugs is difficult in pharmaceuticals for a number of reasons. One of these is that pharmaceuticals has historically been one of the few industries where patents provide solid protection against imitation. Because small variants in a molecule's structure can drastically alter its pharmacological properties, potential imitators often find it hard to work around the patent. Although other firms might undertake research in the same therapeutic class as an innovator, the probability of their finding another compound with the same therapeutic properties that did not infringe on the original patent could be quite small."
With regard to codified knowledge that is partially excludable, a critical issue is the extent to which partial imitation, or copying, preserves the quality of the original. In many, perhaps the majority, of economically important contexts, it will not.

In recent years economists, sociologists, geographers, and historians have addressed the transmission of knowledge, particularly increasing returns due to knowledge spillovers, in a large and varied literature. The empirical work on knowledge spillovers and parallel historical work have documented what the theorical work largely missed: the decline, during the twentieth century, of small scale craft-based production, and the corresponding rise of science based innovation and complex system development projects.

Consider Alfred Marshall's formulation of knowledge would be "in the air," frequently cited as the original articulation of the concept of knowledge spillovers. For craft-based production---glass making in Bohemia (Czech Republic), Champagne in Rheims (France), windmill production in Herning (Denmark)---there are solid reasons to believe that knowledge is "in the air." Masters share tacit knowledge with apprentices, whose core capability lies in replicating centuries-old techniques. New approaches are viewed with suspicion, and are accepted in to common practice only after considerable scrutiny. Science-based innovation and system development are another matter.

That Marshall's observations predated Romer's by nearly a century is of significance. The introduction of new products today (as opposed to a century ago) typically involves overcoming both technical and market risks. When products are based on truly novel technology, or create new markets, their introduction often requires new organizational forms. The knowledge that drives long term growth in a modern economy is thus detailed, highly technical, and context specific. It is an asset of the firm, whose development may be a consequence of explicit investments, "passive learning," or both. Ideas that are easy to copy will do not represent opportunities for entrepreneurs.

Yet to the extent that the knowledge developed by an incumbent firm is the solution to a complex problem, even slightly imperfect copying will likely lead to substantially degradation of performance. Active investment may be required to develop the "absorptive capacity" needed to make use of the information.

Whether knowledge about modern science based innovations is "in the air" or not is---literally and figuratively--immaterial. Only specialists will understand what it means.

A Response to "Why Sharing the Wealth Isn't Enough"

In his column today prompted by the Billionaire's Giving Pledge, Steven Pearlstein of the Washington Post kindly referred at length to an essay that Zoltan Acs and I published in The American Interest last Spring. Here's what Pearlstein had to say:
In an article last year in The American Interest, Philip Auerswald and Zoltan Acs of George Mason University suggested that the defining characteristic of American capitalism is not only an entrepreneurial culture that generates great wealth but also a philanthropic infrastructure that recycles that wealth in ways that create more opportunity, more growth and more wealth. This virtuous cycle, they concluded, is the "inner dynamic of American capitalism and the source of its prosperity." They contrast that to socialist countries, where philanthropy is weak and government takes on the recycling role, or less-developed countries, where oligarchs' fortunes are not recycled at all.
That's a pretty good summary. But Pearlstein isn't buying our case that philanthropic giving is a cornerstone of American capitalism:
Auerswald and Acs are known as institutionalists because of their focus on institutional arrangements and behavioral norms in explaining why economies work. Not surprisingly, their views have been embraced by business types and free-market conservatives who shamelessly use them to justify small government, low taxes and minimal regulation.
... Yes, philanthropy has been important, but so have unions, which ensured a fair distribution of corporate profits. So have antitrust laws that prevented successful companies from snuffing out entrepreneurial competition. So have norms of corporate behavior that made it socially unacceptable for top corporate executives to pay themselves 350 times what their workers made. And so have tax-supported schools, playgrounds and hospitals that were good enough to be used by rich and poor alike.
He goes on to point out that income inequality is increasing, the middle class is disappearing, and " it will take much more to revive the virtuous cycle by which wealth begets opportunity which in turn begets more wealth."

Considered in an historical context, I really don't disagree with much of what Pearlstein has to say. Indeed, I agree that "Sharing the Wealth Isn't Enough." Dewey the development of American public education? All for it. Unions, "the people who brought you the weekend"? Kudos.

But systems of public education are not distinctly American. Neither is organized labor. (Furthermore the same unions that once brought us the 40-hour work week have more recently shared culpability in bringing millions of U.S. manufacturing workers the less-desirable zero-hour workweek.)

What is distinctly American is a system of institutions--didn't really think of myself as an institutionalist, but I guess I am one--that allocates resources to successful entrepreneurial initiative, allows for the accumulation of wealth, and then--importantly--encourages the transfer of wealth back into the economy not only through consumption and investment (that was trickle down), but also through philanthropic giving. This is the process that brought us the National Gallery of Art, Harvard, Stanford, and now an expanding world of philanthrocapitalism that is funding some of the world's most promising entrepreneurial solutions to global challenges. But, of course, such a system does not arise out of nowhere. Political leadership and policy define the context and can be important drivers in advancing entrepreneurship and innovation. As Pearlstein himself has recently noted, even regulation and standard-setting--often incorrectly cast as an enemy of entrepreneurial initiative--can serve to drive innovation.

That's one thing. Another is that Pearlstein's lament about the hollowing-out of the American middle class--while accurate as stated--misses a bigger trend moving in the opposite direction. The fact is that, on a global scale and using measures that mean more than income, inequality has been shrinking dramatically. Skeptical? check out this 2007 talk by Hans Rosling (yes, I know I'm big into Hans Rosling right now):

The entirety of the experience of the United States over the last decade has been a sideshow to this larger global change, driven by increasing wealth in previously poor places (ref. e.g. Greenspan's "connundrum" and role of China's savings in our real-estate bubble).

Bottom line: Do I think that the U.S. at the moment could benefit from looking a tad bit more like Canada or (God forbid!) France? Along some dimensions, such as health care and standards for energy efficiency, I would say yes. But over the next quarter-century most of the world will benefit hugely from looking a lot more like the United States in at least this respect: building institutions to support entrepreneurs and celebrating philanthropists the put their wealth in the service of society.

People Are Not (Statistical) Noise

Bill Easterly had an interesting post yesterday about individual creativity and economic growth. It concludes
I learned from Herr Mozart that musical creativity, like economic growth, proceeds in fits and starts, and we should not be so obsessed with short term fluctuations.

Also I would not dare apply the words “random” or “lucky” to The Marriage of Figaro. Bursts of creativity, like bursts of rapid growth due to, say, entrepreneurial breakthroughs, may be temporary but they are not “random” in any mechanical sense. They reflect the best of humanity’s purposeful activity, and they stay with us forever even if the original creative moment is fleeting.
Bill's post is written at the level of analogy, which is fine. But there is in fact a real-world connection between individual creativity and change at the scale of particular communities or even entire societies. The nature of that connection is not only an interesting puzzle to ponder, but in my view the fundamental question in the study of economic development.

There are at least two ways of posing the question. The first is: Are people just noise? Creativity fluctuates at level of individual, but simple laws of statistical aggregation might seem to imply that societal outcomes should be smooth. They are not. So why does the law of large numbers not apply in cases of discontinuous societal change prompted by individual action? How is it that small-scale fluctuations in talent and creativity, both among people and within a single life, end up having large-scale impacts?

There a lots of answers in theory to this version of the question--herding & other types of increasing returns, chaotic dynamics, self-organization. There is also a rich tradition of addressing something like the same question in philosophy and literature (best in my view: second epilogue to War and Peace and Nietzsche's "Philosophy of History"). I also started in this direction using a culinary, rather than musical metaphor, a while back. These ideas could the be subject of multiple future posts, essays, or books...or, maybe, none at all. Because I don't think that this version of the question is the most interesting.

The interesting version of the question is a much more practical one, namely: Are entrepreneurs just noise? Easterly's earlier post re. system change suggest that they just might be. His link bait for that post: "The most important thing I can ever say: development is NOT about solutions, it IS about problem-solving systems."

An excellent recent post by @penelopeinparis gives solution-finders a bit more credit:
I don’t know for sure, but I suspect that when a bunch of crazy French doctors decided to create Doctors without Borders during the Biafra war, everyone around them must have thought they were absolutely off their rockers.

What about Henri Dunant, the idealistic businessman whose disgust with the horrors of Napoleonic wars lead to the creation of the Red Cross? (Did you catch that? Henry Dunant was a businessman with no experience in anything remotely connected to humanitarian aid)

There are several types of aid entrepreneurs; a fact that sometimes seems to get lost on critics and supporters of NGO entrepreneurs alike. Not everyone is an Henri Dunant, Bernard Kouchner or Greg Mortenson,...

The real question, for me, is how do we support the kind of innovation that does create positive change, all the while weeding out all the useless and potentially harmful amateurish initiatives?
I fully concur that this is the real question. Indeed, the direction @penelopeinparis appears to be going is, well, music to my ears.

UPDATE: @bill_easterly offers this pithy rejoinder via Twitter: "My response on giant potential scale: hello nonrival ideas"