Laura Tyson Urges Investment in Research, Education, Infrastructure
Economist Laura Tyson, a presidential advisor and professor at UC Berkeley’s Haas School of Business, has gauged the pulse of the U.S. economy for a long time. As the nation recovers from the worst recession since the Great Depression, she believes investment in research, education and infrastructure are more important than ever.
Tyson, the former dean of Haas and the London Business School, is a member of President Obama’s Council on Jobs and Competitiveness, and chaired the President’s Council of Economic Advisors and the National Economic Council during the Clinton administration. GSM Dean Steven Currall, a colleague with Tyson at London Business School, was instrumental in inviting her to speak at a UC Davis Chancellor’s Colloquium on March 30. Following Tyson’s remarks, Currall moderated a lively conversation with UC Davis Economics Professor Robert Feenstra, GSM Professor Brad Barber and Tyson.
In all these fiscal discussions, we have to worry about what happens to the federal research budget because that is the seed grain for innovation, and that research budget and seed grain then play into development adn commercialization, which gets back to growth and back to good jobs. –Laura Tyson
In her address on the “Two-track Recovery of the Global Economy,” Tyson deftly described the causes and spread of the global financial crisis—and historic responses to stem it. She explained why emerging markets are now better positioned than the U.S. and developed world, which face soaring fiscal deficits, high unemployment and stagnated growth.
In an wide-ranging interview before her talk, Tyson touched on the themes of her address:
What role do you expect innovation to play in California’s and the nation’s economic recovery?
Innovation is an important driver of growth. It stimulates productivity and efficiency. It generates new ideas and products. To foster and support innovation, we need to continue to make capital investments in research and development. We also must invest in human capital by doing everything we can to enhance the skills of the work force.
You have proposed a national infrastructure bank as a key piece of an economic recovery strategy. Why do you believe the time is right for this?
The national infrastructure bank concept reflects two realities. Number one, the fate of many projects of national significance—a high-speed rail system that connects major state corridors, for example—too often rides on local political considerations rather than economic or cost-benefit considerations. An infrastructure bank could improve this process of decision making around nationally significant infrastructure projects. Number two, we need better ways to mobilize public money with private money. The European Investment Bank offers one model: The government provides money for public-sector loans, and these loans mobilize private-sector money in public-private partnerships on major infrastructure projects. The European experience shows that such partnerships can significantly increase the funding available for infrastructure investments. To date, the U.S. has made very little progress on the formation of public-private partnerships for infrastructure, and an infrastructure bank could help change that.
Do you see any parallels between the declining investments in the nation’s infrastructure and public higher education?
I completely agree with President Obama—and this is an idea that has been around among economists for a long time—that the United States government does not do enough to distinguish public spending that enhances capacity and growth from public spending that funds current government operations, defense and entitlement programs. The former kind of spending represents investments in our future and it includes spending on education, research and infrastructure. A kind of virtuous relationship exists among these three investments, one that fosters competitiveness and the ideas and innovations that support high-wage jobs and exports from the United States. My view is that education is the most essential of these investments, because ideas come from people…. I believe we now need to commit to giving everybody a college education. The skills needed in today’s economy require that level of analytical, technological and entrepreneurial capability, whether in the manufacturing sector or the service sector.