Transcripts For CSPAN3 Politics Public Policy Today 20150219

Get into them and the whole problem will go away. I think that is fundamentally an evasion of a profound social challenge. Raise the issue of the minimum wage and unions and Bargaining Power of workers, but it strikes me were faced with a conund rum in a sense these changes make the imperative of giving workers more sort of Bargaining Power and a higher minimum wage make that more compelling and important but at the same time those same technologies make it easier for employers to replace workers who become too expensive with machines, so how do we thread that needle . Well, i think that is a real challenge and one of the ways i think a lot of us have talked about, not just the minimum wage, but the earned income tax credit which is a way of encouraging people to work and sharing some of the benefits from the economy to people who are are working and maybe not making very high wages. Through the tax code, not the employer, employee relationship. One of the differences is that while it increases the incentive for people working and helps with Income Distribution, its a broadly shared cost that lots of people bear as opposed to the employer who comes up with a way of employing that person and it, i think that you can make a good argument that those employers, those entrepreneurs, who fickgure yur out how to put those people to work shouldnt be the only ones to bear the burden of having to raise the incomes of people who are having their skill demands fall. A way of sharing that more broadly. The net effect is not only encouraging more people to work it could actually encourage more people to look for creating those kinds of jobs. Lets just have some numbers here. Just to put this in perspective. Roughly speaking if we had the same Income Distribution in the United States that we did in 1979 the top 1 would have 1 trillion less today and the bottom 80 would have 1 trillion more. And that works out to about 700,000 a family for the top 1 . Works out to about 11,000 a year for a family in the bottom 70 . Thats a trillion dollars. I dont know what the number is. My guess is that the total cost of the earped income tax credit is 50 billion. Nobodys got on the policy agenda doubling earned income tax credit and the big, aggressive agendas for the earned income tax credit are probably to increase it by a third or a half. So were talking about, im for it. Im all for it, but we are talking about 2. 5 of the redistribution that has taken place and so you have to be looking for things and theres no one thing that is going to do it. My reading of the evidence, its a fairly general evidence, is that while there may be some elasticity elasticity, the elasticity around the current level of the minimum wage is very low. Perhaps a good way to make that point is to observe that the real minimum wage in the United States today is about 20 below where it was when reagan was president and even reagan when he was president , wasnt really complaining that the then existing minimum wage was doing a lot of damage to employment. And productivity has gone up since that time. Its tempting to think everythings trainable but if you ask not across International Borders between the United States and other countries, if you take the boston smsa how much does it say gdp is tradeable, its less than half. And so, theres a lot of scope for raising wages in areas where there isnt going to be some broad kind of competition. Good. So, we have some questions from the audience and im going to ask one that relates directly to that last point. So, the question is what is the role of trade on technology and vice versa . How does this relate to the relative skills of people in Different Countries . Actually, this is what i wanted to bring up. A lot of the disruption that people attribute to technological change over the last 15 20 years has had a great deal to do with change from International Trade and the you know especially succession of china to the wto in 2001. See, everybodys surprise led to an enormous surge in the u. S. And a very sharm decline had large pillovers to surrounding communities. David and Gordon Hansen and brandon price really documents weve all been surprised by how big a factor that really is. And fortunately, were much closer to e quul librium now. I think this kind of disruptive power is underappreciated and its been significant. I think we often find an effect and look for a cause and sometimes, we get it wrong. We thought the internet economy was a tremendous thing from about 1995 to 19 9. I dont see how it became a disaster in 2000. The other thing i would say is i do think that were you know, we could not in miy opinion restore unions to 40 years ago without substantial, competitive effects because we face we dont have the kind of rents the kind of market power. German companies are outsourcing a lot of their employment to eastern europe. So, i think that is a real constraint. Globalization and the technology have brought more human beings out of poverty in the last 20 years than any time in world history. As a percentage. As we look at whats happening in china, india, and a lot of things we view as threatening are creating much broader prosperity. Same time, they create bigger concern. When i think about machines substituting labor i worry more about indian textile workers than the general employment patterns of the u. S. If im thinking about this, i think about a world where you know poor people in kenya have solar cells, but theres not job for which their skills are scarce. But i think we should be thinking about technology and globalization as working hand in hand at this point and the view in the 1980s, early 90s, that trade was irrelevant is quite out of date. And still has not fully permeating the consciousness of how people thought about this. I want to agree in part and disagree. In part. I think first, its right to say that trade and technology in a sense are strongly associated with each other. We wouldnt have much more trade, but for the much greater ease of communicating and transporting acrosscountries but for the technology that represented the containership and a great deal else, so what we call trade and the great increases in trade are very much tied up with technology. First thing. Second, i would agree, but respectfully disagree with david on one aspect. I agree with david and certainly, my thinking would have e involved over the last 20 years, on the question of how much has changing trade patterns impacted the u. S. Labor market . I think there is pretty clear evidence there have been significant impacts. I think some exaggerate them, but i think there have been significant impacts. I think it is a quite different statement to assert that all of that is due to trade agreements. And i think one has to look carefully for example at the counterfactual. David asserted that since chinas succession into the wto, well, what is the counter counterfactual . I have some familiarity with the level of u. S. Tariffs on china prior to the succession and they were not high. And so, the main reason why china is exporting more to the United States is that chinas producing six times as much as it was in 1999 and producing in much more technologically sophisticated ways. Now, the its true that if they had not been in the wto, conceivably, we could have passed a new set of protectionist measures, but i think if you ask the question if the United States had maintained its trade policies visa vi china, as they stood before china was admitted into the wto, what fraction of the increase in chinese exports to the United States would we have observed. I think the answer is the vast majority of that increase. And i think thats very important. Because i think theres a tendency to suppose that if trade developments impact the wage distribution importantly in the United States, then presumpltively trade agreements are a bad idea and i think that in order to analyze any given trade agreement one has to ask the question, how much are barriers being changed in the United States and how much are barriers being changed in the affected country and my reading of the evidence is that in many of the cases because rightly or wrongly, the United States market is already substantially open. If you look at the proposed trade agreements, the reduction in barriers and the consequent increase in exports to other countries looms quite large. Relative to any impact in the United States, so i just think thats an important qualification on the globalization story. Im going to ask a different one that takes things in a bit of a different direction. So, someone asks from the end of the 19th century, technology let the workweek decline. Why cant that process continue with the benefit of technology being a shorter workweek with no loss of income. And im going to add a bit of a maybe exist enshl question. So all of this technology really changes our view of the good life and how we think about our time. And the story about the expert craft furniture maker who now put together ready to assemble products for ikea, maybe this is too nostalgic for an economist but something seems lost in that to me. Eric, im going to open this to you. This must be something youve thought a lot about. This is a great question and those who havent read the great article, he talked about made preductions about what happened to our generation, he was more or less spot on in terms of gdp per capita. He extrapolated those funds exactly right and got that right and he inferred that he looked around people who were that wealthy and inferred people wouldnt want to work a lot. They would go fox hunting, but there wasnt much else to do without wealth. He got that wrong. People are not working 10 to 15 hours a week. Mostly those who are working are working a lot more than that. There are r a number of reasons for that. Part of it is we have a lot more we can spend our money on now. Lots of new goods that people enjoy. Part of it is to sociology. A lot of people enjoy working. Theres a meaning that it gives to life for a lot of people. Bob putnam described what happened when work leaves a community and its really sad to see how all sorts of other social indicators plumet because of being wrapped up in a job and work. I think certainly, we couldnt. Theres a trend in that direction, not as rapid at kanes, but we have to start thinking about new ways, how we get get meaning in life and i dont think theres an insurmountable b problem. Wed have to have enough productivity growth to make that work. Uncertain what i think about this. If you look at an introductory economics textbook from the 60s or 70s, in about chapter 5, theres also a discussion of something called the backward bending labor supply curve and the idea is that the as your wages go up, at first, you work more and more because its attractive to work, then after a while, you have enough income and when you have enough income, you take a bunch of it in leisure, so the labor supply curve looks like this. That idea is largely not there. And the reason is that it used to kind of be true. The high wage people work less hours than low wage people. Their image of the 1930s was that the ceo sort of went out to play golf at 4 00 and the workers worked 60 hours a week. And if you look today, for the first time basically in economic history, people who have higher wages, on average very consistently, are choosing to work more or are finding themselves working more hours than people who have low wages and its in part its not all because of the people who have low wages are not able to get more work. There is choices that people are working more hours. And thats why this idea of a more leisurely nirvana is less in fashion. That said, i must say i have to be impressed that americans work about 50 more hours in a year than northern europeans. Im not sure that i would want to call that a great virtue of american society, but i think we have to think carefully about what the alternative to work is and how meaning and community are found in the absence of work. Classical economics has this simple view, which is working is bad, leisure is good. Those who spent time in Community Communities with 20 unemployment i dont think find that a riveting formulation of human motivation and desire, so i think its something that needs to be thought about a great deal and i guess the thought i have without knowing where to go with it is it sure seems like in our society, whether it is taking care of the young or taking care of the old or repairing a lock that needs to be repaired, there is a huge amount of very valuable work that needs to be done. Its much less clear to use a modern phrase that theres a viable Business Model for getting it done and i guess the reason why i think theres going to need to be a lot of reflection on the role of government Going Forward is that if im right that theres mightily important work to be done for which theres no standard Business Model that will get it done, that suggests Important Roles for Public Policy. Theres actually some activist work that make it with a business return on investment the social good. So addressing Climate Change feels like a big priority for all of us to do something about and the Fastest Growing job in america, energy job solar panel insulation. Now, you made earlier comment about trade and technology. Partially this is because the cost of importing solar panels is low. This is interesting. If you benchmarked germany fwens against the u. S. On the cost to install solar panel in a world where youve got globally competitive prices for importing these technologies what explains it is something called the soft cost of sewolar insulation. The lack of automation in something as simple as permitting the ability for a home or business to put solar panels on the roofs so if we took this powerful concept of Information Technology and innovation and if we had the u bik wiitous same day permitting process and more efficient Financial Markets for credit in order to finance these things, it will have much more readily Available Services so folks who want the solar panels could get them more rapidly. If all of those technologies could be put to work that way, we would reduce this billion dollar hidden tax on the American Solar panel economy, which is already the Fastest Growing energy job in america so youd create more jobs on the backs of what is essentially a low cost trade import. You would address issues important to the world like Climate Change. And whats getting in the way . The lack of the adoption of these innovation, these capabilities in of all places, the Mayors Office or the government. Can you do sameday solar permitting in new york city . You cannot. But you can in certain parts of california where theyre making an emphasis here, so, my only comment about theres too much work to do to have a leisure question, but if youre worried as larry said, theres work to be done, but no return, we can make it profitable. There should be many, Many Companies organizing labor to put solar panels in. If we could decost the process, that would grow the market, create jobs and not all of those jobs requires a pafdh. D. In physics. I think theres a role in government to create market opportunity. We will be having another project event on march 11th focused on removing frictions with the goal of increasing jobs, so hopefully youll all join us for that, but in the meantime, please join me in thanking our panelists. Well have a tenminute break. At the National Press club in washington, hosting a conference looking at the future of work in the age of machines. Theyll come back in about ten minutes, focusing on innovation, the importance of innovation in business and in work. And while they take take this break, ten minutes here, we will show you some of the comments from the opening this morning with treasury secretary robert rubin, former secretary and others in the morning panel. Okay, i think well get underway. Good morning. Im bob reuben. And on behalf of my colleagues at the hamilton project, i welcome you to todays discussion of the future of work in the machine age. Before i lay out some of the issues well be discussing, let me say a few words about the hamilton project. We started about nine years ago. We are not an institution but rather, we are partnerships, Small Partnership of policy experts, former Government Official academics and Business Leaders organized as an Advisory Counsel and our architecture is open. When we have policy proposals, they are commissioned from leading experts then Peer Reviewed rather than coming in internal staff. Our purpose is to support policy development and support serious purposes about policy, discussion, debate and dialogue. We believe that that is particularly important at this time when unfortunately, the Public Policy debate in the United States has become so affected by politics, by ideology and by opinion thats not grounded in facts or an objective analysis. The hamilton project works in project with brookings institution. They contribute enormously to our int lek yul vital thety. Since launching the project, our view has been the objectives of the policy has been growth. Broadbased participation and economic security. We believe these objectives can be mutually reenforcing. For example, widespread income gains promote growth by increasing demand, by increasing the ability of workers to access education, nutrition housing and so many inputs and factors that contribute to productivity. And by increasing support, Political Support public and political, for growth enhancing policies. We support market based economics and equally, we support a strong role for government to perform the functions that market by the nature will not perform. And that takes us to todays subject. The future of work in the age of the machine. Technology development and global saix are keys to increasing productivity and growth. But, they put pressure on job creation and on wages. Over the past few decades as Technological Development has increased at a rapid rate and as globalization has increased median wages have increased sluggishly and had been stagnant and inequality has increased substantially. The exception was the second half of the 1990s when tight labor markets increased incomes at all levels. Today, were going to talk about how to think about that tension. Between the growth enhancing effects of technology and globalization on the one hand and the effects of technology and globalization on wages and on job creation for lower and middle income workers. This forum is a continuation of a long line of programs weve had at the hamilton project focusing on middle income and low lower income workers. Growth is necessary, but thot sufficient for the purpose of aiding and enhancing the economic position of middle income and lower income workers. Growth creates tighter markets labor markets, thats happened in the mid to late 90s and it increases the pie but we need a broader perspective. For example, policies that focused on education and policies that focus on job creation and productivity through infrastructure investment, basic research and so much else both promote growth and directly improve the position of the american worker. With this frame in mind ill pose a number of questions in todays discussions they address. Is Technology Development likely to continue moving forward at a rapid rate and with great Economic Significance or as some argue, with its pay slow and significance decrease . Relatedly, is it intact or te clined . If you dont have it Technology Development wont be applied. Data show that the rate of new business formation in the United States has decreased significantly in recent times. Is that relevant to the question of dynamism in our society and if it is is it a cyclical phenomenon . Similarly, productivity has cloorly fallen to low levels over the last two years. Again, is that a cyclical phenomenon or something secular and more fundamental happening . If labor displacing technology does move at a rapid pace and with Great Potential for Economic Significance and if it continues, such that technology is is is deployed, will new industries and new jobs develop that will replace those that have been lost . And will those new jobs be well paid . In other words what will the net effect of this be on job creation and on wages for middle income and lower income workers. To go further, are there trends in the workforce that arent yet understood that may relate to these questions. For example, will the nature of jobs themselves change . With fewer employees of companies and more independent contractors. With the increase in the number of income, number of functions performed by independent contractors being a function of the enabling power of technology. For example, whats the future of clerical help . When you can get clerical help on an online basis on demand. And that takes us to policy. Policies that could help address the pressures and technology of globalization if those pressures continue aside from improveing the ability of workers through the many facets of education and training to succeed in this new world. Are going to need enormous amount of creative focus. For example, we may need an increase in the earned income tax credit. Not only for those who receive at a present time, but perhaps much further up the income scale. Measures that facilitate collective barking in the benefits of productivity and growth and theres an enormous number of other possibilities and potentials we should consider in the policy arena. Pulling further, i think there may be a more fundamental question thats going to have to be answered at some future time and that may be a distant future time. But if we have ever more rapid Technological Development and it is labor displacing at some point in the future, as i said, that may be some distant point in the future should that lead to some basic change in our lifestyles, less work more leisure and a richer, more robust use of that leisure and if the forces of technology and globalization continue to create rising inequality, even if that rising inequality is accompanied by growth, in addition to everything that needs to be done to enhance growth and tight labor markets and to improve the position of middle and lower income workers, should there be increased redistribution to accomplish the broad objectives of our society and if there is to be increase edd redistribution, how does that get done without impeding growth . United states has tremendous strengths and i think we are well positioned to succeed over time but we need an effective government. One that can deal with the hugely consequential policy challenges we face such as sound, intermediate and longer term fiscal conditions, robust public investment, reform on immigration, k12 education, energy and so much else. In that context Technology Development and globalization raise the thorny issues that ive just mentioned and im sure many others that will come up in the course of these discussions. We will begin our program with framing remarks from eric family professor of science for the center of Digital Business mit school of management and andrew mcafee, Principal Research scientist, center for Digital Business at mit. They will be introduced by the founder and chairman of everycorp. Our first round table is is entitled the future of jobs. Participants are eric david outer, professor of economics at mit, anice chopra larry summers, former secretary of the treasury and charles w. Elliot University Professor at harvard. The moderator will be melissa carney, the director of the hamilton project and professor at the university of maryland. The second panel is the future of business innovation. In addition to andy mcafee whom ive already introduced the participants director of advanced Research Projects agency. The moderateor will be laura tyson. Professor of Business Administration and economics at the berkeley house school. Let me close by extending thanks to melissa carney, who ive already mentioned. Our director managering director and brad, the visiting vel fel low at the hamilton project providing the int luck eventual construct for this session and putting together a remarkable program. Let me also thank the members of the staff of the project whose thoughtful and hard work is central to everything that we do. With that, let me push it over to roger altman. Roger. Morning, everyone. Ill be real brief. I think that the upcoming framing remarks and the two panels were about to have are going to fit anyones description of provocative. I, too, want to thank melissa and kristen and the entire staff for once again organizing an event as rich as this. As substantive as this. As bob said, were going to start with framing remarks from eric and andy. Theyre both professors at mit. And the sloan school of management there. Eric runs the mit initiative on the digital economy. And andy is a Principle Research sign scientist at mit and the song school in his field of research is the impact of Digital Technology, on business, the economy and society. So, we could really not have better framers. Includeing because theyve written a profound book, many in this room im sure have read it. The second machine age. I took away three points from that book. One, that were at an Inflection Point on the pace of Digital Technology logical advance, that it is accelerateing and that it will produce unexpected and transformtive effects. Two, that these effects will be on the whole, positive. More choice. More freedom. More waelt. And three, getting to our focus today. That these effects also will produce considerable economic disruption. In particular, the premiums which labor markets have increasingly been placing on education and skills will rise. Rise sharply. And by implication the wage pressures and lack of Employment Opportunity for those work erers who dont poesz those skills will worsen. Bob reviewed a series of questions that we want to debate today that stem had the to read the second machine age. In any event this panel is really going to focus on business innovation. And its going to focus on it in two ways. One is what technologies are we really talking about . So much of the conversation is about software coding a little bit of robots thrown in there occasionally. But what technologies are really transforming, are they enhancing productivity have we reached a technological plateau, which some org we have. Then if the technology is is changing are our organizations changing rapidly enough . Is our capability to absorb this on the decline and then finally what are some of the Business Models that might work to actually help us absorb all of this and make the most of us, make the most of it for all of us. So, thats what were going to do and i will start with someone i think a number of you know well. John, he has done a lot of really important work. Documenting the fact the pace of innovation and organizations in the United States may be declining, that entrepreneurship may be stagnating, that labor markets fluidity may be less than it has been and believe me, you need fluid labor markets to make the most of this. I thought i would start a question to john by making an observation that eric and andrew make, which is that in the face of rapid change, lets assume that is happening for a minute. The benefit will not go to labor. And it wont go to capital as we traditionally know it. It will go to entrepreneurial people and entrepreneurial organizations who can create new products, new services and new Business Models. But i think johns worried about whether we are capacity to do any or all of these things is declining, so, is it declining . Why and what are the implications and if you got a stagnate sort of structure, trying to absorb this change. Thank you its great to be here. I think when we get the chance to listen to eric and andrew, were struck by this the gee whiz aspects of the changes, but then we heard in the first panel, i think some of the skepticism doesnt seem to be showing up in key numbers like productivity statistics and i think actually, the evidence on the declining entrepreneurship and dynamism may be part of why were not seeing those numbers and raises questions about whether or not the u. S. Is well poised to deal with this. So if we were having this discussion, in fact, none of these people were back in the 1990s, so we have lots of folks here who played important policy roles in the 1990s and the u. S. Was just surging in the 1990s in terms of productivity growth and jobs growth and growth was doing okay. Sort of before the great departure and i have quotes from some of the notable policy people in the room including folks on this panel that indicate, they were giving speeches saying why was the u. S. Doing so well in the 19 0i9ds and aufb times, the two words used by these distinguished policymakers were the dynamism and flexibility of the u. S. Economy. So, what have we sort of seen . One thing we know about innovation is innovation and productivity growth is a very noisy and complex process. Its not just heres some new idea come along and we can talk ab it. Takes many years to figure out how to use it and that complexity, at least historically, has been when we have booming times and sectors we see a very high pace of entrepreneurship and lots of volatility. And also whats kind of stliking about the nature of that volatility you know, it began in the 1990s. Its only a small fraction of businesses that make it, so again, a striking feature of the United States economy, we have the surge in good times, surge of entrepreneur shim and ship. The flexibility part. Well, what this means is that theres lots of restructuring going on in the United States economy as a result of this. And the u. S. Has been quite flex bable and fluid in terms of being able to move workers to other kinds of productivity uses. And the fluidity has helped, weve got to remember, its not just businesses expermenting. Workers themselves. A key way workers build their careers is yob hopping. We know particularly young workers, the way they find the right match its not just at the highend, its all over the place. Where earnings go up and where again, they find good, lifetime careers is through lots of job hopping. So it showed at least cause us concern that we see now in the data, several indicators ill say of drk ynamism and fluidity down, especially since 2000. Some have been going on before that. But its especially since 2000. Weve seen a decline in entrepreneurship. Actually that predates 2000. But in key sectors, the tech sector was rising. Some would say, was that the dot com bubble. If you look, entrepreneurship was rising through the 1990s in the hightech sector and has a Little Mountain peak where everybody was apparently starting a dot com business, then it came down. If you look at entrepreneurship in 2005, its lower than it was in 1995 so only wup swing since 995 . How can that be true . Im honestly puzzled. So yes. So, when i talk about an entrepreneur i am talking about a new business that hires at least one worker. So, what ive been doing and others have been doipg is tracking the number of businesses that hire at least one worker. And again, the u. S. , what weve seen ill say is that these entrepreneurs as so defined have been critical for job creation and productivity with this large pace of entrepreneurs going in and a small fraction taking off and creating lots of jobs and being high in terms of innovation and productivity. So, again, weve seen a decline in the post 2000 period. The Great Recession was insult to injury, so, young businesses were already on their way down prerecession and just got hammered and theyve been slow to recover. So so were obviously concerned about what this might mean for productivity, earnings and wage. Do we fully understand this decline . And the answer is im happy during the questions and so on and the panel to talk about what are ideas . Let me just talk briefly about what we both the costs and consequences. The quenss are going to depend on the costs. One thing we see, one thing weve done in working with steve davis, presented at the jackson hole conference last august is we look carefully at the impact of this decline and labor market fluidity for something that was on a topic of the first panel which is unemployment rates and what we found is that it looks like theyre closely connected. This rate has been especially for young and less educated workers and especially, young, less educated males. It turns out theres lots of variation across states in where weve seen this and weve found the states with the biggest declines are exactly the states that have had the biggest deklains in in the employment rates for young less educated males. Ive pushed further but we try to use instrumental variable procedures to try to generate effects. In fact, our results were consistently bad. So that says that it looks like theres at least some adverse consequences. The second thing weve done is weve tried to look at what the productivity implications of all this are. So, one possibility of this decline, you might say maybe the Business Model in the United States has changed. Maybe we dont need to do as much exper menation as we used to. Maybe weve gotten better. A lot of that was waste. You have entrepreneurs coming in. Many fail. Very costly. Maybe we got better. Maybe Information Technology has made that, we need less of that. So, one way to look at that is weve seen it in the micro data that theres lots of dispersion in product across frms. Thats very much whats driveing it. Lots are experimenting. Some do well, they take off. Some not doing well they shrink and contract. So what we want to do is look at the dispersion of productivity across businesses. Particularly young businesses in hightech, so, one possibility is maybe that dispersion has declined, so we just dont need to see so much of that. Actually, what we see is the opposite. If anything, dispersion has gone up, rather than down. So somethings causing at the end of the day, its not that the shock businesses, you could say not that the technological changes have slowed down, so this is kind of consistent with the story were hear, but the responsiveness of businesses to this change has slowed down and again, that has by construction, that has adverse consequences for productivity so in a mechanical sense part of the way we were getting gains is we were moving resources away from less productive to more protective businesses. Were just not doing that as much. So, a question and i dont expect not an answer now, but a question to put out there to try to relate to the previous discussion is to what extent might we think that these amazing changes in technology that are labor displaceing or potentially labor displacing actually are discouraging the formation of a entrepreneurial venture with one person . Whats the point . I mean, a lot of the entrepreneurial ventures with one person are very labor intensive local things and if you can do those things online, you dont need the local entrepreneur and the one person that person hires and by the way, i would link that to the fact that a lot of those oneperson shops are like mom and pop shops. A lot of them are founded my women. Theres the whole issue of labor rates of participation rates of women stagnating around 2000. So technology and as a cause of this is something to think about. Lets go from there to technology and to our team. The head of the darpa, very wellknown source of technological innovation in the United States and economists tend to, when looking at this technological change tend to raise two issues. One is, its not showing up in the productivity numbers. The other is is is just these technologies are not that important. Were not doing major innovations in health. Were not doing major innovations in transportation and energy. Nothing similar to electrification or telephonic communication. Whats the big deal, right . So, i dont think we have a better person on our team to sort of talk about these pessimistic views of Technology Come rg from the Economics Community andin your sense of where the big technological changes are coming from and is it all it and software . Thats very muchsoftware . Thats very much what i would love to talk about. Thank you, lawyerura. I want to say first how very much i appreciate the chance to participate in this dialogue, the work that you and erin have done. Its subcore to what is important to our country for our values and our country. I really think this is terrific. I want to take the conversation in a different direction and talk about technology itself. The word technology has almost become synonymous. Many people use it synonymously with Information Technology. If you read the new york times, their Technology Section is only about information. Everything else is relegated to the science section. But, in Fact Technology is much, much broader than that. And what i thought i would do is take a few minutes and share with you some perspectives about the bubbling pot of things that are happening in some very, very different areas. First of all, let me say there is a lot more to be said about the technology factors driving the many dimensions of technology. We can come back to that. Let me set that aside. Let me give you very different examples. One is something that is bubbling today in the maker movement. Part that have is neutrals like 3d printing which everyone has talked a lot about. But part of it too, is finding different ways to make those kinds of tools available to lots of people. One example is a tech shop here in alexandria, virginia that we helped get started a little while ago, cofunded it, working with the veterans administration, in part, to be able to provide a gym membershiplike access here. For what it costs to belong to a gym, they or anyone else can have access to advanced 3d printers but also sewing machines, welding tools and every Production Equipment that a wonderful machine shop. I went by to visit there right before christmas. I wanted to get a sense of the vibe there. One of my most engaging conversations is with a young fellow in high school. He found out about tech shop somehow. He drives an hour and a half each way many times a week as often as he can break away to come to the tech shop and build things. What do you do with these things . Well, i put them up on pinterest and all my friends and family buy them. I got his Business Card. It was right before christmas. Maybe ill buy something that he built. It turns out i dont know anyone who wants accessories for guns to play paintball, which is pretty much what he was building. But, you know it just thats whats happening today. People are experiment inging this is a kid who is building a business. I dont know what tomorrow holds. It might be something that broadens and taps the skills and energy from the creativity of new sets of communities. That would be awesome. I dont really know yet if thats going to happen. Thats one thing thats bubbling. A major area of research that were very excited about at dartmouth because we think it holds the seeds for technological surprise, thats our business thats happening in Research Biology is intersecting with the Information Science and technology and also the physical science and technology world. Ill tell you whats happening today but also try to take you out into what i think could be a very wild future. Let me start with Synthetic Biology. This is, of course the ability to engineer microorganisms to create chemistries and materials the world has never seen before, trying to scale it up and do it in factories. What is happening today is were able to build new Specialty Chemicals, new medicines and very interesting beginning. In fact, its only a beginning. We can see in these capabilities a progression of new materials, chemistries, but also functional systems and self repairing systems. We can imagine a future where you might be able, in your environment, you might live in a building in which the walls are able to sense the environment around them add just to temperature and lighting conditions. They might support microbial communities that can disinfect the air, purify the air. They might be materials that can self repair so that you know, when your teenager puts a gouge in the wall, it could fix itself and when the time comes and you want to the wall could biodegrade and not perpetuate this waste we live with today. Imagine a century ago if someone told you about this magical pvc material that would be super lightweight and so corrosion resistant, it would have changed way you do plumbing. Some of these things today technically look like they might be possible. How we turn those into businesses and products is another question. Let me finish with an example from neurotechnologies. Were just at the very beginning of this adventure of understanding the brain and how to harness its amazing capabilities. Today, much more work in this area is about the restoration of function. But in that work, you can start imagining what might be possible out into the future. One of our areas of focus here has been revolutionizing prosthetics, moving beyond the simple hook thats been a standard of care for upper limb prosthetics, to pursue that vision, our Program Manager developed a very sophisticated robotic hand with many degrees of freedom. And that was one branch of it. Because hes a neuroscientist, he also did the research that helped us understand how neuro signaling from the motor cortex actually controls that arm. That work culminated in early human trials. Most notably, a woman named jan who lives in pittsburgh who is a quadriplegic volunteered to have these two small implants surgically plasd on the surface of her brain, on the motor cortex. As she thinks, shes able to move this arm and she can shake hands, she can give you fist bumps, offer you a stack of cookies with this robotic arm just by thinking about it. So first and foremost of course, the Health Care Implications in that dimension, but many other dimensions of restoring function as we understand the brain, thats going to be amazing in itself. As we do this work, of course we also understand that we have opened the door that could free the brain from the limitation of the body. As we start thinking what else is possible beyond restoration of function, we opened the door to many possibilities. Some of them will be great and many so of them will be terrifying. The societal issues will make the work issues were dealing with today look simple. Technology has many quandaries that it raises. I hope some of those ideas give you a sense of the very wide range of things happening today that could lead to alternative futures. You mentioned the work issues. And another and then you mentioned that there are other issues were not even thinking about. There are also issues that you obviously think about, too. Those would be in the realm of National Security. You didnt mention that as an area, but i think thats one we might want to talk about. Behind everything were doing. Right. Technology and moving to Business Models is a concern that i have, and i think Many Americans have which is how we finance basic science and Applied Science and whether we are doing enough and because were pulling back on the support for basic science. This gets to andrew in the following way. The most research and development in the United States, most spending is done by the private sector. Not by the public sector. And actually most of the private sector is done by very Large Companies. 85 of the r d spent in the United States in the private sector is done by the u. S. Multinational companies that are big. Now, lets get to andrew. Andrew is concerned that the existing companies cannot cope with the new technologies. And that we have to develop whole new organizational structures and Business Models to take advantage of. But, remember right now, we have the situation where weve got government doing the basic science and being very resistant to doing more and wanting to do less and wanting to know what the Business Model is right way. Then we have these Large Companies who youre worried about, they wont be able to make it. What kinds of companies and how would they support their ongoing investment in r d, unless you become huge overnight like google or apple and then youre running your own Venture Capital firm, your own r d your own everything. Can i highlight first of all, how interesting this panel is . I say this with no pride because i havent started talking yet. Were hearing about this time of deep technological ferment coupled with institutional sclerosis. We dont fully understand this phenomenon at all. I really dont understand why at a time when the tools of entrepreneurship are really good more widely available than ever, and Getting Better all the time you described a really good example of that. Its on the decline in this country. This is a deep, deep puzzle and we better spend some time figuring out. A lot of it is completely opaque to me. Some of it is clear. Some of it is selfinflicted damage. Some of the ways of approaching the situation and our reactions to it are making the sclerosis worse. I live in cambridge, massachusetts. Pray for the people of cambridge right now, by the way. Stit council in cambridge made a very sincere effort to specifically ban uber from operating in the city of cambridge. They wanted nothing but the taxis to be able to pick up anybody in the city fof cambridge. I think my head came close to exploding when i heard about this i had trouble imagining a worse response to this situation were in. U bechlt r uber is a very conversation company. Its management has done them no favors in many ways but i want to go on the record to say i love u bechlt r and their model. The more i understand about the opportunities theyre providing to put labor back in the economy and to provide a decent living for people, the bigger fan i become of the company. Laura, you probably saw the study that alan krueger just worked on and published. The average. Uber driver, comparison hard to make. Pretty clear they get paid as much as a cab driver does. Per hour. Per hour in contrast to all other parttime workers they appear not to suffer a penalty on a perhour basis for working fewer hours. You make 15 an hour if you drive three hours, you make 15 an hour if you drive 30 hours a week. Especially to the point that larry was making earlier, if we want to bring jobs in demand back, here is a platform bringing jobs in demand back. The harshly negative reactions to it honestly dont make any sense to me. I get the idea that people want to legislate secure jobs in the middle class back into existence. I think thats a fundamentally misguided approach. Are todays great Big Companies able to navigate this transition that a lot of us feel is beginning . And the pattern of history is not encouraging one. When we look back at these Big Technology trends, the pattern is very clear that the companies on top at the beginning are not usually the companies on top at the end. There appear to be two main reasons for that. One is financial. When you have a factory totally set up for steam its hard to get out your pencil and justify the retro fitting for this weird new thing called electricity. Thats part of it. The deeper problem is a mindset problem. If youre used to thinking about a factory with this big thing in the basement pulleys that drive your machines when some weirdo shows up with an electric motor you say that thing is more powerful costs more, why would i do that . You dont see the opportunity to get rid of those belts and pulleys and replace them with overhead cranes and things like that. Well managed companies today, i see that mindset challenge coming up over and over. One example ill give one of my messages to large establishment price sincere your management needs to become a lot geekier. By that i mean a lot more driven by the numbers. A lot more rigorous a lot more evidence based in things like Human Resources where the dominant mode right now is you interview me and you look deep into my eyes and judge my character and fit for the job and make a recommendation based on that. Weve got ample evidence thats a terrible way to make Human Capital decisions. Being a lot more analytical and a lot more geeky is the way to do it. They didnt grow up with that tool kit. They didnt get to where they are by virtue of their geekiness and familiarity of quantitave stuff. There are one that is feel challenging to me. A huge open question is whether todays Successful Enterprises are going to navigate into this technologically very different future. I think some of them certainly will. A lot of them are really going to struggle. Can i sort of connect your question, which is this confusion and a agree with it, about the technology not only changing rapidly, but creating all kinds of enabling technologies like and i think makers was a wonderful example. And yet this decline in entrepreneurship. Might that be look at the issue but just the overall demand. The overall Macro Economic climate here is in fact, possibly the biggest determinant. It doesnt change that fast, productivity. The macro conditions in terms of the excess demand or excess supply in the labor market can actually change. And then i think about 2000 and then 2007. A lot of mom and pop entrepreneurs, particularly 2007, there was no bank capital for these people. Absolutely none. You could not keep your establishment open from one day to the next because your demand fell off the cliff and your ability to finance fell off the cliff at exactly the same time. So i wonder how, john in terms of maybe the Technology May be enabling. If you dont have the demand for your product then you dont have the financing to set up your little enterprise which may some day be google. You cant do it. I think thats right. All those factors are right. I think thats mostly a post 2007 story, right . And i think thats really important. I mean the Great Recession clobbered the whole u. S. Economy, especially young businesses for exactly the reasons youre talking about. But this was going on before that. I would say that weve seen decline in dynamism, fluidity decline in productivity predates this. Is there a reason for why that is . This is going to be very much the twohanded economist kind of thing. On one hand laundry list. On the other hand, what might be going on. So one or more sort of benign interpretations, but may actually have adverse implications for the United States. We talked about this in the first panel. We have seen this big shast way from young businesses to mature large businesses. Their share is going up. One can make the case that especially i. T. Has been especially good. Its enabled the multinationals to be able and eric talked about this as well to be able to communicate with all their activities around the world instantaneously. And so as a result, the question is, the big guys are saying maybe the u. S. Isnt the best place to do all these things. The u. S. Is going through some disruption kind of factor. The second thing that does seem to be going on that again may be associated with the change in the Business Model, not so much an explanation is again one of the its good to remember that most entrepreneurs fail. Only a small fraction really grow rapidly. So really striking in the data were these highgrowth young firms that played such a vital role in the 80s and 90s. Weve seen i dont want to say a but a tremendous decline in highgrowth firms. Who is distracting us from the real story . There are exceptions. One question is whether the Business Model now is maybe it used to be maybe you want to be google. Now the Business Model is i want to be bought up by google. You could make a case maybe thats not such a bad thing. Thats a change in the Business Model. Then again if this is all good news, if this is all entirely benign, then why is the productivity statistics so very bad . Where are we looking . The obvious concern is the u. S. Through has it changed its business climates and regulations, its labor market regulations in some fashion so that we see this gradual decline . We work on that and find some evidence of this. I think in trying to think about that question its useful to think about the Cross Country studies that have been done on this. On the one hand, we have now i would say increasing evidence that countries that are successful are precisely those countries which have the successful productivity enhancing reallocation so that countries that are not doing well are countries in which they have lots of dispersion of activity and theyre just not able to get resources to the most productive businesses. Its actually been harder. And that all suggests we know countries differ quite a bit in terms of labor market relations and all the rest. Financial markets and so on. So were pretty convinced that this matters a lot. In Cross Country evidence, we struggled in exactly finding what the cause is associated with why this country seems to have a bad environment relative to the other. One view thats increasingly been taken in the macrodevelopment community is to think of this as a death by a thousand cuts. Lots of little things. Dont look for one big thing. In fact, i dont think theres any evidence theres no evidence that theres a big smoking gun that, aha, the u. S. Suddenly did something around 2000 and so were seeing this decline. I think we are beginning to look at smaller things. What are two smaller things that looks like they might matter and as a suggestive, we need to push harder on this. This is not a complete explanation. One of them actually builds upon david otters work. We took it and applied it particularly to our more recent data and also applied it, ill say, to more comprehensive data. One part of davids very nice a lot of nice Research Contributions is he found there has been an erosion of will doctrine in the United States in presence through the u. S. Court system that made its way sort of gradually through the nature of how judicial precedence are set. And its precisely that variation that allows you to identify these effects. In his work we followed up. That actually looks like its associated with this decline. Thats at least working in the right direction. Thats not saying the whole story. Its saying, oh, yeah you actually can see. Here is one of 1,000 cuts were looking at. Inspire bid very recent work by krueger and kliner. Occupational licensing has risen dramatically and those are the kind of regulations where you could easily imagine, wait a second. Thats exactly the kind of thing that again could sort of stifle the kind of regulation. We even heard a little bit about this in the first panel. Not on occupational licensing but the permit process. The question is, has the u. S. Become more sclerotic . Our worst nightmare, of course. Become more sclerotic because of accumulation of problems in the way things are working . Im not going to argue that i think we know this for sure now but i am going to come back and say, one, weve seen this decline in dynamism and, two, when we look at the statistics at the microlevel we should see an increase in dynamism, not a decrease. That almost cant be good news. One followup here. Do you have you suggested in looking Cross Country. Historically speaking for a very long time the view was that by far, the u. S. Was the most innovative, most fluid. So who is surpassing us now . Maybe were just less. But our gap to our gap of excellence has declined but were still number one . I think its more the latter by the way. I think that the rest of the world is not necessarily become that much more dynamic and entrepreneurial. And eric tryied to push this. Things are not that dire in the United States. Theyve slowed down but were not in a crisis. We are, i would say in a crisis in terms of employment rates, the point that came up that larry i think that is connected to this. My concern about this decline in dynamism and flexibility is, ill say, both at the top and the bottom. At top, are we poised to take advantage of all these technological changes or is that going to happen elsewhere . Are we going to fall behind or not be as successful as werp in the 1990s when the economy was rocking . Im probably even more concerned, it doesnt seem were accommodating that nearly as well. The worker whose get caught up in this what used to be happening, because we were such a dynamic and flexible economy, other opportunities were arising. Theyre not. And so i think theyre just not participating in the labor market. So, i guess what i would like to say is that another of the many pieces of david otters work, which actually suggest that theres the issue of demand and the fact that we were running at a very low level of demand. So we had a problem across the skill spectrum. Is increasing employment problem that existed before, High School Dropouts or but, in fact in fact, that issue and you run sortative high demand high intensity economy shows up not in unemployment numbers but poor job numbers. Its about the quality of the job not the percentage of people who are employed. And if you think about it someone said on the last panel we have to worry about the fact that the technology itself may be leading to the disruption of jobs that are quality jobs. And then you have care giving education, janitorial services. All of things which actually in a number of the periods david was looking at, you saw employment growth there. It was actually pretty strong. It was one of the reasons unemployment in the u. S. Are down so far because lowwage jobs, lowquality jobs many part time, have increased and people took them. Thats a demand phenomenon. The technology has taken out the middle. It may be in davids more recent work taking out some of the top in order to run a high employment economy if the technology is taking out those kinds of jobs more and more people will have to be employed in lowend jobs which brings me back to talk a little bit about some when you think of these technological breakthroughs, theyre very, very exciting. Think about them in terms of i would say distribution issues. This is not inexpensive stuff. Does everybody get it . If so how do we generate the revenue stream for the societal promise that everybody gets to live in their brain outside of their body or everybody gets an arm when their original arm no longer can you know be a baseball player level hitter. Those are huge issues. But before we boil that entire ocean, because i think that one, we do have a little bit of time before it hits us. We need to be thinking those through. My hope is that we will create a plethora of opportunities. In the Information Technology world if the only answer to the challenge is well Everyone Needs to go back to school, that will be really good for some people but it wont get everyone in a 300 million person society. So think about tying it back to some of the things we talked about a minute ago. You think about Synthetic Biology. I was talking to a Small Company startup that wants to tackle Synthetic Biology pathways to new Specialty Chemicals and to enhancing the production. They think about scaling up they are going to look more like a traditional chemical ss or manufacturing company. Lots of smart people with lots of education can get employed but when they scale up theyll also need technicians and people at all different skill levels with different kinds of skills. Coding but different skills as well. I think were going to really need that kind of diversity of different technological opportunities. I dont know how this will play out. One of the interesting things coming back to your point about where r d investment happens it very much as you said, twice as much of our nations r d is made in the private sector. That ratio was flipped when we were all small children. Its a trend that actually is overall healthy. Right . Its good if we have a more innovation driven economy. But that investment of course Companies Make not thinking about the jobs. They make it in order to pursue their Business Plans and their profits. The government part of that investment, i make my share of that for National Security objectives, National Science foundation and National Institutes of health are seeding basic research but with no particular focus, drive or ability to shape how that turns into jobs. In a market economy, there are no formal drivers to shape how this comes out. I think one statistic that is misleading maybe all of these are misleading. I will say especially if you go look in the more hightech sectors, you still dont find that the young guys are reporting much r d. And thats because the questionnaires are gauged and sort of specified. Then youll be able to report these statistics. Think of all the Tech Companies were about here today. Theyre tiny. They dont have r d labs. Theyre doing everything. So i think actually if those companies arent spending basically 100 of their time indeed, that was the division, of course, that these are businesses they have no revenue but theyre spending an enormous amount of resources its all r d. I think actually the decline in entrepreneurship particularly in the r d sector is troubling. Were seeing less innovation and less r d and were not measuring it in the statistics. Issues aside in fact, i think we are capturing a lot of that but measurement issues aside, when private Companies Invest in r d, it is almost exclusive Product Development for known markets and a small fraction of that will be the kind of next generation, more exploratory work. Not to be too critical, its not that difficult to pick up applied innovation. Its more core to pick up but at the top level i think we can agree that this growing corporate share is much more Product Development driven. Sure, i agree with that. And it still remains governments function to fund the basic research the university core. And i think thats part of there are many messages that if we go to the policy side of this discussion both in the first panel, were all thinking about a world in which the pace of technological change has picked up we need a policy debate. Including even the fact that so much of this has been driven at the beginning from support for basic science and universities. And one thing that the Large Companies do do and then we train people who have phds. If theres not a lot of Research Support for them to do basic research on, they go and do applied research for the companies. Thats where the jobs are going to be for them. We need to have a policy debate which focuses on if we think these are going to improve our lives dramatically how we finance this appropriately. I do worry a lot about that. So we have some questions here. One is a question i think we probably should address. This is regarding the decline and fluidity. Focused on increasing shareholderer wealth and investing in risky adventures . I wonder, youre sort of thinking about what kind of Business Models out there. Is shareholder value particularly driven by activist investors a Good Environment for promoting the kind of technological change that you think we should have . Is it discouraging entrepreneurship . What do you think . I gave a version of the talk to kick off today and you can start to see these great decoupling happen. I was giving this presentation to the open Societies Foundation and he said youre misattributing the root cause here. He said its the rise of what we call market fundamentalism, which he associates with the idea that the job of a company to return money to its shareholders, not to think more broadly about stakeholders. Its that turbo charged selfish version of capitalism thats causing a lot of what youre seeing here instead of any surge in technology. I think thats a really intriguing idea. But my career, as someone who kind of tries to understand whats going on in the Business World is on the order of 25 years old throughout that entire career i had been reading about the excessive shortterm of american business, and over reliance, in keeping wall street happy. The names have changed. That critique has really not changed as i have been reading it for twoplus decades. So i dont know honestly laura, i dont know how much weight to attach to that. I dont i dont see that as a major factor here. And the most among the Tech Companies that i know the most ruthless growth hungry vicious competitors are also investing the most in the basic fundamental technologies. Yeah. So, these are a hard set of questions like all the ones were about today. But again i think theres evidence that historically the major innovations have come not so much from the incumbents but from the newer businesses. So thats kind of one concern. The second concern here is whether what the incumbents are trying to do obviously they havent installed basic products out there. Certainly in the popular press are they just trying to protect their and grow their market share . Back again i said maybe the goal now is not to be the next google, but to be bought by google. The question is, whats googles goal in that . Is it actually to take advantage of new technology or actually to shut down competition . Those are the kind of concerns that fit into the kind of questions that youre about. I dont know that weve got overwhelming evidence that thats whats going on. But its not inconsistent with the evidence weve seen decline in entrepreneurship and weve seen this increased share at the top end of businesses. I spent half of my professional life here in washington, the other half in the private sector, 15 years, 10 of which was in Venture Capital and the other portion in a couple of different companies. And i think youre right, andrew that perhaps thats the core Market Drivers shareholder value, nothing has changed. On the other hand i think those are actually huge drivers. They are fundamental core drivers of every business decision i ever participated in. I just think the fact that this unchanging marketdriven decisionmaking process how its grappling with this new set of changes in technology, maybe its that nexus and thats whats different. I do think the premise of lauras question is really a core issue. We do rely on the market to solve right. Whoever asks, we do rely on the market to solve a whole host of problems. And i think we are in a regime where these problems will not get solved that way. Every Venture Capitalist i know encourages their companies to hit home runs swing for the fences, not to do an incremental because thats how you return for the lps, thats a Business Model for the Venture Capitalist. Absolutely. Thats not part of the problem were talking about. I think thats a good thing instead of a bad thing. But let me translate it to what actually happens when you have a small startup. The conversation around the board table every single month is about the burn rate and that is about not hiring too many people because youll run out of runway before you get the product built and Revenue Generating profit. So theres never a conversation about it would be really good if we could employ a few more people. Thats only a consequence of achieving that hyper growth sometimes, once anyway great while. Ive heard someone say theres a kernel of truthd about this ive heard people say the u. S. Has the very best incentives comparatively speaking, until recent things like patent boxes and the rest of the world great incentives to do the research in the United States. We can weak incentives of employment and very weak incentives of profits. All the incentive structure in our tax law and a whole bunch of other thing sincere yes yes, yes yes, locate around great universities and start the google apples, everything there. Dont worry too much about employment. Except for the people you have to employ on your prem isz bass you have to keep the prem isz going. You can do most of this work some other place. Dont worry about your revenues because you can put them in places where they are not highly taxed. I do think this issue of thinking about the employment effect certainly is not something which a wealth generation, Venture Capitalist or nonVenture Capitalist has on the top of their agenda. Its not even on the agenda because labor is a cost. Exactly. Labor is a cost. Sometimes theres discussion of talent. When you talk about talent its something you want to acquire. Its not a cost. But labor is a cost. Can i ask the question you were both in and out. Do you think that relative to what john and andrew were saying, you might think that the rate of diffusion, ideas that are generated is slowing down. Theyre not being picked up. We used to say in the Clinton Administration we were worried about whether there was enough dual use technology to fill over. Now we believe theres a huge amount of dual use technology to spill over. Is the recipient the catcher not there to catch . What do you think . We think all the time about how our technologies are going to move out into the world. Some are very statistic military systems and will not move. But the number of enabling technologies, some we talked about today, but also in the Information Technology arena do depend on graduate students going off and starting new companies or established Companies Adopting things out of basic research but fundamentally at some level or another a business decision has to be made around a commercial opportunity. And and, you know, there was a time in dartmouths history when we were scaling the internet and the ciscos and suns and huge number of Amazing Companies was spinning out from mostly the university research. That is a very lumpy thing. Were in our sixth decade. There were seasons when there was a huge amount of that activity and other seasons where theres only a modest amount. It ebbs and flows according to when those markets present themselves and entrepreneurs go seek those opportunities. It goes on today. I wouldnt say its at that level. Theres no secular. So some of this is about whether theres been a secular decline in the ability of the private sector to pick this up and move it forward. My sense is much more about when they see Market Opportunities and more that organic drive that fuels this big burst of activity or then it moderates its fairly modest. There arent 20 companies who see huge markets. Because its too far from the markets. It got to the market and then blew out. But, of course all the social network all the stuff that has grown up in the last decade yes. And just to finish about the first decision to put money against the idea of connecting computers was 1968. It was 1993, as i recall was the year that all of a sudden every Business Card you got had an email address on it. Thats when the market really started exploding. We talk aid fair amount of its especially the high tech sector thats had according to the very nice work by john. That says in terms of whatever they happen to be doing its certainly not showing up in the productivity statistics since 2003. I really have to caution you. Darpa is 2 of federal spending in r d. Retail sector may not have shown any productivity increase because the quality of locating the product you want at the price you want has really improved. Improved. Productivity has been growing in the private sector. That statement this morning was off base. Okay well in that case, it is related in a good way to the decline of mom and pops. The shift away from mom and pop to walmart has been good for the sector. Whether the Retail Sector was the right one to use or not wasnt is do you think that given the nature of the technological changes were going through that this wont on what the output actually is . Made this point. Now a couple of days ago that said were already back 20 years ago moving. And thats you know increased and so i agree, our productivity statistics need work. I dont want to rely on that. I think the productivity numbers are weird especially in the face of this idea that eric and i are putting out there that were in this technological surge auchlt i can do is fall back on the other evasion of someone whose evidence is not supported, wait and see. I do think well it takes a long time zplt near future, i believe will look fairly different, even in some of these very without growth and prouktivity and, therefore, big increases into their contribution to cpi. Theres a hotel sorry, a hospital that just open eded up a little while back in San Francisco where every meal has not been cooked by robots but delivered to patients by robots. The dirty laundry is being carted throughout the hospital by robots. Automation is coming to these sectors, quickly. So this is a good point on which to draw the panels together. Because the positive part is if youre a patient youll get your food well prepared on time by somebody who is not going to make a mistake. The bad news is that in every projection ive seen for employment growth in the United States and for other countries around the world care giving and health care is a major source of employment growth for lets say, middle educated to low educated workers. If the robots are smarter and can do it more precisely thats when you start to get to the issue we talked about earlier today. Who will be technologically displaced and what do we say as a society if one of the most brilliant lines in the book that andrew wrote with eric is the essence of capitalism is that most people get their income from their labor. Had an if brilliant machines take away certain jobs all together and undermine labor for a large fraction of societys workforce . That is a social problem that we have to begin to think about. And i really thank the hamilton project for having us all here today. I thank my very distinguished panel for forcing us to think about technology and Business Models and how could we get this to work better. Its been a great session and more to come. Thank you very much. [ applause ] if you missed any of this event you can watch it again any time in our Video Library at cspan. Org. More live coverage still to come today on the cspan networks of the Bob Schieffer of cbs news moderates a discussion on countering violent extremism with former officials from the obama and george w. Bush administrations, coming up live at 5 30 pm eastern on cspan 2. National security adviser susan rice wraps up the white houses threeday summit on combating terrorism. She is joined by u. N. Secretary general ban ki moon and other International Leaders to talk about counteracting extremism from groups like isis live at 5 45. Cspans three nights of tech concludes with cisco ceo John Chambers at the wall street journal breakfast. Digital infrastructure and staying ahead of the competition. Here is a preview. What youre about to see is connect all these devices, the number of devices squared to where this will go. The challenge is how to get the right information at the right point in time to the right device for the right person to make the right decision . That is about architectures and that is about transforming your business process. Right. You would have to change health care, turn it on its head. Education, same thing. Supply change is about to change as much. And how countries is run is about to change. You see the Industry Leaders its one thing as a ceo or government leader. You have to have the instincts as to when something fundamentally changed. Now probably unfair because shes an engineer. You talk to in mexico how does he achieve his goals of social equality and how does it transform each business . You do the same thing in germany, in france, in uk. And suddenly they get it. See all of that event tonight at 7 00 pm eastern on our companion network cspan. The white house last week blasted House Republicans proposal to overhaul no child left behind, releasing a report showing how the bill would affect each States Education spending for poor children. Cq writes the measure to reauthorize the law would hold funding for lowincome students flat through fiscal 2021 and remove maintenance of effort provision. Last month senator lamar alexander, who chairs the Education Committee and was education secretary under president george h. W. Bush out lined his proposal for fibsing the law, open to discussion on whether the federal government should dictate standardized testing or leave it up to states. His remarks came at a Senate Hearing with representatives from state and local agencies from around the country. Please come to order. This morning well have a hearing on fixing no child left behind testing and accountability. Theres a lot of interest in this hearing. Weve heard from people around the country ever since last week when we put a draft working paper on the website. We have a lot of people in the hall. There is an overflow room 538. Youll be able to listen to all of the proceedings. So if someone would let those outside know that, why, then theyll have a chance to hear the witness testimony and the questions. We welcome them and we welcome everyone who is here. Ranking member murray and i will each have an Opening Statement. Theyll well introduce our panel of witnesses. Then well have a round of questions. Ill call on the senators in order of seniority. We ask our witnesses to summarize their testimony please in five minutes each because the senators will have lots of questions. Ill call on the senators in order of seniority. At the time the gavel went down and who are here. After that they will go on the order of first come first serve. We will conclude the hearing at noon or before if we get through earlier. And in my opening remarks they take a little longer than normal since this is the first meeting of the committee in this congress. I promise my colleagues i wont make a habit of that. And i will keep my questions to the same five minutes that everyone else has. First some preliminary remarks about the committee itself. This committee touches almost every american. No committee is more ideologically diverse and no more productive than this committee. Last congress 25 bills through this committee were signed by the president and became law, some very important. That is because chairman harkin and i work to find areas of agreement. I look forward to working in the same way with senator murray. She is direct and well respected by her colleagues on both sides of the aisle. She cares about people. She is a member of the democratic leadership and result oriented. I look forward to that working relationship. We will have an open process which means every senator regardless of Party Affiliation will have a chance to participate, full opportunity for discussion and amendment not just in committee but on the floor. I mean, when our bills in the last Congress Never got brought up on the floor but this year we want a result and that means go to the further and further amendments and further discussion. That means 60 votes to get off the floor. It will be a bipartisan bill. If it goes to conference we know the president will be involved. We want his signature on our bills. All the way through we will do our best to have input from everyone so we can get a result. Now the schedule. The schedule of the committee generally will start with unfinished business. First fixing no child left behind. This is way overdue. It expired more than seven years ago. We posted a working draft last week on the website. We are getting a lot of feedback. Staffs are meeting exchanging ideas. We will have more weeks of hearings and meetings but we have been working on this six years. We have had 24 hearings over the last three congresses on k12 or fixing no child left behind and almost all of the members of the committee this year were members last year. So we hope to finish our work by the end of february and have it on the floor. I say it is important to do that so we can get the floor time. No child left behind took six or seven weeks when passed in 2001. We would like to have a full opportunity for debate and amendment. Second reauthorizing Higher Education. This is for me about deregulating Higher Education, mabing rules simpler and more effective for example student aid loan forms so more students can go to college. We can finish the work that we started in 2013 on student loans. We can look at accreditation and look at deregulation. The task force that was formed on deregulation will be the subject of our hearing on february 24. As rapidly and responsibility as we can we want to repair the damage of obamacare and provide more americans with Health Insurance that fits their budget. On this issue we dont agree among party lines but first hearing is on the bipartisan bill on the 30 to 40hour workweek. We will have a hearing tomorrow on that and will report our findings to the finance committee. Then some new business. Lets call it 21st century cures what the house calls it. It finishes its work this spring on that issue. The president talked about it last night. He is also interested. I talked with him about it. He is interested in all three of these subjects that we talked about. Fixing no child left behind, finishing our work on Higher Education and 21st century cures. I like that because i like to find those areas of agreement. We hope we can have a legislative proposal that he will be glad to sign. What we are talking about here is getting more medicines, devices and treatments through the food and Drug Administration more rapidly to help millions of americans. Now, there will be more on labor, pensions, education and health. These are major priorities and that is how we will start. One other thing, the president has made major proposals on Community Colleges and Early Childhood education. These are certainly related to elementary and secondary education but we always handled them separately. We can deal with the Community College proposal as we deal with Higher Education. We will have to talk about how we deal with Early Childhood education. To do that in a comprehensive way involves getting into head start and the Child Care Development block grant we dealt with in the last congress. Now to todays hearing. And i said some more of my colleagues are here today i said i would not be as long in my Opening Statement in future meetings but this is the first one. Last week secretary duncan called for the law to be fixed. No child left behind. Almost everyone seems to agree with him. It is more than seven years overdue. Weve been working on it for six years. When we started working on this we did this republicans, democrats six years ago former representative George Miller said lets identify the problems. Lets pass a lean bill and fix no child left behind. Since then we had 24 hearings on k12 or fixing no child left behind. In each of the last two congresses we have reported bills out of the committee. I would say to my colleagues at congress before last it was mainly what one might call a democratic bill but we voted for it so we could get it to the floor and continue to amend it. 20 of the 22 of us on the committee were members of the last congress when we reported the bill. 16 of the 22 of us who are members this committee were in the Previous Congress when we reported the bill so we ought to know the issues pretty well. One reason no child left behind needs to be fixed is it has become unworkable. Under its original provisions, almost all of americas 100,000 Public Schools would be labelled a failing school. To avoid this unintended result, the u. S. Education secretary has granted waivers from the laws provisions to 23 states, including washington which has since had its waiver revoked, as well as the District Of Columbia and puerto rico. This created a second unintended result by congress which has stated in law that no federal official should exercise any direction, supervision or control over curriculum program, instruction or administration over any in exchange for the waivers, the secretary told states how they should measure progress, what constitutes failure for schools and what the consequence of failure are and how to fix low performing schools and how to evaluate teachers. Their department has in effect become a National School board or as one teacher told me it has become a national Human Resources department for 100,000 Public Schools. At the center of the debate about how to fix no child left behind is what to do about the federal requirement that states each year administer 17 standardized tests with high stake consequences. Educators call this an accountability system. Are there too many tests . Are they the right tests . Are the stakes for failing them too high . What should washington, d. C. Have to do with all of this . Many states and School Districts require schools to administer additional tests. Now, this is called hearing for a reason. I have come to listen. Our working draft includes two options on testing. Option one gives flexibility to states to decide what to do about testing. Option two maintains current law regarding testing. Both options would continue to require annual reporting of student achievement disaggregated by subgroups of children. Washington sometimes forgets but governors never do that the federal government has limited involvement in elementary and secondary education contributing 10 of the bill. For 30 years the action has been in the states. I have seen this firsthand. If you forgive me for pointing it out, i was governor in 1983 when president reagans education secretary issued a nation at risk saying of an unfriendly Foreign Policy the educational performance we might as well have viewed it as an act of war. The next year tennessee after a long battle with National Education association became the first state to pay teachers more for teaching well. Then the next two years every governor spent the entire year focusing on education. First time that happened in the National Governors association. I was chairman of it then. Bill clinton was vice chair. In 89 the first president bush convened a meeting of governors and established voluntary National Education goals. In 91 and 2, president bush announced america 2000, to move the nation voluntarily toward those goals, state by state, community by community. I was the education secretary then. Since then states have worked together voluntarily to develop academic standards, develop tests to create their own accountability systems, find fair ways to evaluate teacher perform and then adopted those that fit their states. I know members of this committee must be tired of me talking until i am blue in the face about a National School board. I know that it is tempting to try to fix classrooms from washington. I also hear from governors and School Superintendents who say this. If washington doesnt make us do it the Teachers Union and opponents from the right will make it impossible for us to have Higher Standards and better teachers. I understand there can be short term gains from washingtons orders but my experience is that longterm success cant come that way. In fact, washingtons involvement, in effect, mandating common core and certain types of teacher evaluation is creating a back lash, making it harder for states to set Higher Standards and evaluate teaching. As one former democratic governor told me recently we were doing pretty well until washington got involved. If they get out of the way we will get back on track. Rather than turn blue in the face one more time in front of my colleagues let me conclude with the remarks of new yorks High School Principal of the year, carol burress. She responded last week to our Committee Draft in the following way. And i quote her. I ask that your committee remember that the American Public School System was built on the belief that local communities cherish their children and have the right and responsibility within sensible limits to determine how they are schooled while the federal government has a very special role in insuring that our students do not experience discrimination based on who they are or what their disability might be, congress is not a National School board although our locally elected School Boards may not be perfect they represent one of the purist forms of democracy that we have. Bad ideas in the small do damage in the small and are easily corrected. Bad ideas at the federal level result in massive failure and are harder to fix. This is carol burris, new yorks High School Principal of the year. She concludes with this. Please understand that i do not dismiss the need to hold schools accountable. The use and disaggregation of data has been an important tool that i use regularly as a principal to improve my own school. However the unintended negative consequences that have arisen from mandated annual testing has proven testing not only to be an ineffective tool but a destructive one, as well. Senator murray. Thank you very much, chairman alexander, for holding this hearing today. I want to thank our witnesses here with us. This is my First Committee meeting as Ranking Member of the health committee. I want to start by acknowledging our former chair, senator tom harkin and commend his many years of service on this committee that really is a committee that touches every american life. He was a tireless advocate for those without a voice and will be missed as we all know. I also want to acknowledge and congratulate our new chairman senator alexander. I look forward to working with you, as well. We have had a number of conversations. As we both adjust to our new roles we have one belief we mentioned every time we talk and that is we think working together this committee can really get exciting work done in the coming two years. Talking to our colleagues i am very excited about what we can do together in the coming weeks and months. I am ready to get to work especially on an issue as important as the topic of this committee hearing, education. In fact, this is the issue that got me into politics in the very first place. Throughout my career first as a preschool teacher and then on a school board in my own state senate in washington and here in the United States senate i have been committed to making sure every child has someone fighting for them and their future. Serving on this committee i am looking forward to making college more affordable and reducing the overwhelming burden of student loans, expanding access to Early Learning and making sure voices of students and parents are heard in the policymaking process and in the coming weeks and months i will be especially focused on fixing the broken no child left behind law. That, of course, is what were talking about today. Nearly everyone agrees that we need to fix no child left behind. The law set unrealistic goals for schools across the country and failed to give them the resources they needed to succeed. We cant turn our back in the process on measuring students progress or let schools and states off the hook for failing to provide a quality education to all of their students especially because we have seen some successes since 2001 when congress enacted no child left behind. Our Graduation Rate has increased by ten points among students with disabilities regular diploma Graduation Rates have increased by more than 12 and dropout rates have decreased by more than 17 and achievement gaps have declined among africanamerican and latino students. The federal government has a an Important Role and productive role in working to make sure assessments and accountability works for our kids. Assessments help parents and communities hold schools accountable. If a school is failing students year after year, parents and communities deserve to have that information and be assured the school will get the resources it needs to improve. I know there are a number of parents here in the audience today and out in the hall who would agree with that. When it comes to our nations largest federal investment in k12 education it would be irresponsible to spend billions in federal taxpayer dollars without knowing if the law is making a difference in student lives. Many colleagues demand evidence and accountability in other federal programs and i hope they agree we need it with education as well. For those reasons, i would be very concerned about any attempt to eliminate annual state wide assessments, just as i would be very concerned about any attempt to roll back accountability to make sure were delivering on our promise of a quality publication for all. Now, 13 years after Congress Passed this law we should use the research and the best practices and the Lessons Learned to fix no child left behind. I have heard from so many parents and teachers as well as Community Members in my home state of washington about the way the Current System doesnt work when it comes to testing. We can and should encourage states and districts to reduce redundant and low quality tests. Because we have a National Interest in making sure all students get an excellent education we do need federal oversight to make sure our system is working for every child. That means offering the resources for improving professional development and for expanding access to high quality learning opportunities to help our struggling schools so we dont consign some kids to subpar education. While we carefully consider changes to assessments and accountability to give states and districts the flexibility they need we cant forget our obl obligations to the kids who far too often fall through the cracks. I have laid out my priorities for fixing this broken law. I know chairman alexander has put his priorities out i