Putting innovation at the center of our national vision is not simply about spending more money. An innovation nation would think about all problems differently. The long debate over the Patient Protection and Affordable Care Act (aka: Obamacare) for example, was almost entirely about welfare and redistribution, about dividing the pie. During this debate how much did we hear about health innovation?

From an innovation perspective, two facts about health care are of importance. First, a huge amount of health care spending is wasted. A strong consensus exists on this point from health care researchers along the political spectrum. Hundreds of billions of dollars are spent on health care today with little or nothing to show for it in terms of improved health. Second, although spending more on health care today doesn't get you much, spending more on health care research gets you a lot. The increases in life expectancy from fewer deaths brought on by cardiovascular disease over the 1970-1990 period, for example, were worth over $30 trillion. Yes, $30 trillion. In other words, the gains from better health over the period 1970-1990 were comparable to all the gains in material wealth over the same period.

Looking at the future, if medical research could reduce cancer mortality by just 10 percent, that would be worth $5 trillion to U.S. citizens (and even more taking into account the rest of the world). The net gain would be especially large if we could reduce cancer mortality with new drugs, which are typically cheap to make once discovered. A reduction in cancer mortality of this size does not seem beyond reach. Medical research spending is far more valuable on the margin than medical care spending yet because we lack an innovation vision, we endlessly debate how to divide the pie while we overlook potentially huge improvements in human welfare.



THE RED-TAPE MENACE



Regulation is another area in which we lack an innovation vision. There are good regulations and bad regulations and lots of debate over which is which. From an innovation perspective, however, this debate misses a key point. Let's assume that all regulations are good. The problem is that even if each regulation is good, the net effect of all the regulations combined may be bad. A single pebble in a big stream doesn't do much, but throw enough pebbles and the stream of innovation is dammed.

Building in the United States today, for example, requires navigating a thicket of environmental, zoning and aesthetic regulations that vary not only state by state but county by county. If building a house is difficult, try building an airport. Passenger travel has more than tripled since deregulation in 1978, but in that time only one major new airport has been built: Denver's. That airport is now the fourth busiest in the world. Indeed the top seven busiest airports are all in the United States, not so much because we are big but because without new construction we are forced to overcrowd our existing infrastructure. The result is delays and inefficiency. Meanwhile, China is building 50 to 100 new airports over the next 10 years.