WHEN trading in the Standard & Poor's (S&P) 500 stock index opened on June 2nd, Bear Stearns was not among the stocks that comprise it. To add insult to the injury caused by its subprime peccadilloes, the crippled 105-year-old investment bank was ejected from the S&P 500 at the close of trading on May 30th following its takeover by JP Morgan.

It was replaced by Intuitive Surgical, a firm that was founded in 1995 and now dominates the fast-growing global market for minimally invasive surgical techniques that use robotics and other leading-edge technologies.

Intuitive Surgical

Both intuitive and surgical

America has long been a global powerhouse of innovation, breeding thousands of firms such as Intuitive Surgical that have forged new, world-beating technologies and services from ideas born in garages, laboratories and offices across the nation. Yet some observers fear that the country is now in danger of losing its lead in commercial innovation to India, China and other upstarts unless the federal government gets more heavily involved in sponsoring innovation.

With a presidential election looming, the cries of alarm are reaching a crescendo. A report published in April by The Brookings Institution and the Information Technology & Innovation Foundation, two think-tanks, warns that “without a robust, targeted, and explicit federal innovation push, US competitiveness will slip and economic growth will lag”.

The report's authors, Robert Atkinson and Howard Wial, urge the swift creation of a National Innovation Foundation that would use its $1 billion-$2 billion budget to, among other things, promote partnerships between universities and industry, and support regional industry “clusters” with federal grants.

Their concern that America will soon be overtaken in the innovation stakes is echoed in the blogosphere. Last week Bruce Nussbaum, who writes a blog on design and innovation issues, called on the American government to go beyond supporting higher-education research in areas such as maths and science. His taxpayer-financed “to-do list” includes funding research around innovation in the service sector and paying for the roll out of a national, high-speed broadband network.

On his blog, Mr Nussbaum called the presidential primaries “devoid of any serious discussion” of American competitiveness. Hillary Clinton has an “innovation agenda”, but this seems to be dedicated to reducing America's dependence on oil and to boosting funding for existing government-research bodies and science fellowships. Barack Obama and John McCain have both said they would make tax credits for research and development (R&D) permanent and, in Mr Obama's case, use regulation of the wireless spectrum to encourage broadband usage. But neither has shown much appetite for broader-based intervention.

So is America's next president guilty of neglecting an issue that is vital to the country's future prosperity? Not in this column's view. On the contrary, the candidates are right to turn a deaf ear to techno-nationalists whose prescriptions are at best misguided and at worst positively harmful.

Indeed, the assumption that America is losing its innovative edge is open to question. Messrs Atkinson and Wial cite statistics that show the country's share of worldwide total domestic R&D spending fell from 46% in 1986 to 37% in 2003 as evidence that the nation's leadership is under threat. And they bemoan the shifting of American R&D overseas: in the last ten years, they claim, the percentage of US corporate R&D sites within America fell from 59% to 52%, while the number in China and India rose from 8% to 18%.

Yet by many traditional measures, such as the number of patents registered and levels of venture-capital funding, America remains ahead of the global pack. And its research is still widely recognised as being top-notch: the 2006 science Nobels all went to Americans. As for “offshoring” R&D, this reflects US firms' desire to tap into huge markets abroad and to understand the potential of ideas being developed there.

Techno-nationalists who focus on “domestic” R&D levels as an indicator of a nation's innovativeness overlook this important fact. They also fail to appreciate that R&D is not the only driver of successful innovation. In a book to be published later this year Amar Bhidé, a professor at Columbia University, argues that what matters in today's global economy is not where an idea comes from, but how fast a country's firms and consumers are willing to try it out.

And America is outstanding at what Mr Bhidé has dubbed “venturesome consumption”. Many popular American gizmos, such as Apple's iPod and Dell's computers, are chock full of the latest technologies from overseas.

The good news for America is that creating a “venturesome” economy isn't easy, as it has more to do with a country's culture than with central planning. That's one reason why efforts to jump start Europe's innovation engine by, for instance, pouring billions of euros into industrial clusters have proven so disappointing (see The Economist's special report on innovation, published last year).

America would be well-advised not to follow suit. It should also think twice before creating a federal innovation agency, which would do more harm than good by backing technologies that consumers might not want. And as for funding research into the services sector, leave that to firms like IBM and EDS—American companies that practically created the market and now dominate it.

The best thing a government can do is to ensure that the creative juices of its residents and its companies are allowed to flow as freely as possible. In America's case that means, for example, rethinking the stiff restrictions placed on work visas following the 2001 terrorist attacks, which have driven away foreign talent and probably stimulated the growth of those R&D centres abroad.

It also means overhauling the educational system from the bottom up, so that American schoolchildren have access to the best possible science and engineering education. Creating a better framework within which human ingenuity can flourish—rather than trying to pick winners from the centre—is the right way to ensure that the Intuitive Surgicals of the future are made in America.