ITIF is putting on a forum tomorrow on The Obama Administration’s Innovation Policy. The cast is, as Hollywood would say, star-studded,  with Austan Goolsbee (CEO Chair), Phil Weiser (NEC Senior Advisor), & Aneesh Chopra (US CTO), to list only Federal government people, plus reps of state governments and several high tech companies.

The background document is the Administration’s Strategy for American Innovation, a Feb. 04, 2011, update of the Fall 2010 release, and the focus will be on: “key elements of the Administration’s strategy: 1) Investing in the Building Blocks of American Innovation; 2) Promoting Competitive Markets that Spur Productive Entrepreneurship; and 3) Catalyzing Breakthroughs for National Priorities.”

The skeptic in me is always amused by bureaucratic products that purport to promote “innovation,” “creativity,” or “think out-of-the-box.” These are not exactly the strengths of bureaucracy, and such initiatives tend to be Christmas-treed with shop-warn favorite programs and interest-group subsidies.

One reason is the simple arithmetic of hierarchies. If an organization has four layers, and the chance of a good new idea getting through any layer is 50% (which is high for anything new), then the chance that it will survive review by all four layers is only 6%.  Furthermore, the odds of the new surviving decrease as anything goes up the bureaucratic ladder because the higher levels have less time to devote to it, less context, and greater risk aversion. I have participated in many decisions in many different hierarchies — government; the legal system; foundations; business — and without exception the discussions at the higher levels were dumbed down compared with discussions at the working levels.

The trick to innovation is not to create national plans but to create institutional structures (property rights; markets; regulatory predictability and restraint; rule of law; rational tax systems) that allow innovation to occur, and then let the strengths of the culture take over.

Some of the Strategy‘s ideas are along these lines, such as patent reform and more spectrum. But much of it is the same old fluff — vague “onwards” without consideration of the real economic and technical issues. For example, a green energy revolution, but no discussion of the economics; more money for K-12 education without mentioning possible institutional reforms; encouraging biotech innovation not by reforming the regulatory agencies but by creating a new Federal bureaucracy (LOL – which stands for either Laugh Out Loud or Lots of Luck).

This is not meant to single out the current White House — my first government job was in the Great Society, and these same criticisms applied then.  That is the truly depressing thought.

Chart from Strategy for American Innovation.

Self-operating napkin from Wikipedia.