Slate -- What Is the Mother of Invention? - Innovation and why the American economy is so innovative. -- Robert Shapiro

So if innovation responds to economic incentives, the government should be able to actively promote it, just as it does in education. Subsidies for basic research and development are one obvious way. Another is open trade, which can help avoid redundancy in R & D and gives a country access to the rest of the world's innovations—witness the enormous productivity gains achieved by the Asian Tiger economies after they opened their markets.

But the most powerful spur for innovation is low long-term interest rates for businesses, which reduce the cost of investing in, developing, and applying new technologies and techniques. Here we see a disturbing difference between current policy and that during the '90s boom. The sharp and steady deficit reductions of the '90s lowered real long-term rates, but the renewed prospect of red ink for years to come has reversed that trend. While productivity gains remain strong for now, Washington's current fiscal stance bodes ill for productivity and innovation in the future.