Tutorial Paper on Quantitative Risk Assessment Mohammad Reza ...

The  Competitiveness  and Inno  vative
 
Capacity  of the  Uni ted State s

January  2012
Prepared  by the   
U.S.  DEPARTMENT  OF COMMER  CE
In  consultation  with the 
NATIONAL  ECONOMIC CO UNCIL Table  of Con tents
Foreword .......................................................................................................... iii

Executive Summary......................................................................................... v

1. Rising to the Challenge............................................................................... 1 – 1

Exceptional Performance .......................................................................................... 1 – 1

Alarms ....................................................................................................................... 1 – 4

Addressing the Alarms .............................................................................................. 1 – 10

2. Keys to Innovation, Competitiveness, and Jobs ...................................... 2 – 1

Concepts and Definitions........................................................................................... 2 – 2

What Made the United States So Successful in the Past? ........................................ 2 – 4

Interconnections ........................................................................................................ 2 – 9

3. Federal Support for Research and Development ..................................... 3 – 1
The Economic Justification for the Federal Government’s Role in Funding
for Basic Research .................................................................................................... 3 – 1
The Federal Government: A Key Force Driving Major Innovations ........................... 3 – 7
Cracks in the Federal Research Foundation ............................................................. 3 – 13
Preserving and Extending Federal Support for Science and Industrial R&D in the
st 21 Century ............................................................................................................... 3 – 14
Appendix 1. Definitions of Relevant Terms................................................................ 3 – 18
Appendix 2. The Theoretical Underpinnings for a Federal Role in Research
Funding...................................................................................................................... 3 – 19
4. Educating Our Workforce ........................................................................... 4 – 1

The STEM Workforce is Expanding........................................................................... 4 – 2

STEM Skills in Demand Throughout the Economy ................................................... 4 – 4

Many U.S. Universities Are Outstanding But Our Production of U.S. STEM

Graduates Is Not ....................................................................................................... 4 – 6

The High Cost of College and Poor Academic Preparation Deter Students.............. 4 – 9

Demographics Create Challenges and Opportunities for Growth ............................. 4 – 12

The Foreign-Born Are Key Members of the STEM Workforce .................................. 4 – 14

The Administration is Lowering the Barriers to a College Education......................... 4 – 15

st5. Infrastructure for the 21 Century.............................................................. 5 – 1

Introduction................................................................................................................ 5 – 1

stDefinitions of 21 Century Infrastructure ................................................................... 5 – 3

stHow Does Our 21 Century Infrastructure Stack Up? ............................................... 5 – 4

stEnsuring the United States’ 21 Century Infrastructure is Sound.............................. 5 – 12

U.S. COMPETITIVENESS AND INNOVATIVE CAPACITY i 6. Revitalizing Manufacturing ......................................................................... 6 – 1

A Strong Manufacturing Sector is Uniquely Important to the U.S. Economy.............. 6 – 1

The Current State of U.S. Manufacturing: A Crossroads for American

Competitiveness......................................................................................................... 6 – 4

Economic Rationales for Federal Government Support for U.S. Manufacturing........ 6 – 8

Longstanding Federal Government Support for U.S. Manufacturing ......................... 6 – 9

Federal Initiatives to Revive Manufacturing ............................................................... 6 – 16

7. The Private Sector as the Engine of Innovation ....................................... 7 – 1

Introduction ................................................................................................................ 7 – 1

Regional Clusters and Entrepreneurship ................................................................... 7 – 1

Startup America.......................................................................................................... 7 – 6

Promoting America’s Exports and Improving Access to Foreign Markets.................. 7 – 8

Corporate Taxes......................................................................................................... 7 – 10

Ensuring a Well-Functioning Intellectual Property Rights System ............................. 7 – 11

Moving Forward ............................................................................................... M – 1

Supplemental Materials................................................................................... S – 1

Innovation Advisory Board Members ......................................................................... S – 3

Section 604 of the America COMPETES Reauthorization Act of 2010...................... S – 4

ii U.S. COMPETITIVENESS AND INNOVATIVE CAPACITY On January 4, 2011, President Barack Obama signed into law the America Foreword

COMPETES Reauthorizat on Act of 2 010 (COMPETES). Secton 6 04 o f COMPETES
mandates that the Secretary of C ommerce complete a s tudy that addresses the
economic compettvene ss and innovtave capacity of the United States (see Sup-
plemental Materials). Congress directed t hat this report address a div erse array
of topics and policy opt ons, including: tax policy; the general business climate in
the U.S.; regional issues such as the role of state and local governments in higher
educat on; barriers to setng up new firms; trade policy , including expor t promo-
ton; t he effectvene ss of Feder al researc h and developmen t policy; intellectual
property regimes in the U.S. and abroad; the health of the manufacturing sector;
and science and technology educat on.
In conduct ng this study, COMPETES specified tha t the Secretar y o f Commerce e-s
tablish a process for obtaining comments. One part of t hat process w as to estab-
lish a 1 5 m ember Innovat on Advisory Board (IAB) “for purposes of obtaining
advice with respect t o the conduct of t he study.” The Department of Commerce
announced the members of t he IAB (listed in the Supplementary Materials sec-
t on of th is report) o n May 4, 2 011, and the inaugural meet ng of t he IAB was on
June 6, 2 011, in Alexandria, Virginia. A second me et ng of the IAB was held Sep-
tember 23, 2011, in Boulder, Colorado. IAB members provided input into the pro-
cess throughout the summer. Additonally , some IAB member s generously hosted
COMPETES-related events in Washington, D .C.; Youngstown, Ohio; M organtown,
West Virginia; Philadelphia, PA; and New York, NY. These events brought together
community and business leaders, and experts in a wi de variety of areas, to share
their ideas on compettveness. Department of C ommerce and Administraton
staff a t ended all of these meetngs.
Additonall y, w e receive d input fro m a numb er of oth er group s at variou s event s.
These included an all day event wi th a gr oup of pr ominent academic economists
in Cambridge, Ma ssachuset s, and a conference at the Silicon Flat rons’ Center
for Law, Technology, and Entrepreneurship at the University of Col orado. Other
groups, a s well as the general public, provided addit onal input.
We are very grateful for the generosity of a ll contributors, but special thanks go
to the Innovaton Advi sory Board members—they passionately care about the fu-
ture of this country and have been willing to give th eir valuable tme a nd exper-
tse t o enrich this process.
Sincerely,
John E. Bryson
Secretary of Commerce
U.S. COMPETITIVENESS AN D I NNOVATIVE CAPACITY iii th The  U.S. econ  omy reigne d supreme