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July 24, 2000

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n the heels of Federal Reserve Board Chairman Alan Greenspan estimating the value of value chains and the benefits that accrue to companies with the minimal smarts required to take advantage of information already at their disposal comes word that another fusty precinct, academia, is waking up to the fact that there's a booming technology-enabled economy going on out here in the real world.

Those hopes were raised by a recent report from economist Paul M. Romer, a professor at the Stanford University School of Business, who pithily summed up the academic community's nonresponse to the past eight-odd years of sustained economic growth. Said Professor Romer: "There's something really bizarrely wrong with our system when math and physics Ph.D.s are talking about a Ph.D. glut and there's a shortage of high-tech employees."

The numbers bear out Romer's contention, with a recent Department of Education study finding that the percentage of science and engineering Ph.D.s who do not hold a full-time position in their field shot from 1 in 10 in 1973 to 1 in 40 by 1995, the most recent year for which findings are available. (Evidence in itself that somehow institutions involved in education often find themselves a touch behind the times.)

Romer's modest proposal for remedying the situation: repurposing, a concept hardly foreign to the technology community but apparently breathtakingly new to academia. Noting that the current tech-worker shortage is such that 115,000 skilled technology workers are now allowed to enter the United States annually (and that legislation is being considered that would raise the ceiling to 200,000 workers annually), Romer proposes that government do what it does best: provide funding and then get out of the way of free markets.

In his paper, Romer points out that Washington (writ large) has traditionally focused on stimulating demand for scientific research with programs that fund --or, at minimum, heavily subsidize --specific research and development efforts at both universities and private companies. That model worked superbly once upon a time, but its days have long gone.

For one, as Romer points out, said funding overwhelmingly finds its way into established areas of inquiry. For two, and far more detrimentally, graduate science programs become dominated by the research needs of the high-visibility professors who attract government grants. And who performs the research? Graduate students who hire on as research assistants to keep a dollar or two in their wallets and who, as a result, find themselves on a professional path that feeds them back into the academic community to perform even more government-directed research.

Romer's core contention is that this is a funding-fulfillment Mobius strip that needs to be sliced, preferably by government shifting its focus from a demand-driven research model to a supply-side structure that prompts truly inquisitive students to pursue scientific degrees.

His model has two key elements. One would give universities a $10,000-per-head bonus for increasing the number of undergraduates who pursue scientific and engineering degrees. Part two would provide three-year fellowships at $20,000 a year to 17,000 students pursuing graduate science and engineering degrees.

Romer posits that the $2 billion annual price tag for his program would be much more than offset by the flood of innovation that the body of additional homegrown talent would unleash. He argues that market forces are the most potent catalyst for changing the academic culture and spreading the benefits of individuals with graduate educations.

Per Romer, science students freed from the research-assistant track by their fellowships will demand that university graduate programs prepare them for the openings that demonstrably exist within the technology community. Universities will continue to focus their efforts on where the money is --in this case, the bounties on each graduate student's head, not the individual grant reeled in by a marquee faculty member.

Perhaps most important, Romer's proposal gets government out of the crystal-ball-gazing business and appropriately shifts the onus for innovation to where it belongs, to the minds of some of the best and brightest students the academic community can produce.

Is his proposal a quick-fix panacea? Hardly. Even Romer says that he's talking about things "that could make a difference in how the economy looks in 2050." But when all prognoses are negative (consider that 30,000 fewer students are pursuing advanced scientific and academic degrees than were doing so in 1993, when the number of such students peaked at 436,000), quick-fixes are mere Band-Aids.

Plainly, the system is badly broken and is proceeding along with an alarming limp. Romer's proposal addresses the root cause of a disease that resulted from hidebound institutions (government and academia) that contentedly continued to apply a wartime model to an unprecedentedly vibrant, unimaginably innovative economy.

Human nature being what it is, offering those in need of anything too much relief too soon is a prescription for disaster. Offer a starving person a banquet and you'll have a glutted person who in the short term will be sicker from overconsumption. Similarly, universities can't be expected to become free-marketeers overnight. Nor can government turn off the switch for existing research programs.

At modest and recoverable cost, Romer proposes a remedy that is sustainable and, above all, sound. The single and utterly unavoidable weakness in Romer's proposal is that it hinges on both government and academia embracing new visions, a tall order but one both entities must embrace in the face of the evidence before them.

Now about those elementary school and high school curricula . . .

Lou Bertin is an industry consultant. He can be reached at Lou.Bertin@gte.net


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