There is a perennial worry among economists that the much celebrated capacity of the U.S. to produce innovation is about to have run its course. Joseph Schumpeter, the most influential historic voice to have explained America’s decades-long economic expansion, noted that upon the widespread adoption of electricity in the 1920’s and 30’s, many theorists believed they had seen the “exhaustion of technical possibilities.” This idea was commonly used to explain the Great Depression.
The story that America could lose its cutting edge in innovation arose again in 1949 when Vannevar Bush wrote a seminal paper for the Office of Scientific Research and Development. Bush, an engineer from MIT, argued that, without the stimulus of WWII, the U.S. might have forgotten that innovation was the central feature of the nation’s future.
He needn’t have worried. The Soviet’s test of its first hydrogen bomb in 1953 provided indisputable evidence that the Russians were innovating as fast as we were. The launch of Sputnik in 1957 cemented that certainty. In a way reminiscent of how the nation mobilized for WWII, the United States reacted decisively and, more to the point, effectively.
Among other initiatives, Congress funded massive programs aimed at increasing the nation’s scientific human capital. Universities’ production of doctorates in physics, chemistry, mathematics and engineering nearly quintupled. Military research, built specifically around the idea of radical innovation, birthed the Defense Advanced Research Projects Agency (DARPA) in 1958, which continues to be one of America’s centers of radical innovation. DARPA’s mission -- that the U.S. can never again be surprised by a potential enemy’s unmatched technology -- continues today.
It can be argued that DARPA laid the ground work for the 2021 creation of Space Force. Of course, well before the major structural and political shake-up of establishing a new military branch, the “space race” in the 1960s overwhelmed American culture. The nation saw new designs for cars, refrigerators, toasters, and kitchen clocks echoing our imagined interplanetary destiny. Kids clambered for Tang, a powdered orange juice made for astronauts. Restaurants and roadside stands sold “rocket burgers” and “intergalactic shakes.” The 1969 lunar landing and George Lucas’ 1977 Star Wars continued to feed America’s imagination. E.T. was an extraterrestrial!
In 2012, Robert Gordon’s book The Death of Innovation attempted to bring down the curtain on the country’s infatuation with innovation. He argued that the invention of mobile phones, jet travel, personal computers, the internet, air conditioning, and other consumer products had attenuated humankind’s interest in a grander innovative world. The “real” wants and needs of humankind, largely defined in his eyes as conveniences, had been sated, and the special American century of economic growth was over.
Contrary to Gordon’s predictions, gross domestic product continued to grow, from 2012 to 2025 by nearly 90 percent — from approximately $16.2 trillion to $30.8 trillion. Innovation's capacity to drive expansion remained very much intact. Gordon did not imagine a future in which drones, with the help of AI, could deliver miracle drugs like insulin, antibiotics and GLP1s to our doors.
The most recent voice suggesting that the U.S. has already fallen behind a presumed enemy in the innovation race, this time to the Chinese, is Rafael Reif, a former president of MIT. Recently writing in Foreign Affairs, Reif advanced a widely held perspective in the American academy that universities are the real home of innovation and that the Trump Administration, by cutting research support to universities, was displacing professors as the preeminent group responsible for effectively determining what research is important to the nation’s future.
Reif seems to ignore the fact that many Chinese scientists are being trained in America’s best universities. President Trump was initially worried about the theft of intellectual property from university and corporate labs. Perhaps as part of his charm offensive with China, or the pressure universities have asserted over lost revenue if forbidden to accept Chinese students, he no longer sees Chinese students as a conduit of new ideas back to Beijing.
Looking back now over a century, it seems that the innovation literature is peculiar in several ways. Almost as if Kondratieffian waves are at play, the subject of how American innovation is slowing has a certain periodicity. Every twenty of so years we cycle through big public worries about the decline or death of innovation.
Second, for such an apparently important topic, discussions over the demise of innovation proceed without any real statistical data. In fact, there is no empirically sound means of measuring innovation in the U.S. economy, or any other. Without a basis in fact comparison of any country’s innovation performance can be little more than conjecture.
Third, the “slowing innovation” literature always considers the issue in an existential context, seeing the U.S. falling to a superior power more specifically adept at military-related innovation. This part in the drama, as noted, now is being played by the Chinese government.
The fourth theme in essays arguing that America has lost its edge is the need for the nation to improve the educational achievement of its students. Compared to the academic performance of China’s school population, scandalously large numbers of American graduates have no math skills -- a significant number cannot competently balance a checkbook.
The last commonality in contemporary policy literature that laments the need for America to overcome the Chinese threat is for the United States to embrace a national industrial policy, much like China’s central planning model. This argument, while superficially sensible, should be seen as part of a larger emergent policy dialog that seems largely unaware that it would actually result in protecting America’s giant industrial firms from competition rather than preserving and strengthening our historic free market system. In fact, our free market celebrates entrepreneurs who see their mission as challenging what they see as lumbering incumbent giants.
The idea of the demise of innovation seems to have gained momentum in commentary on today’s war in Iran, during which it has been repeatedly observed that our defense industrial base is inadequate to the demands of recent kinetic engagements. One dramatic example is the comparative difference in the number of commercial and naval vessels that China has the ability to build. Just one Chinese firm — China State Shipbuilding Corporation — built more commercial vessels by tonnage in 2024 than the entire U.S. shipbuilding industry has produced since the end of World War II.
Industrial policy, another name for government central planning, however, is out of character for America. Here, free market commerce is revered as the reason for our enormous gains in innovation and GDP expansion. Perhaps a new era of public/private partnerships is a critical next step in accelerating U.S. innovation such that the nation can outcompete China’s command and control model? These arrangements, however, are -- as the Chinese model continues to teach -- nearly impossible to operate without engendering massive corruption. And, critically, corruption has been a significant and historic enemy of innovation because it inevitably shoulders aside entrepreneurial startups while government bestows favored status on established large firms.
In the end, whether or not innovation is slowing or accelerating -- a phenomenon that we know is impossible to really discern -- the production of discoveries and new ideas must be enthroned as the nation’s premier goal for long run economic and national security. To achieve this, two objectives should be targeted:
First, new social mores should be purposefully engendered that can ignite, in the greatest possible number of Americans, an imagination of themselves participating in a world where what might be called “radical scale innovation” prevails.
Second, our education system must be the object of revolutionary reform. A new society-wide shared pursuit of radical scale innovation will require millions more young Americans trained to not be merely proficient in math and sciences but ready to advance these fields in significant ways.
Fortunately, the U.S. has models for finding students who possess great potential and successfully nurturing them. One example is the Johns Hopkins Center for Talented Youth, which has provided a unique programming model for nearly fifty years. Among the graduates of its program model at some universities are Lady Gaga, Sergey Brin, Mark Zuckerberg, Andrew Yang, two winners of the Fields Medal in Mathematics, and many Rhodes scholars.
As President Trump returns local control of schools from federal management, the moment is at hand for parents to continue to insist that schooling should be responsive to market needs. We see evidence of this movement in the daily news, and it seems that this trend may be much more pronounced than the coverage of individual efforts implies. The nation has long had a system of Catholic and private schools, and parents who could manage to do so paid for what they viewed as a better product. Today, only fifteen states have voucher programs that subsidize parents who aren’t able to make that purchase but want to buy a better education for their children.
To move the United States to the frontier of innovation, we need millions more people equipped to invent “the new.” Our nation’s single most important step will be to reform the preparatory level of education, and the nation’s university systems, to produce an abundance of highly trained persons competent to make our’s the most innovative future possible.
