Why Policy Matters? – New Perspectives from Dennis Senik

Government spends more than one-quarter of GDP, much of it on programs to support policies aimed to improve the common good. This desired result comes down to supporting economic growth: the sum of our efforts to create value-added outcomes that better support our way of life. Eighty percent of economic growth is driven by technology. In the 20th century alone, it has lifted world GDP per capita over 800 percent. Advanced nations like Canada have benefited even more. Stripped to its barest essentials, technology is simply ‘best practice’ in transforming more basic resources into valued goods and services. It underpins the economy’s many value chains that combine to create, produce, operate, and support the stuff of everyday life: from cars and fresh produce at the supermarket, to cellphones and healthcare. But technology evolves, continually changing our patterns of living and working. Beginning with the Industrial Revolution, it has radically restructured economic life no less than five times – most recently with information and communications technology (ICT). Predecessor game-changing technologies include steam and railways; electricity; automobiles, petroleum and aviation. Each upended the economy’s existing network of value chains, shifting the very ground on which government programs are carefully laid. And more technologies continue to emerge, from genetic engineering to robotics. Technology is an equal opportunity force of disruption, blind to ministerial mandates. For example, ICT has changed the rules of the game in old industries like agriculture, banking, law, publishing, entertainment, and healthcare – while creating new ones like video games and social media. But technology’s very nature – best practice in how we transform more basic resources to create valued outputs – provides a powerful framework for understanding how it restructures economic life. Because technology is ingrained in our patterns of living and working, it is an integral part of culture: the highly structured transmission of accepted practices between generations. Culture takes two generations to fully adopt technology’s new possibilities. Over this time, old value chains are realigned to capture the benefits of novel products and services. Economics has made major advances in unraveling this process. Because technology is a recurring cultural transition, it unfolds along a well-worn path, marked by a series of familiar developments. In just one generation, technology’s novel practices win acceptance by about half of potential uses. Institutions, practices, and economic infrastructure adapt in five distinct phases as technology moves from the periphery to received wisdom on Main Street. It is through exploiting recent knowledge of this recurring process of cultural transition that policy and program staff can better achieve government objectives. The following figure summarizes the dynamics of this transition that reshapes the context faced by governments.

 

The Changing Context Facing Policy and Programs  ‘Best practice’ – the bottom line that achieves the desired outcome of economic growth – is a moving target. Nailing it with policies and programs requires pro-active measures to realign three drivers of value creation that evolve as technology penetrates the economy:

  1. Value begins in the eye of the beholder. It starts with the new possibilities opened up by novel products and services.
  2. As the technology evolves, affordability, integration with established practices and ease-of-use increase.
  3. New value chains take shape and old ones are restructured.

As each phase unfolds, uneven evolution of these value drivers results in foreseeable lags, gaps, and misalignments. As the figure at right illustrates, different technologies vary widely in where they stand along the road to maturity and full market penetration. The policy and program measures that are appropriate to aligning the value drivers of young technologies such as drop-in biofuels and nanotechnology are very different from those that can meet the challenges of rapidly-growing ones like social media or more mature ones like cell phones and air travel. We spend hundreds of billions annually on policies and programs to help business, industries, and communities grow an innovative, sustainable, and competitive economy. But the windows of opportunity snap open and shut within a decade and the costs of missing the target are high. We need to employ the most effective tools to get it right. For more information, or to discuss this topic with our CTS, please contact Dennis Senik at 613.247.0725.

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