“Think of the American republic as a railroad train,” writes Bruce Ackerman in the first volume of his constitutional history of the U.S., “with the judges of the middle Republic sitting in the caboose, looking backward.” Time passes, the political and judicial landscape changes, judges come and go. But all the while the judges are facing backward, not in charge of the train’s direction but trying to make sense of how everything they’ve seen fits together. This notion of judges engaging in “retrospective synthesis” didn’t seem all that helpful to me when studying constitutional law — But how should the judges decide?? — but Ackerman was writing a history, and I found myself thinking of his metaphor recently as explaining part of what historians do.

Jill Lepore, the Harvard historian and New Yorker writer, has taken on an ambitious act of retrospective synthesis with her new one-volume history of the U.S. I strongly recommend it. “Some American history books fail to criticize the United States; others do nothing but,” Lepore writes. “This book is neither kind.” Instead, it is a synthesis, a telling that puts ideals and atrocities on equal footing and which returns continually to the question: By what right are we ruled?

It is also “meant to double as an old-fashioned civics book.” And there is no doubt that any American who reads the book will come away better prepared for civic life. But while history is an important input into civic participation, Lepore’s account also emphasizes why we cannot proceed based on retrospection alone. Americans, James Madison wrote, “have not suffered a blind veneration for antiquity” — and that was a good thing. Lepore also quotes him as warning against fealty toward the wisdom of the founders. (I can’t for the life of me find the quote, but having finished the book just a couple of weeks ago I am confident it’s in there.)

The past can inform, inspire, and chasten. But civics is about the passengers on the train, not just the view from the caboose. It is up to us to choose a destination.

There are many tie-ins between the two: both are “doers,” there are similarities in how they made their case within and beyond their field, and both worked on externalities — with Nordhaus most famous for his work on negative environmental externalities and Romer most famous for his description of positive externalities in the form of ideas. (Nordhaus, it must be noted, has done seminal work on positive externalities, too.)

To me, though, the most obvious connection between them is with an eye toward the future: among the biggest challenges society faces is encouraging innovation and economic growth without destroying the environment, most notably through climate change. Romer and Nordhaus have done more than almost anyone to address that challenge.

In honor of their work, here are a few things related to it:

https://ourworldindata.org/grapher/the-price-for-lighting-per-million-lumen-hours-in-the-uk-in-british-pound

The chart is from Our World in Data, but based on Nordhaus’ work. On the environmental side, his book Climate Casino is worth a read.

As for Romer, here’s his plain English overview of economic growth. Here’s a video by Marginal Revolution University on his work. And the excellent book Knowledge and the Wealth of Nations, by David Warsh, tracks Romer’s essential contribution to economics, with lots of great historical context.

Of the many causes of faction, there is one that James Madison called out in particular:

So strong is this propensity of mankind to fall into mutual animosities, that where no substantial occasion presents itself, the most frivolous and fanciful distinctions have been sufficient to kindle their unfriendly passions, and excite their most violent conflicts. But the most common and durable source of factions has been the various and unequal distribution of property.

Emphasis mine.

I was reminded of that line by James MacGregor Burns’ Fire and Light.

My point in writing this post is both to note that there are internet-based models of organization and production other than the much-discussed “platforms,” and to distinguish a few different kinds of platforms. All of this is based just on my own reading and thinking. I’m sure others have better, more formal, and more considered definitions.

Three kinds of platforms

Participatory platforms: They offer users the ability to create something, to communicate, or similar — often in a fairly open-ended way. And they place few if any limits on those users’ activity or on who can join. Think Twitter or Tumblr. The scale and variety of users’ activity and the connections between users create something the platform owners could never have created on their own (for good or ill).

Operating systems/application platforms: They offer others the ability to build on top of their product. Operating systems themselves obviously count here, but think also about Facebook or Twitter at some points letting others build apps on top of their platforms. This type of platform typically describes a piece of software plus an SDK, but people often use the metaphor to generalize the idea of letting others “build on top” of whatever you offer.

Two-sided markets: These platforms match buyers and sellers. Think eBay, Uber, Airbnb.

Big companies like Google, Facebook, or Amazon fit multiple categories; they are platforms in multiple senses. Other platforms are platforms only in a single sense.

Non-platform models

Sometimes, reading the business press, you’d think platforms were the only way the internet changed organization. But there are other models made possible by digital technology and the internet:

Peer production: Users come together to collaborate, typically towards a project that will be a commons — like Wikipedia or Linux. The collaboration is complex and may require elaborate rules and norms to govern interactions.

Crowdsourcing: Users offer distinct inputs — votes, predictions, code — that are collected by a central entity. Sometimes they’re aggregated (as in prediction tournaments) and sometimes the top entrant is rewarded (as in contests on Kaggle or TopCoder).

Data loops: A product gathers data which is used to improve the product, creating a positive feedback cycle. Netflix’s recommendation algorithm is one example, and here is a piece on this model.

Aggregators: They sit on top of a mountain of content and help their users find things. Participatory platforms often have to build aggregators — like the Facebook news feed — but aggregators needn’t be participatory platforms. Google is an aggregator, but unlike Facebook the content it navigates is not it’s own.

(I’ve only tried here to include models where the nature of organization and production is changed. Of course there are lots of ways to use the internet and digital technology to make existing production more efficient.)

The problem with thinking of platforms as the end-all be-all of the internet is — other than the confusion that comes from the multiple types — that it distracts from the real concept at the internet’s heart: networks. These are all networked models of organization and production, made possible by ubiquitous connections and the constant flow of information between them.

A new paper finds that tax rates (corporate and individual) have large effects on innovation:

Our main findings can therefore be summarized as follows. Taxation – in the form of both personal income taxes and corporate income taxes – matters for innovation along the intensive and extensive margins, and both at the micro and macro levels. Taxes affect the amount of innovation, the quality of innovation, and the location of inventive activity. The effects are economically large especially at the macro state-level, where cross-state spillovers and extensive margin location and entry decisions compound the micro, individual-level elasticities. Not all the effects of taxes at the macro-level are accounted for by cross-state business stealing or spillovers. Corporate inventors are most sensitive to taxation; and positive agglomeration effects play an important role, perhaps in offering a type of compensating differential for taxation.

This goes against my prior, at least to some degree. I would have said before that incentives do matter for innovation — and that that includes taxes — but that the effect of taxes on innovation may not be that large. Here’s what I wrote a few years ago:

Of course benefits are only one side of the ledger. Taxes are just as often held up as a threat to entrepreneurship and a dynamic economy. A lower capital gains tax rate does seem to be associated with a greater supply of entrepreneurs. But keeping the capital gains rate low to help startups is incredibly inefficient, since only a small portion of realized capital gains are from entrepreneurial activity. As Harvard Business School professors Paul Gompers and Josh Lerner write, “policies that increase the relative attractiveness of becoming an entrepreneur and promote technology innovation probably would have more of an effect on venture capital investments than an across the board cut in the capital gains tax rate.”

Instead of preserving low tax rates, entrepreneur-friendly tax reform would encourage startup investment by shifting the tax code away from its current bias for debt over equity, and could preserve or expand key tax credits like the exemption for long-term investment in small businesses.

Here are my notes on taxes and economic growth in general.

I remain interested in how efficient low corporate, income, and capital gains taxes are or aren’t for incentivizing innovation, and how the tax code and other incentives might provide more tailored options. But taxes do seem to have a meaningful effect.

There is a topic I occasionally try to write about, but which always seems to turn out poorly. It goes like this:

The development of technology is, broadly speaking, an important driver of progress in the world. That development depends on social context, including culture, incentives, and rules which can further technological development or impede it. Getting the culture, incentives, and rules right requires mutual understanding, cooperation, and trust. And so it is worrisome when the tech sector and the rest of society seem so distant from one another, and so at odds. In particular, it’s worrisome when most of society believes the tech world has little to offer them.

Now, a few loosely related digressions…

What is the central idea behind Silicon Valley? Here’s how The Economist describes it today:

The Valley is not just a place. It is also an idea. Ever since Bill Hewlett and David Packard set up in a garage nearly 80 years ago, it has been a byword for innovation and ingenuity. It has been at the centre of several cycles of Schumpeterian destruction and regeneration, in silicon chips, personal computers, software and internet services. Some of its inventions have been ludicrous: internet-connected teapots, or an app that sold people coins to use at laundromats. But others are world-beaters: microprocessor chips, databases and smartphones all trace their lineage to the Valley.

Next, a bit of a detour, to the founding of the venture capital industry, on the east coast:

The first modern venture capital firm was formed in 1946, when MIT president Karl Compton, Massachusetts Investors Trust chairman Merrill Griswold, Federal Reserve Bank of Boston president Ralph Flanders, and Harvard Business School professor General Georges F. Doriot started American Research and Development (ARD) [Lample, 1989]. The goal of the company was to finance commercial applications of technologies that were developed during World War II.

Doriot was the heart and soul of ARD and is justifiably called the “father of venture capital.” Doriot’s focus was on adding value to companies, not just supplying money. Companies funded by ARD were considered to be “members of the family” [Sexton and Kasarda, 1991.] ARD’s staff under Doriot’s direction began providing industry expertise and management experience to the companies they backed in order to increase their chances of ultimate success.

Doriot served as ARD’s president until it was acquired by Textron in 1972. During the course of his tenure at ARD, Doriot’s vision was not one of “making money” but rather financing “noble” ideas. The first investment made by ARD in 1947 was in High Voltage Engineering Company. The firm, founded by several MIT professors, was established to develop X-ray technology in the treatment of cancer. ARD invested in the company for reasons noted by Compton’s comment to Doriot:

They [High Voltage Engineering Company] probably won’t ever make any money, but the ethics of the thing and the human qualities of treating cancer with X-rays are so outstanding that I’m sure it should be in your [Doriot’s] portfolio. [Lample, 1989]

When High Voltage went public in 1955, the original $200,000 investment was worth $1.8 million.

Just one more detour…

I recently finished AMC’s Halt and Catch Fire, which was the subject of one of the first pieces I wrote on this topic, back in 2014. Here’s what I wrote, comparing the show, which begins in the 80’s, to HBO’s satirical Silicon Valley, set in the present:

Why the contrast? Why do we increasingly glorify the tech industry’s past while mocking or dismissing its present? One answer is that history has a way of filtering out the also-rans and focusing on the greats. That may be part of the explanation, but there’s more to it.

Despite the current pace of technological change, it’s hard to shake the feeling that today’s new products and services are somehow smaller than the innovation we saw 20 or 30 years ago. The companies have fewer employees and rarely push the boundaries of basic or even applied science. The ideas that get hatched and funded are apps masquerading as platforms, platforms masquerading as breakthroughs.

Whatever we think of today’s tech companies and however much we believe the industry needs to be reined in or reformed, we must continue to incentivize and celebrate the development of new technologies — something that historically the U.S. and, most of all, Silicon Valley has excelled at. That isn’t a little thing, or an afterthought. It’s arguably one of the most important ingredients for economic success. Doing this doesn’t mean just blindly lionizing entrepreneurs, or obsessing over every VC fundraising. It doesn’t even have to revolve so heavily around VC-backed startups; that’s been a very successful model, but one among many. What it means is focusing on the job the tech companies are supposed to be doing: turning cutting-edge technologies into useful products and services that make society better off. That’s what Halt and Catch Fire was about, and that’s what ARD apparently was about. That’s the history of the modern tech industry. It ought to be its future, too.

Getting that right isn’t trivial, and right now the U.S. is largely just coasting off path dependence. We were good at innovation before, so odds are we’ll keep being pretty good at it. Over time, though, culture, incentives, and rules change or decay. We need to think about what we want from technology and actively create the sort of society that can deliver it. That requires some level of trust between the people in tech and the rest of us.