Governing Principles for the New Economy

The following are some of the rules to govern the New Economy. They should not be seen as absolute injunctions that cannot be breached in any situation. Nor should they have to evolve to keep pace with each new innovation. Rather they are signposts intended to guide policymakers as they craft a policy framework for the New Economy.

Spur Innovation to Raise Living Standards New economic research shows that innovation plays a central role in productivity growth in the New Economy. Innovation and productivity are the prerequisites for higher wages and expanded opportunity for American workers and are critical to addressing a host of social needs, from averting a future Social Security crisis, to improving human health, to solving global warming. As a result, government must be on the side of policies that boost innovation and foster higher productivity and against policies that seek only to divide a slowly growing pie, protect or reward special interests at the expense of overall economic progress, or slow down the process of change. But at the same time, government must play a key role in providing workers and communities with the skills and tools they need to successfully navigate turbulent waters and prosper.

Innovation and change are disruptive. They displace workers; they cause firms, and even entire industries, to fail; they lead to industrial and economic restructuring in cities and sometimes even whole regions; and they upset traditional ways of doing things, making some skills obsolete. There is every reason to believe that this will be just as true, if not more so, in the New Economy. Because innovation and change are disruptive, they tend to spark strong political demands to insulate affected segments of the economy and slow down economic change.

Such demands, while understandable, inherently deny opportunities to less politically powerful interests in the guise of “protecting” those with clout. As a result, to effectively promote growth in the New Economy, government must facilitate, rather than resist, the processes of economic change and modernization as these changes create new opportunities and increased incomes for all Americans. A key lesson of American economic history is that the broad benefits of innovation and change vastly outweigh the short-term costs associated with disruption. This is particularly true in the New Economy, where innovation and change are creating more jobs than they are eliminating and are driving productivity and wage growth.

Expand the Winners′ Circle Ensuring that the benefits of innovation and change are spread broadly will require that all Americans, including those not yet engaged in or benefiting from the New Economy, have access to the tools and resources they need to get ahead and stay ahead.

As the economy has become increasingly volatile and knowledge-based, success for people, organizations, and entire communities is more than ever determined by the ability to learn and adapt. Government needs to counterbalance the tendency toward a new division of society around learning and skills.

As the economy churns—destroying some jobs while creating others—government needs to ensure that employee benefits are portable, that workers can access a state-of-the-art system of rapid re-employment, and that all workers have expanded opportunities for capital ownership. In a skill and knowledge-based economy, government must provide every American with access to continuous and affordable lifelong education.

As information technology becomes an increasingly important driver of the economy （and a determinant of worker skill requirements）, and as it becomes an increasingly vital tool for accessing information and participating in civic life, government needs to enable widespread access by ensuring that public libraries, schools, job centers, community centers, and all regions of the nation are connected to the Internet and that individuals have the skills they need to use these technologies.

Invest in Knowledge and Skills To spur innovation and equip citizens to win in the New Economy, government should invest more in the knowledge infrastructure of the 21st century: world class education, training and lifelong learning, science, technology, technology standards, and other intangible public goods. These are the essential drivers of economic progress today.

In the new knowledge-based economy, over two thirds of economic growth stems from technological innovation. But the knowledge economy is not only about expanding the frontiers of knowledge; it is about more effective use and implementation of all kinds of knowledge in all kinds of economic activity. In short, our competitive success stems from our capacity to innovate. Moreover, skills and learning not only drive economic growth, they increasingly determine individual opportunity.

But a global, hyper-competitive, fast-paced economy has made it increasingly difficult for the private sector to maintain its investments in these kinds of public goods, especially training and mid- to long-term research. Moreover, publicly supported research is a key driver of economic growth. （Over 30 percent of U.S. patents are based on research supported by the public sector, and that share is increasing.） Therefore, government investments in science and technology should be increased, and private sector research should be encouraged through the R tax credit and support for collaborative R. In addition, in an economy where competitive success stems increasingly from shared industrial standards, government needs to support standards setting.

Finally, investments in education and training, including science and engineering education, are critical to ensuring that companies have the skilled workers they need to be productive, and that workers have the skills they need to navigate, adapt, and prosper in the New Economy.

Grow the Net The Internet is a critical component of the emerging digital economy. In the old economy, the key driver of economic growth was mechanization of production, particularly in manufacturing and agriculture. In the New Economy, the key driver will be digitization （using digital information technologies to produce goods and services, particularly using the Internet and other information technologies in the services）. The service sector employs more than 80 percent of working Americans. The information technology revolution is transforming virtually all industries and is central to increased economic efficiency and productivity, higher standards of living, and greater personal empowerment.

Governments must avoid policies and regulations that would inhibit the growth of the Internet or slow progress by protecting business interests threatened by the digitization of the economy. Policymakers should craft a legal and regulatory framework that supports the widespread growth of the Internet and high speed〝broadband〞telecommunications, in such areas as taxation, encryption, privacy, digital signatures, telecommunications regulation, and industry regulation （in banking, insurance, and securities, for example）. However, they must do so in ways that are fair and responsible. Government can also help spur future growth of the Internet by co-investing in the information infrastructure, including the Next Generation Internet （NGI）, a collaboration among more than 100 U.S. universities to develop networking and advanced applications for shared learning and research. The importance of the Internet also means that we must expand its reach to all Americans.

Let Markets Set Prices In the old economy, government often regulated prices when national markets were dominated by oligopolies or monopolies. In those cases, the economic costs of government intervention were manageable, and sometimes necessary. But in the new, more competitive global economy, distorted prices are much more likely to lead to economically inefficient decisions by consumers and producers and to unfair, politically driven resource allocation. Therefore, in the absence of clear market failures, markets, not governments, should set prices of privately provided goods and services.

In this critical transition period, as the old economy gives way to the New Economy, policymakers must embrace forward-looking, innovation-producing investments （e.g. industry-university collaborative R） while at the same time, distinguishing between programs that address legitimate market failures and industry subsidies that foster economic inefficiency. Government must focus on increasing investment in the foundation areas of the New Economy: technological innovation, education, and skills. At the same time government must strive to reduce or eliminate the tariffs, unnecessary price regulations, and the array of government protections that protect entrenched interests without increasing the economy’s innovative or productive capacity.

Markets are a means, not an end in themselves, and they do not always work as intended. Government has a responsibility to address the problems stemming from market failures, through such mechanisms as emissions taxes to reduce pollution or the R tax credit to boost research. Government must also safeguard democratic values of equal opportunity. Along with establishing rules to ensure fair competition, it must also support policies to ensure citizens have access to the information they need to make informed choices.

Open Regulated Markets to Competition Economists have long acknowledged that competition keeps prices down. The New Economy creates another critical reason for competition: competition drives innovation, and ultimately provides the greatest benefits to consumers and citizens. Of course, government must continue to provide commonsense health, safety, and environmental regulations. However, government should move away from regulating economic competition among firms and instead promote competition to achieve public interest goals of lower costs, new products and greater consumer choice. For example, competition in the long distance telecommunications market has driven down costs and improved the quality of service for consumers. Likewise, the Federal Communications Commission’s goal is to set rules to open telecommunications markets to robust competition and then step back and ensure network interoperability, universal service, and consumer protection. Through minimalist, yet consistent rules, public policy should also ensure that consumers have the information they need to make educated choices and provide a backstop to protect consumers and citizens from abuse in markets.

Let Competing Technologies Compete In the New Economy, technology is not just the province of Silicon Valley; it is the catalyst for profound change throughout the economy and society. Technological innovation has now become central to addressing a wide range of public policy goals, including better health care, environmental protection, a renewed defense base, improved education and training, and reinvented government. For example, technology provides doctors and patients with state-of-the-art health information systems that improve the quality of care. Similarly, new generations of cleaner technologies can dramatically reduce pollution generated by industrial processes.

We should look for technology-enabled solutions to public problems, but not so that today’s winners are frozen in place at the expense of tomorrow’s innovators. As a case in point, in the 1 980s the French government decided to provide free 〝Minitel〞 terminals to all French households. However, because the Minitel systems are incapable of supporting modern Internet technology, France now lags significantly behind in Internet usage. Similarly, some U.S. states have passed legislation locking in particular technical standards for the digital signatures that allow individual authentication in electronic commerce. Given today’s rapidly changing technological capabilities, locking in any particular technology through regulation or massive public investment would run similar risks.

Notes:

1.standard of living 生活水平

Degree of prosperity in a nation, as measured by income levels, quality of housing and food, medical care, educational opportunities, transportation, communications, and other measures. Standards of Living include not only the ownership of consumer goods, but also aspects of living that cannot be purchased or are not under an individual's direct control—for instance, environmental quality and services provided by the government. Social scientists debate how exactly to measure standards of living. A standard of living determined for a group such as a country must be examined critically in terms of its constituent values. If the mean value increases over time, but at the same time the rich become richer and the poor poorer, the group may not be collectively better off. The standard of living in different countries is frequently compared based on annual per capita income. On an individual level, the standard of living is a measure of the quality of life in such areas as housing, food, education, clothing, transportation, and employment opportunities.

Compare Cost of Living

cost of living生活费用

The cost of living is the monetary cost of maintaining a particular standard of living, usually measured by calculating the average cost of a number of goods and services; its fluctuations are closely tied to rates of inflation and deflation. To estimate the cost of living, such items as food, clothing, rent, fuel, and miscellaneous items such as recreation, transportation, and medical services are considered. The cost of living is usually measured by calculating the average cost of a number of these particular goods and services; the average cost is then used as an index for a given cluster of consumables.

Measurement of the cost of a minimum standard of living is essential in determining relief payments, social-insurance benefits, and minimum wages. The cost of living is customarily measured by a price index such as the consumer price index. Measurements of change in the cost of living are important in wage negotiations. Cost-of-living measurements are also used to compare the cost of maintaining similar living standards in different areas.

2.As a result, government must be on the side of policies that boost innovation and foster higher productivity and against policies that seek only to divide a slowly growing pie, protect or reward special interests at the expense of overall economic progress, or slow down the process of change.

在此句中，

1）on the side of policies that boost innovation and foster higher productivity 和 against policies that seek only to divide a slowly growing pie, protect or reward special interests at the expense of overall economic progress, or slow down the process of change是两个并列成分，共同作must be后面的表语。

2）that boost innovation and foster higher productivity 是个限制性的定语从句，修饰第一个policies。

3）that seek only to divide a slowly growing pie, protect or reward special interests at the expense of overall economic progress, or slow down the process of change 也是个限制性的定语从句，修饰第二个policies。

4）to divide a slowly growing pie、protect or reward special interests at the expense of overall economic progress和 slow down the process of change 是三个动词不定式短语，作动词seek 的宾语。

3.Ensuring that the benefits of innovation and change are spread broadly will require that all Americans, including those not yet engaged in or benefiting from the New Economy, have access to the tools and resources they need to get ahead and stay ahead.

在此句中，

1）ensuring that the benefits of innovation and change are spread broadly 是动名词短语，作句子的主语，其中 that the benefits of innovation and change are spread broadly 是ensuring 的宾语

2）that all Americans, including those not yet engaged in or benefiting from the New Economy, have access to the tools and resources they need to get ahead and stay ahead 是句子中的谓语动词 will require 的宾语从句，其中 including those not yet engaged in or benefiting from the New Economy 是介词短语，作定语，修饰 all Americans；they need to get ahead and stay ahead是定语从句，修饰名词 tools 和 resources

4.As the economy churns – destroying some jobs while creating others – government needs to ensure that employee benefits are portable, that workers can access a state-of-the-art system of rapid re-employment, and that all workers have expanded opportunities for capital ownership.

在此句中，

1）as the economy churns – destroying some jobs while creating others 是个时间状语从句，修饰后面主句中的谓语动词 needs to ensure，其中destroying some jobs while creating others是个现在分词短语，状语，表示与churns 同时发生的伴随情况。

2）that employee benefits are portable、that workers can access a state-of-the-art system of rapid re-employment, 和 that all workers have expanded opportunities for capital ownership 是三个由 that引导的宾语从句，作谓语动词 needs to ensure的宾语。

5.As information technology becomes an increasingly important driver of the economy （and a determinant of worker skill requirements）, and as it becomes an increasingly vital tool for accessing information and participating in civic life, government needs to enable widespread access by ensuring that public libraries, schools, job centers, community centers, and all regions of the nation are connected to the Internet and that individuals have the skills they need to use these technologies.

在此句中，

1）as information technology becomes an increasingly important driver of the economy （and a determinant of worker skill requirements）, 和 as it becomes an increasingly vital tool for accessing information and participating in civic life 是两个由 as 引导的时间状语从句，修饰后面主句中的谓语动词 needs to enable

2）needs to enable 是句子中的谓语动词

3）by ensuring that public libraries, schools, job centers, community centers, and all regions of the nation are connected to the Internet and that individuals have the skills they need to use these technologies 是介词短语，修饰主句中的谓语动词 needs to enable

4）that public libraries, schools, job centers, community centers, and all regions of the nation are connected to the Internet 和 that individuals have the skills they need to use these technologies是两个由 that引导的宾语从句，作ensuring的宾语, 其中 they need to use these technologies 是个限制性的定语从句，修饰名词 skills。

6.public good 公共货物

a good from which everyone can simultaneously obtain benefits. Public goods retain the characteristics of non-rivalry and non-excludability. Non-rivalry means that one person's benefit does not reduce the benefit available to others, and non-excludability means that there is no effective way of excluding individuals from the benefit of the good, once it comes into existence. Examples of public goods that are claimed must be provided by the state because of non-excludability include national defense, street lighting, and environmental regulations. A private lighthouse would be an example of a public good that is produced even though its use is non-excludable.

7.public sector公共部门

The public sector is the part of economic and administrative life that deals with the delivery of goods and services by the government, whether national, regional or local/municipal. Examples of public sector activity range from delivering social security, administering urban planning and organising national defences.

8.private sector私营部门

That part of an economy in which goods and services are produced by individuals and companies as opposed to the government, which controls the public sector.

9.tax credit课税扣除

Direct, dollar-for-dollar reduction in tax liability, as distinguished from a Tax Deduction, which reduces taxes only by the percentage of a taxpayer's Tax Bracket （税级）. （A taxpayer in the 33% tax bracket would get a 33-cent benefit from each $1 deduction, for example.） In the case of a tax credit, a taxpayer owing $10,000 in tax would owe $9,000 if he took advantage of a $1,000 tax credit.

10. oligopoly寡头卖主垄断

Market situation in which only a few competitors （usually large companies） control the market supply of a particular good or service and are therefore able to control the market price. An oligopoly can be perfect-where all firms produce an identical good or service （cement）-or imperfect-where each firm's product has a different identity but is essentially similar to the others （cigarettes）. Because each firm in an oligopoly knows its share of the total market for the product or service it produces, and because any change in price or change in market share by one firm is reflected in the sales of the others, there tends to be a high degree of interdependence among firms; each firm must make its price and output decisions with regard to the responses of the other firms in the oligopoly, so that oligopoly prices, once established, are rigid. This encourages non-price competition, through advertising, packaging, and service-a generally nonproductive form of resource allocation. Two examples of oligopoly in the United States are airlines serving the same routes and tobacco companies.

11. monopoly 垄断

Control of the production and distribution of a product or service （with no close substitutes） by one firm or a group of firms acting in concert. In its pure form, monopoly, which is characterized by an absence of competition, leads to high prices and a general lack of responsiveness to the needs and desires of consumers. Although the most flagrant monopolistic practices in the United States were outlawed by Antitrust Laws enacted in the late 19th century and early 20th century, monopolies persist in some degree as the result of such factors as patents （the reasoning behind patents is to give innovators some time to recoup what are often large research and development costs. In theory, they are a way of using monopolies to promote innovation）, scarce essential materials, and high startup and production costs that discourage competition in certain industries. Public monopolies-those operated by the government, such as the post office, or closely regulated by the government, such as utilities-ensure the delivery of essential products and services at acceptable prices and generally avoid the disadvantages produced by private monopolies.

12. market failure 市场（供应）短缺

An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers does not equate to the quantity supplied by suppliers. This is a direct result of a lack of certain economically ideal factors, which prevents equilibrium.

Market failures have negative effects on the economy because an optimal allocation of resources is not attained. In other words, the social costs of producing the good or service （all of the opportunity costs of the input resources used in its creation） are not minimized, and this results in a waste of some resources.

Take, for example, the common argument against minimum wage laws. Minimum wage laws set wages above the going market-clearing wage in an attempt to raise market wages. Critics argue that this higher wage cost will cause employers to hire fewer minimum-wage employees than before the law was implemented. As a result, more minimum wage workers are left unemployed, creating a social cost and resulting in market failure.

13. In this critical transition period, as the old economy givers way to the New Economy, policymakers must embrace forward-looking innovation-producing investments （e.g. industry-university collaborative R） while at the same time, distinguishing between programs that address legitimate market failure and industry subsidies that foster economic inefficiency.

在此句中，

1） as the old economy givers way to the New Economy 是个由 as 引导的时间状语从句，修饰主句中的谓语动词 must embrace。

2） while at the same time, distinguishing between programs that address legitimate market failure and industry subsidies that foster economic inefficiency 是个省略了主语 policymakers 的时间状语从句，也修饰谓语动词 must embrace， 其中 that address legitimate market failure 和that foster economic inefficiency 是两个限制性的定语从句，分别修饰名词 programs 和 subsidies 。

14.emission taxes （污染）排放税

Emission taxes involve tax payments that are directly related to the measurement （or estimation） of the pollution caused.

Questions:

1. What role does innovation play in the new economy?
2. Why is the demand to protect special interest groups in the economy understand understandable but should be neglected?
3. Why should the government facilitate rather than resist the process of economic change and modernization?
4. Why is the ability to learn and adapt so important for people and organizations?
5. Why should employee benefits be portable in the new economy?
6. What is knowledge infrastructure?
7. Why should government increase its investment in science and technology?
8. What is the key driver in the old and new economies respectively?
9. What are the two roles competition serve in economy?