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Funding Breakthrough Research: Promises and Challenges of the “ARPA Model”
Pierre Azoulay, Massachusetts Institute of Technology and NBER
Erica Fuchs, Carnegie Mellon University and NBER
Michael Kearney, Massachusetts Institute of Technology
Anna Goldstein, University of Massachusetts Amherst

From its 1958 origin in defense, the Advanced Research Projects Agency (ARPA) model for research funding has, in the last two decades, spread to other parts of the U.S. federal government with the goal of developing radically new technologies. Azoulay, Fuchs, Kearney, and Goldstein propose that the key elements of the ARPA model for research funding are: organizational flexibility on an administrative level, and significant authority given to program directors to design programs, select projects and actively manage projects. They identify the ARPA model's domain as mission motivated research on nascent S-curves within an inefficient innovation system. Finally, the researchers describe some of the challenges to implementing the ARPA model, and comment on the role of ARPA in the landscape of research funding approaches.

Artificial Intelligence and the Economy
Jason Furman, Harvard University
Robert Seamans, New York University

Furman and Seamans review the evidence that artificial intelligence (AI) is having a large effect on the economy. Across a variety of statistics -- including robotics shipments, AI startups, and patent counts -- there is evidence of a large increase in AI-related activity. The researchers also review recent research in this area which suggests that AI and robotics have the potential to increase productivity growth but may have mixed effects on labor, particularly in the short run. In particular, some occupations and industries may do well while others experience labor market upheaval. The researchers then consider current and potential policies around AI that may help to boost productivity growth while also mitigating any labor market downsides including evaluating the pros and cons of an AI specific regulator, expanded antitrust enforcement, and alternative strategies for dealing with the labor market impacts of AI.

The IT Revolution and the Globalization of R&D
Lee G. Branstetter, Carnegie Mellon University and NBER
Britta Glennon, University of Pennsylvania and NBER
J. Bradford Jensen, Georgetown University and NBER

Since the 1990s, R&D has not only become less geographically concentrated, but there has been especially fast growth in less developed emerging markets like China and India. One of the distinguishing features of the R&D globalization phenomenon is its concentration within the software/IT domain. The increase in foreign R&D on the firm side has been largely concentrated within software and IT-intensive multinationals. This concentration is mirrored on the country side. New R&D destinations such as India, China, and Israel look very different in the types of innovative activity being done there than older R&D destinations such as Germany, France, the U.K., Canada, and Japan. Branstetter, Glennon, and Jensen document three important phenomena: (1) the globalization of R&D by U.S. MNCs, (2) the growing importance of software and IT to firm innovation, and (3) the rise of new R&D hubs, and the differences in the type of activity done there. The researchers argue that the shortage in software/IT-related human capital resulting from the large IT- and software-biased shift in innovation drove U.S. MNCs abroad, and particularly drove them abroad to "new hubs" with large quantities of STEM workers who possessed IT and software skills. The researchers findings support the view that the globalization of U.S. multinational R&D has reinforced the technological leadership of U.S.-based firms in the information technology domain and that multinationals' ability to access an increasingly global talent base could support a high rate of innovation even in the presence of the rising (human) resource cost of frontier R&D.

The Orphan Drug Act at 35: An Outlook for the 21st Century
Nicholas Bagley, University of Michigan
Amitabh Chandra, Harvard University and NBER
Craig Garthwaite, Northwestern University and NBER
Ariel Dora Stern, Harvard University

Precision Medicine and the Orphan Drug Act

The Economics of Artificial Intelligence
Joshua S. Gans, University of Toronto and NBER
Ajay K. Agrawal, University of Toronto and NBER
Avi Goldfarb, University of Toronto and NBER

Recent progress in artificial intelligence (AI) - a general purpose technology affecting many industries has been focused on advances in machine learning, which we recast as a quality-adjusted drop in the price of prediction. Gans, Agrawal, and Goldfarb study how will this sharp drop in price impact society. Policy will influence the impact on two key dimensions: diffusion and consequences. First, in addition to subsidies and IP policy that will influence the diffusion of AI in ways similar to their effect on other technologies, three policy categories - privacy, trade, and liability - may be uniquely salient in their influence on the diffusion patterns of AI. Second, labor and antitrust policies will influence the consequences of AI in terms of employment, inequality, and competition.

Innovating in a Global Economy
Pian Shu, Georgia Institute of Technology
Claudia Steinwender, Massachusetts Institute of Technology and NBER

The past several decades saw remarkable growth in international trade. Operating in an increasingly globalized competitive environment, firms today face unique opportunities and challenges in deciding whether, when, and how to innovate. Shu and Steinwender review the recent economics and management literature studying the link between trade liberalization and firms' innovation-related outcomes. They first classify trade shocks by direction and target market. They then summarize the theoretical predictions and empirical evidence on the impact of trade shocks on innovation. Finally, the researchers discuss policy implications, empirical limitations, and opportunities for future research.



Christopher Adams, Congressional Budget Office
Jeffrey Alexander, SRI International
Gary W. Anderson, National Science Foundation
Anwar Aridi, George Washington University
Danial Asmat, Department of Justice
Suresh Balakrishnan, University System of Maryland
David Balan, Federal Trade Commission
Maksim Belenkiy, U.S. International Trade Administration
Mark Boroush, National Science Foundation
Amy Burke, National Science Foundation
John Burnham, Real Measures, Inc.
Octavian Carare, Federal Communications Commission
Elias Carayannis, George Washington University
Maria Carina Ugarte, George Washington University
Julie Carlson, Federal Trade Commission
Eliana Carranza, The World Bank
Lilia Chaidez, General Accounting Office
Shih-Hsin Chen, National Chiao Tung University
Gail Cohen, The National Academies of Sciences
Richard Conroy, National Institutes of Health
Daniel Correa, Stanford University
Paulo Correa, The World Bank
Donna Davis, American Association of the Advancement of Science
Harsh Desai, Nuclear Energy Institute
Nicholas Eberstadt, American Enterprise Institute
David Edelman, Massachusetts Institute of Technology
Kerry Fang, University of Maryland, College Park
Ana Ferreras, National Academy of Sciences
Christina Freyamn, SRI International
Ted Gayer, Brookings Institution
Matteo Grazzi, Inter-American Development Bank
Shilpa Grovers, General Accounting Office
Sue Hamann, National Institute of Dental & Craniofacial Research/ NIH
James Hansley, Hansley Associates, Inc.
David Hart, George Mason University
Pauline Henriquez, Inter-American Development Bank
Robert Hershey, Robert L. Hershey, P.E.
Derek Hill, National Science Foundation
Cassandra Ingram, Bureau of the Census
Cecilia Joy-Perez, American Enterprise Institute
Shalin Jyotishi, Association of Public and Land-grant Universities
James Kadtke, National Nanotechnology Coordinating Office
Audrey Kindlon, National Science Foundation
Michael Kniss, General Accounting Office
Kei Koizumi, American Association for the Advancement of Science
Nataliya Langburd, Council of Economic Advisers
David Langdon, Department of Commerce
Jessica Lin, Oracles Utilities
Jennifer Liu, CDS International
James Lloyd, Arizona State University
Jeffrey Macher, Georgetown University
Guru Madhavan, National Academy of Sciences
Adrian Magendzo Weinberger, Inter-American Development Bank
S.J. Maxted, Massachusetts Institute of Technology
Eliot Maxwell, Johns Hopkins University
Alicia McLeod, REDI
Peter Meyer, Bureau of Labor Statistics
Erika Meyers, Federal Trade Commission
Nancy Miller, National Institute of Health
Nathan Musick, Congressional Budget Office
Juan Carlos Navarro, Inter-American Development Bank
Leonardo Ortega, Georgia Institute of Technology
Moon Parks, Government Accountability Office
Vanessa Pena, Institute for Defense Analyses
Ruth Raubitschek, Department of Justice
Michael Richey, Scineer Scientific Engineering LLC
Shawn Roberts, Emprata
Sarah Rovito, Association of Public and Land-grant Universities
Seth Sacher, Federal Trade Commission
Simone Sasso, Interamerican Development Bank
David Schimmelpfennig, Department of Agriculture
Johanna Schneider, National Institutes of Health
Joshua Schnell, Clarivate Analytics
Richard T. Schwinn, Small Business Administration
Kayla Sharee Grant, Inter-American Development Bank
Chad Shirley, Congressional Budget Office
Sujai Shivakumar, The National Academies
Randolph Sim, Georgetown University
Keunwon Song, George Mason University
Peter Stenberg, Department of Agriculture
Roland Stephen, SRI International
Anne Stevens, Government Accountability Office
Claudia Stevenson, Inter-American Development Bank
Miron Straf, Virginia Tech
Claudia Suaznabar, Inter-American Development Bank
Asrat Tesfayesus, U.S. Patent and Trademark Office
Joseph Teter, Naval Surface Warfare Center
Richard Van Atta, Institute for Defense Analyses
Nicholas Vonortas, George Washington University
Jack Wang, Government Accountability Office
Caleb Watney, R Street
Karen E. White, National Science Foundation
Brad Wible, Science Magazine
Nathan Wilson, Federal Trade Commission
Timothy Wojan, National Science Foundation
Patty Wu, C&M International
Joseph Wyer, Amazon
Susan Xu, U.S. International Trade Administration
Weifeng Zhong, Mercatus Center at George Mason University

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