policy and in my opinion we're at a point where marginal tax rates are not exhale the most important thing. if you were to reduce tax rates marginally that doesn't solve the problem that we need to construct hundreds of new nuclear reactors in this country very quickly. i personally wouldn't mind having slightly higher taxes if i could actually have the freedom to spend the other money on things i'd like to spend it on. if we had as it is, i'm living in a country where for many purposes the effective tax rate is 100%. i'm not allowed to spend any of my money on innovative drugs. i'm not allowed to spend any of my money on supersonic private jets and on and on down the line. i would say the -- the -- i think there was a very important slow down that took place around that time you can map it on to full series of other things that shifted culturally.

we shifted from the science fiction as a literary genre has collapsed. technology is described as things that are dangerous or don't work. when was the last positive sci-fi movie that's not a star trek rerun. i do think we need to take this issue very seriously. i think the measurement question is very hard. i suggest an economic measure and there has been a deceleration in wages. i think that the international question is very interesting. there are some good reasons to hope that we'll head towards a more multipolar world and maybe innovation will start picking up in other countries in decades to come. but the reality is that most of the world doesn't really need to innovate. the emerging markets are poorer countries and they can do well just by copying things that work. that's basicalely what the developing world is do. if you're a talented person in

china open a mcdonald's fran nice or coke franchise. that's the easiest thing to do. the only place where people need to innovate is in the developed world, japan, europe, the u.s. all of which suffer from a heavy regulatory load. we're not living in a world of hundreds of countries where people are free to do whatever they can. i think the shift in the language from first world and third world what was the way the dichotomy existed in the '60s to developing and developing world is another illustration of this tech slow down. the developed countries are by definition where nothing new can happen. they're developed. >> tony, i've got to resist. i'll resist.

tony wanted to -- >> this is quick. it relates to the long term flow of innovation that richard mentioned. it's not the why or the what but what to do and what's enough. it occurred to me that the epoch of great innovation that peter talked about those planes, those rockets, those were a direct function of very substantial government investment as was the internet in fact this entire semiconductor industry and nuclear bombs, too. there's a very substantial amount of government investment there. you can say, well, it's become politicized. the question is, can you depoliticize it or just withdraw the government entirely. there's a dings i think to be made between investment versus regulation. it is possible to deregulate and still invest. it goes back to what i said before, you cultivate and invest and get out of the way. what i think about is whether the problem here is that we

spent so much money doing regulation badly that we've wasted all the money we might be able to use to invest sepsably and for that matter poisoned everybody's reaction to any government involvement whatsoever. i think if you spend too much time focussing on how bad regulation could be, which it can be and often is. i think all the points that have been made here so far are exactly right. there are other roles for government to play in investment. i think they tend to eclipse what i think is some potential for a positive role to be played by the government here, deregulation, but not deinvestment. >> i just -- to just before, i will let you go, you guys should if you have questions now would be to time to start lining up. thank you. >> one sentence on tony's point. i am philosophically inclined to that view as well. i will note in defense of

peter's position that the government expenditures in science and technology are by and large in the industries that we dent seem to be seeing substantial innovation, right? the government spends lots of money in medical, pharmaceutical, biotech, alternative energy and so forth. not in software, internet research in particular. >> that's because they have to offset all the difficulties on the regulatory side. what i think is correct that tony said, the book that you should read is the endless frontiere. he got it right. the one sentence version was we subsidize. research up to the point of proof of principal. after that we run it through the patent system. the government's repayment is a nonexclusive license of technology with the government fund. otherwise do with it what you will. that's the way i best understand it. the question is how much of it

becomes private, how much of it is public? what is brsting on the bioscience side, the original grants were quite small. what has happened since that time if you look at public investments now they've all shifted from basic infrastructure including science to transfer payments, which is the other great thing which peter did not mention. the switch other is just enormous. most of the innovation prooms on infrastructure are disguised labor protection programs. the damage that was done by the new deal on truck churl issues we have yet to live down and we managed to man fest and multiply in the years that have followed. >> one quick last point if i might on the question of whether government can do something positive on the technology and science area by investing. it strikes me that that it depends a great deal upon who is in the government to do that. if you look at the 535 people in

the u.s. house and senate, i think by generous count about 35 of them have any sort of background in science or engineering. the rest of living in the middle ages. they don't understand that windmills don't work when the wind is not blowing or solar power does not work at night. i think that if you want to have a technocratic government, you have to have a government that has a lot fewer lawyers in it as a basic first cut. [ applause ] and we have sort of very interesting instances with the clean tech failure and solyndra failure. the legal question is a public critique. the obama defense is it was a process that was followed to allocate the money. but the substantiative question is does the science actually work. it seems like nobody has any

confidence to evaluate if that works and that's not a question that's sort of a question that's beneath or above or both people's dignity to think about. so as a libertarian i have no problem with lawyers being in government. but if you are a liberal person who believes that government should be driving science, then you should have some powerful affirmative action quota for it being a government heavily dominated by scientists and technocrats. >> i'm just going to go back and forth. first question. >> there may be people up top, too. >> we're going to go around, but we'll start here. >> president of the santa clara university chapter. i'm curious about seeing so many silicon sal lee firms supporting net neutrality. it strikes me as the camel's nose under the tent. i wonder about this because i can't understand the limiting

principle if we say that the telecoes are a monopoly. why shouldn't we say facebook has become a monopoly of access and how people communicate with each other. maybe we should force people to get on there. how can we have a limiting principle to say net neutrality at the protocol but not at the application. >> you can't. what you have to do is to go back by the lit amateur written 40 years ago called "why regulate public utility." you look at these regulations from a static point of view, you will always overregulate and the static regulation will make it difficult for new firms to get in there, so you'll hurt the dynamic situation. the dominant theme of con verns is essentially when you reduce everything to zero and ones, the industry separations are gone and if these guys screw up within a matter of week they

will become "life" magazine and everybody will take away at their side. that's what happened. let me give you the one example. when mci basically decided to enter into business against the bell stamp choir monopoly what it did is created a dedicated line for the shipment of information from st. louis to chicago. these guys didn't need any of the networking interconnective i and they wanted high levels of securities. once those guys were able to break off then the subsidy system under the old bell network started to crackdown. the last thing you wanted to do is say it's really important to say we have these cross subsidies. therefore we have to prevent this breakoff from taking place. that of course, is one of the problems with the medical mandate. the true damage in this one sentence is if you actually understand how the government defines competition in health care, the level of stew pen dougs ignorance saying it can only be on quality and price, not the introduction of new products, that's the real

long-term stuff on this thing. we are facing genuine crisis. >> there's a little bit of a history missing to richard's mci story. it's important for the net neutrality debate. mci created a dedicated line. you would make a local call in st. louis. they would to a special number an mci number they would pass it to chicago and make a local call in chicago. at&t found out about this, they started shutting down all of mci's local numbers because they didn't like the competition. the way mci managed to survive was that they ended up filing an antitrust lawsuit against at&t. >> because there was a monopoly. >> the network neutrality question is this, it's right to say it's hard concept chally. if our justification is this is a monopoly and we should regulate it it's hard to distinguish that from google or facebook or a number of other things. i think you need a justification that's a little bit more

directed at difficulty of entry. if you're going to distinguish the two it's got to be on something structural about the telecommunications infrastructure and the network that people have created that makes it difficult for somebody to come in and enter if you're doing something inefficient. now richard suggests and increasingly he may turn out to be right. that was absolutely true 25 years ago, it's not true today. right, that as we're moving in -- as we're moving towards a world that has more possible means of alternative communication, we have people with less control over the network and we need to worry less about it. i'm not persuaded we're there yet in part because all of the possible means of communication depend on government licensesure. in a world in which we had ten

different ways, my information, my phone call could go from me to you, i wouldn't be worried about net neutrality. >> i think there's a lot to what you're saying. i think there's less unanimity among silicon valley on net neutrality that you might think. frankly i think the industry got a little down the road into supporting net new neutrality before thinking through some of the issues that you raise here that are seemingly pretty apparent. i don't think you should take away the idea that silicon valley buzz behind net neutrality. there's plenty of debate on that. >> also there's not one version of what net neutrality means. there are many different ways to think about what it is and how you regulate it. there's not necessarily an agreement on that. unfortunately she's not here, we have a colleague he's written a compelling book especially for us that believe that all wisdom wasn't written 40 years ago.

called "sberkt, architecture and innovation", which i would recommend to you is just a different way to think through intermediate positions to keep the net open for innovation that go beyond a correction to antitrust law. >> the one imperical thought on the net neutrality, the innovation seems pretty healthy. i think the case impeercally seems much weaker than 15 years ago. >> we are in the best of all possible words, we are just about to impose the regulation, but we never do. because of that people are afraid to exercise powers they otherwise would. >> up there. >> university of michigan. he started to answer my question, i'd like to hear the rest of the panel's opinion on this. given that most lawyers, politicians and judges don't have strong technical

backgrounds, can they make good regulation. if not should we be incurring scientists and engineers to serve on the bench. >> we don't want scientists in congress. they're lambs for the slaughter. in fact, the single worst government today is stephen choot. nobel prize winner in physics, total bafoon in energy regulation. you need to get people who know the sound principles of torts, and so forth. if peter is qualified to serve in congress because he's been in business. and that also makes a huge difference. i don't want these guys there. >> richard wants more lawyers in congress. >> no. i want people who understand what the business of government is about. i don't care what their labels are. what i care about is that they know something. and start with the president of

the united states who's a colleague of mine for many years and the basic skill set that dealing with these issues that that man managed to accumulate in 14 years at the university of chicago is summed in a single digit, zero. >> i don't know if that says shotgun something about the university of chicago. >> no, no. >> we have well trained law grads. >> same thing. let's go over here. >> i appreciate your willingness to say regulation maybe should be toned down. but that maybe investment should be stepped up. my problem is who is doing the investment? an economist said a bad economist looks at what is seen, a good economist looks at what is unseen. so you talk about well, this investment, but the problem is when government invests, it's in the creating the wealth, it's having to steal the wealth from people who would otherwise create it inno places before allocating it in a way which in

government then wants to. my question is who -- i guess it's just very broad. what would you say especially as it pertains to technology, i feel like the fast pace of it i would trust mr. teal to allocate resources in a way it wouldn't trust the government to keep up with tech no longical innovation. >> the answer is you've got to trust both. my point is that you shouldn't leave it all to private markets. you shouldn't leave it all to the government. that would be a disaster. my point is that there are certain components of it that i think the government may play an important role in some instances. now as far as stealing anybody's money, we don't steal anybody's money to provide for national defense. there are things the government rightfully provides for us. that's why we have a tax base. my only point is do we want -- is the answer to lots of bad regulation to throw up your hands and just deregulate everything? i think not. i think the point is there may be some terrible, terrible

instances of bad regulation that you need to fix and deregulation is part of the story. but just because you're going to deregulate doesn't mean you shouldn't also invest in certain spots. >> the right way to think about it is this, our research universities useful? >> the answer is yes. >> but that is a statement basically. the research universities are doing research in substantial part because they're taking government money and using it to do basic research that a private company's not going to do because it's a 20 year payoff if anything down the line. there may be ways to do that without government funding. if you can find some other cross subsidy of alumni. if we're going to charge tuition high enough. should government be competing with private enterprises to fund research? no. are there areas of science that i don't think that the market is going to generate research?

to the level that we might actually benefit from? >> yes. >> the key to success for the most part is that the small grants which are highly competitive are all peer reviewed by people inside the profession. it turned out for the most part those things actually work quite well. when you get to big science you can't use that project. you have to figure out are to spo fend $3 billion. the project works much worse under that circumstances because at this time it's the texas delegation against the illinois delegation as to who's going to be able -- what you need to do is get government guys with the emphasis on small sciences. on the university side, what you have to do since this technology is too expensive is to figure out how it is to pool joint ventures. to give you one example, the proon the source which runs in

chicago, they have pumps. they financed these things by having each university pay for a fraction of the pod so you get private development inside the thing what pod is the system becomes a highway and then the pods become the cars and you don't allow the government to decide what you put in the pod, but you now have joint financing to create the public good. you can get this thing done. you don't have to be a complete cynic about government support. you have to read the bush book. this was the guy that organized the science effort in world war ii. he was the guy that got the los alamos labs up and they knew what they were doing and there's nothing that we can't learn from them today. >> good evening. my name is james bailey and i'm from the evening division at university in springfield, massachusetts. my question this evening is for there telio asand mr. ulliot.

in the world of high finance and technology where you have government regulation and great results and then the world of stuff in which you r heavy regulation and poll results. how do you fit in the world that works, neither stuff nor technology into that -- into that theory. do you consider it to be highly regulated or lightly regulated and how would you change the regulatory scheme and to make it better, more productive, et cetera? >>. >> well, i would be in favor of going back to the 1950s e, '60s regulation in the world of stuff, and i think even if you were in favor of government doing things there are many

cases where the government regulations are stopping governments from being able to do things they would like to do. i had conversations with people in the obama administration on yet stimulus bill, why couldn't they build an infrastructure and there were no ready projects they could build because they wanted to build clean tech windmills north of chicago. you weren't allowed to connect the power lines connected to chicago. the high-speed rail in california cannot possibly be built because you have local zoning rules that prevent it. so i think that -- i think that it is really important to understand that there is sort of no regulation and there's light regulation and there's moderate and heavy and insane and self-destructive and we're somewhere between insane and self-destructed. and we don't need to ask all of the pure libertarian questions about -- what about should we

have privatize the nuclear program and should we privatize what about private roads and we don't need to deal with those problems. go back to the '50s. >> yea. i don't know if i can add much to what peter said, but i would say that the little bit is certainly the world is more regulated and there's plenty of regulation and that's an increasing problem. >> there is something about the world of bits where we have to realize that it's a cautionary tale. we had these geese-laying all these golden eggs in technology and the geese have all been killed and only one left is the computer goose. the finance goose was killed the

last few years with dodd frank. so the only one left at this point is the computer one. so i think unnecessary excess of regulation of computer six troerd fairly dangerous because it's the only thing that's left. everything else has been killed off. >> i can make a comment? >> think peter's wrong about one thing and it doesn't challenge, but strengthens his thesis. environmental regulations, to some extent differ from all of the others because when you're concerned with the things done with the private law nuisance that were actionable in 1200. i can see, whatever you want to think about the levels of innovation in 1950, smog and san marino were not one of the things that you praised. the big problem with the environmental protection act and the clean air act was not that it chose to regulate, but you have to go down a level and figure out what the proper scheme of regulation is and you can't answer that question by saying i'm pro or against. one of the huge blunders that they all made which is that they

thought they would grandfather old technology and they would regulate new technology. this is the fundamentally most expensive word in the environmental protection word is the world new. what this did, although nobody thought about it, is it completely disrupted the cycles from old to new transmissions. the regulations on the new stuff were intolerable and the new area is what counts as a modification that allows you to keep over. this has gone on now for 40 years in which you put all sorts of rattle tramp because you don't allow the new stuff to come in under the same thing. what you needed was a system of regulation that replicated common-law rules which were caused by externalities i.e., i don't mean carbon dioxide here which was basically punished because it was extra and it didn't matter whether you did it through a new or old plant and just on that system you would have been able to stop 95% of these problems at a tiny fraction of the current cost.

so that what happens is it's one thing to say and peter's right, ramp it down in order of magnitude, but when you actually do regulations there's no substitute for knowing what's going on inside an industry, particularly in those cases where some regulation is indeed needed and that's where the other piece of information has gone wrong and the system designed for environmental protection regulation on every area you care to talk about is fatally flawed in the way that you put this together and the political stuff on transitions turned out not to be a two-year issue, but a 40-year issue. >> hi, my name is chris guyer from the university of pennsylvania. my question is a little on the last one. going to the two industries which mr. theol discussed the lack of regulation in the industry in the face of inadequate regulation exposed us to systematic risk and requires strong governmental intervention. what are the major risks from the lack of regulation regarding technology?

is it limited simply to restrictions on innovation or are there broader risks and then following up on that, going to professor linley's point about a rule-based regulatory system and given the slight mismatch and speed between which the legislation has passed and technology develops. how can legislation develop that is flexible enough to talk about some of the issues that we talked about and others that will arise in the future. >> and i think this is a very hard problem and as richard suggested and the last question, it's a hard problem any time you have to intervene and you can't avoid intervening at some level. to me, by and large, and i think this is in line with what richard is saying. we're just agreeing all of the time. >> you're agreeing with me. >> i disagree with you on vaccine threats. >> the -- it seems to me right for the reasons you suggested we

are generally speaking better served with common law and flexible rules than detailed legislative parameters in part because congress can get them wrong because they don't understand or congress can get them wrong because they have a vested interest because they are not efficient and in part because they just don't change. >> so, you know, i think, for example, in the patent system i've argued along with dan burke, the way we need to account for the very different characteristics of the pharmaceutical and the bio technology industries and the information technology industries is not by passing legislation that is specifically tailored to each them, but it's by having general rules that the courts can generally apply with sensitivity to the needs and different circumstances. >> one look, the key illustration on that is on injunctive relief, the common

law rule with respect to massively dislocating injunctions was to delay innovation in position and so if you have this mosaic and the business that you're in it is banded and we give you six months and you pay a royalty and by that time you design around it and instead of having an instantaneous shutting the things down and that'sa i classic illustration where you do it for him and you do it for a guy who can infringe on lipitor. >> exactly right. >> on your first question, so it seems to me, we're starting to see there are two mechanisms by which we start to regulate the computer internet industry. one is hollywood, right? which is a very powerful lobbying machine which is pushing very hard to try to restrict the freedom of the internet precisely because they view that as a real danger point to them because a lot of the stuff that crosses the internet is piracy