Three papers examine how infrastructure investments can promote economic growth and broader prosperity.
Washington, DC, July 14, 2021 – The Aspen Economic Strategy Group (AESG) today released a set of three papers on infrastructure and technological innovation and their impact on the post-pandemic economic recovery. These papers will be included in the group’s annual policy volume, “Rebuilding the Post-Pandemic Economy,” which will be released in December 2021, but it was critical to release these papers now so they can help inform debate as the US infrastructure agenda evolves. The authors of these papers, all renowned experts on the topics covered, provide important economic insights relevant to ongoing private and public sector discussions about the size and scope of infrastructure spending.
The AESG, a diverse, bi-partisan group of distinguished economic leaders and thinkers, will convene in late July to discuss important questions about why and how to invest in American infrastructure. How much infrastructure investment do we need and what type of infrastructure should be prioritized (roads and bridges vs. digital infrastructure)? How do we enhance the efficiency of the current infrastructure stock? How should we think about the equity dimensions of new infrastructure investments?
As the Senate reconvenes this week and resumes work on a bipartisan infrastructure plan, the papers provide economic analyses on which types of new infrastructure investments can be a springboard for innovation, energy efficiency, sustained competitiveness, and broader prosperity.
Economic Perspectives on Infrastructure Investment
Edward Glaeser, Fred and Eleanor Glimp Professor of Economics in the Faculty of Arts and Sciences at Harvard University
James Poterba, Mitsui Professor of Economics at MIT and the President of the National Bureau of Economic Research
As the country embarks on a major infrastructure initiative, the authors highlight relevant policy lessons from economic studies of infrastructure projects. Key themes include:
- Projects vary widely in their benefits and costs, even within categories such as roads and bridges. Overall, interstate highways today are smoother, and fewer bridges are structurally deficient, than several decades ago. Careful cost-benefit analysis, perhaps carried out by a nonpartisan federal agency created for the purpose, can help identify which projects should be undertaken.
- While many potential infrastructure projects have substantial benefits, infrastructure costs in the United States are very high by international standards. Controlling costs by improving procurement practices and project management can raise the benefits per dollar of infrastructure spending.
- Maintaining existing infrastructure, rather than building new projects, is one of the most cost-effective ways to deploy new infrastructure dollars.
Challenges of a Clean Energy Transition and Implications for Energy Infrastructure Policy
Severin Borenstein, E.T. Grether Professor of Business Administration and Public Policy at the Berkeley Haas School of Business
Ryan Kellogg, Professor and Deputy Dean for Academic Programs at the University of Chicago Harris School of Public Policy
A central challenge in the transition to clean energy is the need to simultaneously control costs and ensure a reliable energy supply. The authors present key issues the country faces in transitioning to a low-carbon energy system, and the infrastructure that will be needed to support this transition:
- Broad incentives – such as carbon pricing, clean energy standards, or clean energy subsidies – that do not discriminate across zero-emissions resources will be essential for directing capital towards cost-effective investments in clean energy infrastructure.
- The climate challenge is a global challenge, and an essential way to encourage other nations to reduce their own emissions will be to invest in development of zero-emissions technologies and then export those technologies around the globe.
- Reforms to wholesale and retail electricity markets, and to the regulatory process for long-distance transmission investment, are needed to enable a low cost energy transition that distributes its costs and benefits in an equitable way.
- The clean energy transition must provide for decommissioning of legacy fossil fuel infrastructure, which also offers an opportunity to employ displaced oil and gas workers.
Science and Innovation: The Under-Fueled Engine of Prosperity
Benjamin Jones, Gordon and Llura Gund Family Professor of Entrepreneurship, and Professor of Strategy at the Kellogg School of Management at Northwestern University
The paper explores the central role of science and innovation in the national interest and what role the government needs to have in enacting policies that strengthen public investment. Key findings include:
- The United States massively underinvests in science and innovation, with implications for our future standards of living, health, national competitiveness, and capacity to respond to crises.
- Public R&D investment is near its lowest level in the last 60 years and doubling current funding would more than pay for itself.
- The social returns to R&D investment are huge: for every $1 that is invested, society reaps an average return of $5.
“As policymakers continue to shape the US infrastructure agenda, these papers provide valuable insights and recommendations about how to promote efficient and equitable investments,” said Melissa S. Kearney, AESG Director and the Neil Moskowitz Professor of Economics at University of Maryland. “Smart investments in infrastructure will advance the goals of a more robust, inclusive, and resilient nation.”
The Aspen Economic Strategy Group (AESG), a program of the Aspen Institute, is composed of a diverse, bipartisan group of distinguished leaders and thinkers with the goal of promoting evidence-based solutions to significant US economic challenges. Co-chaired by Henry M. Paulson, Jr. and Erskine Bowles, the AESG fosters the exchange of economic policy ideas and seeks to clarify the lines of debate on emerging economic issues while promoting bipartisan relationship-building among current and future generations of policy leaders in Washington. More information can be found at https://economicstrategygroup.org/.
The Aspen Institute is a global nonprofit organization committed to realizing a free, just, and equitable society. Founded in 1949, the Institute drives change through dialogue, leadership, and action to help solve the most important challenges facing the United States and the world. Headquartered in Washington, DC, the Institute has a campus in Aspen, Colorado, and an international network of partners. For more information, visit www.aspeninstitute.org.