Economist Louis Johnston on innovation opportunity in Minn.

Innovation was clearly a theme in the president's State of the Union address. Obama championed creating jobs through investments in biomedical research, information technology and clean-energy technology.

MPR's Tom Crann spoke with economist Louis Johnston on Wednesday about opportunities for innovation in Minnesota. Johnston teaches economics at St. John's University and the College of St. Benedict.

Tom Crann: What was your reaction to the speech when you heard it last night?

Louis Johnston: My reaction was that it really gives Minnesota an opportunity, because right now Minnesota is in many ways a state that is looking at innovation as a source of growth. And here the president was saying this is what the nation needs, so in a sense he was saying, 'The nation needs what Minnesota's got to offer.' So I think it's a great opportunity for us.

Crann: Specifically, where do you see those opportunities here in Minnesota?

[[header:Johnston: Well, I think the two that stood out for me at least in the speech were in biomedical research, we've got a lot of potential there, not just in the more well known medical device industry, Medtronic, St. Jude, and so on.

We also have a lot of potential in the basic science through the University of Minnesota and our other institutions of higher education who are working on everything from stem cell work to breakthroughs in biochemistry that can be turned into pharmaceuticals, what's sometimes called now nutraceuticals, companies like Cargill are using them to put nutrition ... into foodstuffs themselves. So that's one.

And then the other was clean energy. We are I think now the fourth largest state in terms of the generation of clean energy. We know how to do it. We know how to install it. I think we have an opportunity to spread that technology and leverage our ability to the rest of the country.

Crann: You've mentioned biomedical and clean energy. They're certainly a part of Minnesota's economy, but what about more traditional sectors like food processing, farming? Are any of those in the areas the president's talking about, do you think?

Johnston: Yes, I definitely think so. In agricultural technology I think we've got a lot of things that we could share with the rest of the country in terms of not only just mechanization of farming, but the application of biotechnology to crops.

That's kind of one end of it, and the other is we have one of the better situated small farm oriented, immigrant oriented agricultural communities.

And I think even though that isn't high tech in the usual sense of it, it's definitely innovative because it's taking what we've got and doing a better job of utilizing our resources, and that economists have identified as one of the most important sources of economic growth is taking what you've got and doing better with it, not just inventing new things.

Crann: You say that Minnesota is poised for innovation and you're even seeing it, or seeing certainly openness to it in Minnesota's companies. And yet the economy is still lagging.

So, what's the disconnect? What's holding this innovation from actually moving the economy forward a bit?

Johnston: I actually think we're in a situation like we were in the 1970s where we've got innovation going on, but we haven't either learned how to commercialize it or learned how to utilize it in the workplace. And so we have a period where there is this disconnect, but there's always a lag between the time something is innovated and when it actually has an effect on the economy.

A great example is the internet. We started seeing the internet developed in the '70s and in the '80s, but it didn't really affect the rest of the economy until the early '90s when it started to show up in terms of increased output and increased jobs.

Crann: A little economic analysis of what the president is calling 'investment,' if we could. The Republicans are saying it's a code word for more government spending. Is that a fair critique of this time of investment as the most efficient way to bring this kind of innovation about that we're talking about?

Johnston: I don't think it's fair. The characterization of this as simply more spending would be true if all we did was take our budget and just pile more money on top of it, but I don't think that's what the president's talking about.

He's talking about reorienting what we do as a government towards these kinds of investment expenditures, rather than on simply things we might think of as consumption expenditures, things where we simply buy something and that's it, or recycling money from one group of people to another through a subsidy or a tax break. That really is an investment. That really is creating something of value that's going to last for a long time. And so, no, I don't think it is fair.

(Interview edited and transcribed by MPR reporter Madeleine Baran)