How to Fill the Gaps in the U.S. Economy

What do the internet, nuclear power, GPS, cloud computing, voice recognition and artificial intelligence all have in common? They were all developed with the help of the U.S. government. As economist Mariana Mazzucato and others have documented, government-led research efforts have been crucial to breakthroughs in a number of key technologies that later yielded big dividends for American industry.

Many of these advances have come through a single agency — the Defense Advanced Research Projects Agency, or DARPA (also known as ARPA at some points in its history). In a recent essay, economists Pierre Azoulay, Erica Fuchs, Anna Goldstein and Michael Kearney explain the organizational model that makes DARPA — and its cousins such as ARPA-E, which focuses on energy technology — unique. DARPA first selects an area of technology that the private sector hasn’t made a lot of progress in yet — for example, brain-computer interface, or drone submarines — then finds researchers who are working on ideas that might fill that void. By giving wide latitude to powerful project managers, DARPA avoids much of the bureaucratic overhead and red tape that might otherwise gum up a government-led project.