Should public policy push or pull technology?

All predictions are wrong, some are just more wrong than others. (ht dml) Since this is the case, what is the role of public policy in moving technology forward. This is an extremely important question right now as many people (such as the President) are waiting around for technology to solve our energy, pollution and climate change problems. See the President's recent energy speech for an example of technologist thinking.

I was thinking about this issue when I read Kevin Kelly's list of things he's been terribly wrong about. He writes about technology for a living, and missed the appeal of Photoshop and the Sims, plus he overestimated the importance of Second Life (as did a lot of people. I wonder how John Edwards' Second Life campaign headquarters is doing now.).

Specifically to public policy, new technologies are extremely important for the transportation sector, but who should lead the way on development and implementation? The new CAFE standards issued this week will likely push new engine technologies and ultimately produce cleaner and more efficient cars. Automakers react differently to CAFE standards, however. This paper argues that American car companies do just enough to meet the standards while Japanese car makers already exceed them and European companies only import cars luxury cars and they incorporate the fines for not meeting CAFE numbers into the price of their cars.

The new CAFE standards are certainly one step forward and at least two steps back as California will lose it's ability to regulate to a higher standard than federally mandated. California has a long history of regulating emissions above and beyond federal standards, but the new CAFE prohibits this from continuing. In this case, the likely outcome of the overall policy is to limit the development of new technologies that improve fuel economy as the increase in CAFE is not great enough to require complete re-engineering of engine technology, and existing technologies that are deployed elsewhere in the world are less likely to find a market in the U.S. For instance, there are many Japanese and European cars that are far more environmentally friendly in propulsion and overall size than are available in this country. If California is able to regulate it's own environmental standards, the companies that build these cars could conceivably introduce them to the large and important California market. This would open the door for a national roll out at some point in the future.

Ultimately, as the development of the web taught us, predicting the future of technology is a risky game. Often technologies are used in ways that they were not designed for initially, but they prove very useful anyway. Certainly waiting around for technology to save us is foolish, and those thoughts are only popular because technologies that are not yet invented do not yet cost anything. Our experience with existing technologies suggests that how we pay for future improvements is far more important as an issue than what those improvements are. I guess that's where public policy should focus, and at times force people to pay for something new. At the same time, policy needs to allow for innovations that would occur in the absence of public intervention (such as more efficient cars from abroad).