Not long after Paul Krugman's (1994) incisive critique of economic development in East Asia, Singapore's then Prime Minister, Goh Chok Tong, told The Straits Times Weekly that “We have reached a stage where [total factor productivity] growth becomes more than just a theoretical concept” (Straits Times Weekly, 1995). With this statement, the prime minister made clear his recognition that if Singapore was to continue growing as it had in the past, it had to transition from an economy where growth is derived mainly from input mobilization to an economy that exhibited much more technological progress.

Policymakers often acknowledge the importance of innovation and technology diffusion for economic development. And just as often, they promise to take daring and ambitious steps to catalyze those processes. In a 2011 speech, for instance, President Barak Obama vowed to “knock down any barriers that stand in the way” of “making it easier and faster to turn new ideas into new jobs and new businesses” because, as he put it, “if we're going to create jobs now and in the future, we're going to have to out-build and out-educate and out-innovate every other country on Earth.”

Given the importance of technological progress, these sorts of acknowledgments and promises of bold action are understandable. Nevertheless, we saw in Chapter 1 that countries differ markedly in the premiums they actually assign to supplying technology policies. The Thailand–Singapore comparison that began this book demonstrated that divergence most clearly, but we also saw more generally that there exists substantial cross-national variation in the supply of policies thought to encourage innovation and technology diffusion.

In the present chapter, I develop a theory to explain these diverging efforts. Specifically, in what follows, I advance two propositions. The first is that governments’ time horizons influence the premiums they assign to encouraging technological progress. The second is that those horizons extend farther into the distance when wellinstitutionalized political parties control government.