 The digital revolution continues to be extended through exploration of the internet as a medium for innovation relating both to consumer and business requirements and needs and desires. It is particularly reflecting the acceleration of deployment of machine learning technologies with all of the associated problematic issues that arise. But the need for the next new economy, the next technological revolution, is apparent. Only a bit more than three years ago, the United States appeared poised to participate, if not lead. One of the last things President Obama did was this contribution to the science magazine issue on climate change. Well, we all know what happened next. But in the face of Trump's denialism, the radical decline of renewable energy costs accelerated to reach grid competitiveness with fossil fuels. Technological and economic challenges remain. Energy storage at the scale required and smart grid management software are both needed to enable integration of intermittent renewables as primary sources. Economists have long had a first-best policy response to climate change address the negative externality of carbon generation by pricing it. Joe Stiglitz, Nobel Prize-winning economist, was co-chair with Lord Nick Stern of the 2017 High-Level Commission Report on Carbon Prices, sponsored by the World Bank. This written paper of his lays out the nuanced and sophisticated reasoning behind that report. The conventional recommendation assumes perfect markets, rational agents, with complete information, including, of course, information about the future. But the real-world context is much more complex, with macro as well as micro-externalities and multiple points of contact between public policy and private decisions. Central to the policy challenge are the inevitable and multidimensional, distributional implications. All decision makers, public and private, are acting under inescapable uncertainty without that fantasy of an infinity of state contingent markets in which to buy insurance. The intergenerational distribution of costs and benefits looms over the entire policy discussion. Behavioral economics provides insight into the risks and loss aversion that can be expected to motivate resistance to policy initiatives. Given that the economic losses and political resistance will rise with the level of a carbon tax, specific regulatory interventions, Stiglitz argues, may very well be justified. Here, a regulation that requires sector J, a particularly damaging sector, to switch to a low carbon process achieves the same reduction in carbon emissions at a lower effective carbon price and with lower distributional consequences across all other sectors. The general lesson, again, is that efficiency is not only the enemy of innovation in the allocation of resources, it can also be the enemy of fairness in the distribution of the returns from the use of those resources. And the simple carbon tax solution is actually very complicated. Economic policy should never be divorced from the political responses it generates. Imposing attacks to affect behavior runs a further risk. It can translate what might properly be a social norm into an exercise in economic calculus. Stiglitz is referring here to a famous lesson in the behavioral economics literature. At a daycare center in Israel, parents were occasionally late to collect their children, imposing a cost on their teachers and those who were responsible for maintaining the school. So it imposed a fine on any parent who was late. What happened? The result was that parental lateness increased hugely since there was now a price to be paid for what previously had been bad behavior, ethically and morally wrong. Finally, a certain potential conflict exists between a gradual increase in the price of carbon to allow for adjustments by those paying the price, versus a sharp increase to induce needed technological innovation. A sharp increase could be followed by a more moderate carbon tax down the road. The first oil crisis offers a challenging analogy. Once the OPEC oligopoly exercised its power to enormously increase prices, the price system generated a massive incentive to invest in reducing dependence on hydrocarbons. But the financial capacity to do so was radically constrained by the very tax, and that's what the price increase was, the very tax that provided the incentive. That is why any carbon tax must have offsetting modes of compensation for economic as well as political reasons, and why non-price policies are bound to be essential, including direct mission-driven state investment for relevant technological innovation. Of course, and unfortunately, in the United States, any attempt to formulate effective policies in response to climate change remain tragically irrelevant for the time being, at least through until January 2021. In fact, both retrospectively and prospectively, the American state has failed its constituents with consequences that can be read in the polarization of politics and the paralysis of policy. Backward looking, the American state failed to buffer its constituents from the economic consequences of the digital revolution. Forward looking, the American state has formally abdicated, at least for now, from the next needed green revolution. And in the current moment, the coronavirus has forced a hesitant and haphazard and highly differentiated response across the federal, fragmented American political landscape, even as once again America's original sin of slavery has regained political salience. In this most problematic moment, climate change as a mission offers an enormous, unique political opportunity to legitimize state investment at systemic scale with enormous benefits spread across the spectrum of incomes and jobs throughout the private sector and without killing anyone. The benefit of a legitimate war without shooting, but rather building. The Obama administration made a gesture in this direction. It created the Advanced Research Project Agency Energy, modeled on DARPA, the Defense Department's Vehicle for Advanced Innovative Investment. But even before 2017, the level of funding ranged between the trivial and the marginal, well under a tenth of what DARPA gets every year. For three years, the Trump administration has been seeking to liquidate RPE, as it has been seeking to suppress and repress any recognition of the reality of climate change. Congress has saved RPE, but only at these trivially low levels. Throughout, as noted in lecture two, venture capital has been missing in action in clean and green tech. And understandably so, since the politically legitimate support of a mission-driven state is also missing in action. Two years ago, somehow, the Trump administration allowed a federal agency to slip through an all-too-realistic forecast of climate outcomes down the road in the year 2100. There is an answer to this question, which is worse, ignorance or indifference. Unfortunately, the answer is, don't know, don't care. The capacity of the American state has been compromised for a long generation by the political spillovers from inequality in the market economy. Michael Spence is a Nobel Prize-winning economist, and he succinctly summarizes the result. Loss of authority breeds loss of confidence. It's already possible to imagine that in retrospect, the most lasting legacy of this, the Trump administration, will have been its contribution to accelerating China's advance to global leadership. Abdication by the U.S. has indeed left space for China, which in turn has raised its targets for renewable energy. China leveraged European subsidies for the installation of solar and wind power to reach leadership and production of solar panels and wind turbines. Another example, in this case somewhat indirect, of the power of procurement or subsidized demand to pull the supply side of the economy down the learning curve to low-cost reliable production. Now China is committed to generating domestic demand while it has been leading the world in R&D for a decade, green, clean R&D. Really China's role is and will be critical to any effective response to climate change. Is an effective division of innovative labor possible between China and the United States? The U.S. still leads in discovery and invention, and China dominates scale-up and production. But does China really mean it? Is China simply greenwashing its image with cheap talk? Well, they better mean it. China generates 29% of the world's carbon dioxide versus 16% for the United States. In the meantime, the ongoing drama of the coronavirus pandemic has offered China the opportunity to demonstrate both the somewhat belated but extraordinary effectiveness of its state capacity domestically as well as its capacity to reach out as an international leader. Even while the Trump administration was ignoring the evident acceleration of climate change, the American electorate was tuning in, and this may be the most positive news available. And that electorate included an increasing number of Republicans. Now the results of the 2020 election will inevitably be over-determined, meaning there will be numerous overlapping explanations for the outcome, whatever it turns out to be. Undoubtedly, one of the unique conditioning factors will have been the coronavirus pandemic, even if by then it will have at least stabilized, if not subsided, and even with a variety of more or less effective vaccines and therapeutics purportedly on their way. But shockingly deep as its impact has been on economic and social life around the world, the coronavirus necessarily represents a limited war. In fact, its lasting impact is likely to be on accelerating the deployment of technologies for online engagement and on cultural shifts in economic and social behavior that may well prove net beneficial in the overall response to climate change. But the longer struggle that Trump has consistently evaded will remain. The Green New Deal has gained traction as a slogan. It's a brand, not a plan. FDR's New Deal, the original New Deal, embodied, quote, bold, persistent experimentation. He did not take office with anything resembling a roadmap. In fact, his only two campaign commitments were, first, repeal prohibition, and second, balance the budget. FDR orchestrated a succession of more or less effective improvisations that reflected how the economic and financial catastrophe that he inherited legitimated state interventions both for recovery and for reform. Like FDR's New Deal, an effective, not an efficient Green New Deal will also require a mission-driven state legitimized this time by the urgency of climate change. And state funding of R&D and procurement can again catalyze productive speculation to fund broader development, deployment, and diffusion of the innovations that are needed once again to change the world. Let me conclude with a short set of takeaways from these lectures. First, the dynamics of the innovation economy encompasses complex and unstable feedbacks between the financial system, political processes, and the market economy, what I call the three-player game. Next, at the frontier, technological innovation necessarily entails investing in ignorance of the long-term economic value and quantifiable financial returns. As well, historically, such investing has depended on politically legitimate state interventions and episodic waves of financial speculation, productive bubbles. Financial venture capital has played a significant role over the past 40 years in funding bridges from invention and discovery to commercial exploitation, but only in a limited set of sectors – information communications technologies and healthcare biotech – where prior state investments had built platforms for entrepreneurs to dance on. The current financial environment is extraordinary. Very low interest rates, responding to successive shocks to an excessively globalized and financialized economy, inflate the current value of speculative future cash flows while failing to drive real growth in the face of the pandemic and in the face of endogenous self-insurance by market participants worried about the ability to depend upon the state for what they would hope would be there. Finally, exploration of the maturing digital economy dominates activity in the innovation economy today. Building the next new green economy waits on broad collaboration among nation states to underwrite the massive investments needed for effective response to climate change. Above all, it depends on effective collaboration between the United States and China. Hard to imagine at this moment, but the incentives for such collaboration can only become more compelling. This next chapter in the political and financial economics of innovation remains to be written. Thank you all for your time and attention. I trust that these lectures have contributed to providing some insight into the complicated, perverse often, but potentially productive process through which our world continues to be transformed by technological innovation and scientific discovery.