As the U.S. economy struggles to recover from the deepest economic downturn since the Great Depression, the debate over how to move forward has focused until quite recently on the traditional levers of fiscal and monetary policy. There is, however, no longer much room to pull on either one of them. The huge Federal deficit is constraining the ability to enact additional fiscal stimulus measures, and the record expansion of the Federal Reserve’s balance sheet and near-zero real interest rates mean that it has done about as much as it can to boost job growth without unduly risking significant future inflation.

We are left with two choices: Either we wait for the economy to somehow heal its own wounds, as it has done many times before, or we stimulate innovation through programs focused on encouraging entrepreneurship to meet a host of serious long-term needs: a greener economy, a more efficient health care system, better schools, and more. Taking action to stimulate innovation is by far the wiser course of action, but for political and other reasons the Federal government’s record in supporting innovation is, to be generous, fitful.

Washington’s traditional answer to the innovation challenge has been to spend more money on research and development (R&D). One problem with this answer is that R&D money is hard to come by in the current economic environment. Fortunately, sometimes the right answer is not more money, but better ways to spend it. Such exactly is the case with the $90 billion that the Federal government grants to universities every year to advance the scientific ball in many areas of endeavor.

The United States already has a legal superstructure in place to help convert research money into commercial products: The Bayh-Dole Act of 1980 gives universities intellectual property rights to the innovations their faculty discover with the help of Federal funds. However, the commercialization ecosystem that has developed on campuses throughout the country since that law was passed has become too cumbersome. We can make modest improvements to that ecosystem that would significantly accelerate the commercialization of new discoveries, and thus help to restore some of the hope for the future that America has lost in the ongoing recession.

Long overdue adjustments in our immigration laws offer a second, low-cost opportunity to unleash pent-up economic dynamism. The debate between Washington and the states today is mostly about low-skilled illegal immigrants, but we would be better off if we concentrated on high-skilled immigrants already attending our universities or working here on short-term H1-B visas. These immigrants could transform our economy for the better, as they have in the recent past.

In short, policymakers looking for inexpensive ways to boost our economy need not...