If you're expecting a lot of business jargon about market share, product channels, and delivery models, you probably won't get it from Mark Zupan. Professor of economics and public policy at the University of Rochester and dean of the Simon Graduate School of Business, Zupan tends to sound more philosophical, even a bit artistic, when he talks about business.

Zupan places enormous emphasis on human creativity and the innate desire to solve problems. The largest contemporary economies, he says, are driven by great ideas, not commodities. America's success, he says, is a direct result of unleashing the creative prowess of its citizenry, not by subjecting it to endless regulatory hurdles. And, he says, the country's at a crossroad.

Zupan cautions against the tendency to look to the federal government for solutions to some of the country's most systemic economic problems: high unemployment, the high cost of health care, and the need for more sources of clean, affordable energy. Instead, he sees business as somewhat cyclical. Companies and their products attract consumers until someone invents something better. Old, uninspired companies fall to what he calls "creative destruction." Government efforts to preserve jobs by preventing this from happening - though often well-intended - are doomed to fail, he says.

Much of Zupan's understanding of economics was shaped, he says, by his parents' experience - immigrants from the former Yugoslavia who arrived in Rochester with only two suitcases. Their eventual prosperity, a result of hard work, would never have happened in the former Soviet satellite, he says, where everything was run by the centralized state government.

The most serious problem facing the US, Zupan says, is its ballooning debt, now topping $12 trillion. A recent New York Times article pegs the cost of servicing all this borrowed money at $700 billion annually. Zupan also discusses the rise of China and India, and why the US shouldn't fear their success.

The following is an edited version of an interview with the Simon School's Mark Zupan. 

CITY: The economic downturn has made this a difficult year for a lot of people. Where do you think the US economy is headed in the next year or two, and over the long term?

Zupan:I believe we've bottomed out, but we haven't seen the job growth, yet.

My worry over the long run is how we've tried to solve this sizeable downturn through government means, because the money doesn't come out of thin air. I was just reading an article today that says New York is one of the states losing the most population, and how the impact is at the high end in terms of tax rolls.

That's a microcosm of what I believe we see playing out. Creative types will ultimately go toward environments that best nurture that creativity. And government, though well-intentioned, doesn't foster the creativity that the private sector does. And it's the creativity that hands down produces the job growth and the wealth.

We've lost millions of jobs during the last 18 months. If we've bottomed out and we're moving into a recovery, is it even possible to create the number of jobs needed to get unemployment down to a reasonable level anytime soon?

One thing to point out: the jobs won't necessarily come back where they once were. It's this element of creative destruction that happens, and you can't forestall it. For instance, for all the jobs that iPhone created, I saw this piece yesterday on Androids. The new Google invention may entirely upend the iPhone's perch.

What I think we should take heart in is just how dynamic the ideas are that people can and do come up with - ideas that you or I don't even have a clue about right now. We have an enormous track record for coming up with new gizmos that will be sources of future jobs in our economy, so long as we continue to foster that creative spirit.

And the education component is at the heart of this. Thomas Friedman wrote a column on the "new untouchables," which basically argues that the folks who can push creativity, who are educated in terms of investing in human capital, are the folks who will hold the least vulnerable of jobs. These folks know how to create value.

How concerned are you about education and its direct influence on the economy?

We've just lived through one economic bubble. To what extent we may have an even bigger bubble ahead because of our education system isn't known. When it comes to getting the basics right, we haven't done a very good job, especially when it comes to language skills, writing skills, and analytic skills. Those chickens look like they may come home to roost.

Craig Barrett, the former CEO of Intel, used to warn about how few people were going into core fields, in particular, engineering, math, and science. We've been able to satisfy that need a bit through immigration.

Many economists believed that if we didn't act quickly, some kind of financial collapse was imminent. But now we don't seem to know how effective those decisions were. Do you think that the bank bailouts were a good idea?

I don't. I think it was a short-run fix. It certainly would have been more painful in the short run. I think there are some important long-run consequences. Not all of them have to do with taxes, inflation, and the debt and how we are going to pay for it.

If people see the lesson in this as - if we screw up the government will just bail us out - you get much less effective risk-taking. Failing is the flipside to risk. One of the things that motivates better attention toward success is failure. When you take out the failure, you get people who are willing to make more outlandish bets.

I would add that this decision [the bailouts] is about not having enough trust. We know that there is pain in life, but people are surprisingly resilient. We don't give people enough credit for their ability to endure and prosper even in the most challenging environments. It's the most wonderful trait we have as human beings.

Yes, but some people hearing you say this, especially if they've just lost their jobs, will think "That's easy for Zupan to say." You're a professor at a respected university making a great salary. What do you know about their pain?

I know; it sounds harsh.

But our system over time creates opportunity, and allows people to rise to the occasion. There are just too many examples of entrepreneurial dreams that were realized out of adversity.

The Japanese didn't have a stimulus plan during their last major recession in the 1990's, a period they refer to it as their "lost decade." This has been used as the reason why the US needed a stimulus plan, and some are arguing for a second. Has it worked?

It's interesting because that was the reason given for the stimulus plan. What's more interesting is they actually did have a stimulus plan. In an economy that was roughly half our size, I think they spent about $3 trillion trying to jumpstart their way out of recession. They engaged in a lot of road repair and bridge building as a way to create jobs.

The key take away was that it didn't jumpstart their economy. If anything, it saddled them with even more debt.

By coincidence, Tim Geithner [US treasury secretary] was there at the time, and his biggest take away appears to be that the Japanese government didn't intervene enough.

So you don't share the same views as the Obama administration on how to get out of this recession and grow the economy?

No, I don't. I think we need to have a little more humility and trust in what common men and women are able to accomplish, compared to a few policy makers.

The US economy was growing at around 2 to 3 percent annually before the recession. But at that rate, how can we service a multi-trillion dollar debt load? It doesn't seem mathematically possible unless taxes are raised substantially, which would further slow growth.

That's a fabulous question; and if there was ever one that should keep us up at night, that's the one.

We take out loans to send kids to college, to buy cars, to buy houses; and the ability to take out loans is a wonderful thing. We can borrow today against future income.

But if we are just borrowing without realizing that it comes with a price, there's a problem. Right now, at the rate we are taking out loans, we must have a very delusional view of our future productivity. I've just never seen productivity and economic growth that could match what the debt obligations are going to end up being.

And health care is going to add to the burden.

In the 1980's there was this hysteria about the strength of the Japanese economy. Of course, most of the predictions were wrong. Now it's happening again with the Chinese economy. Will it soon overtake the US economy?

In some respects they have a long way to go, but in sheer magnitude, by that I mean buying power, they are already number two. And at this pace, sometime in the next few years they probably will be number one.

I think it was three years ago that Shanghai built more office space than New York City in its entire history. That gives you an idea of the pace.

In India, too, you will take off from the airport in Mumbai, and all along the runway are these little shanties in the most abject poverty you've ever seen. But a year ago there were more millionaires in India than there were people in Australia. Every second page of the local paper in Mumbai has a story about education - an engineering school, a new business school. So it's very much a culture that is concerned with: How do we build for the future?

In both cases, these are people who have been freed from all kinds of government regulations. It's kind of funny because they are very much heading away from government restrictions, and we are headed in the other direction.

With these economies growing at such an incredible pace, particularly China's, what will that mean to the average American? Should we be concerned?

In general, we have more to look forward to when that happens than we have to fear. We overtook the British economy. And the average person in Great Britain is better off today because of it.

It's not a win-lose; it's a win-win. When China develops some kind of new vaccine or new technology, we're all going to benefit from their creativity. We have more in common than we think. We should be hoping that they keep succeeding. It's like if your neighbor invents a remedy for the common cold; well, he may become fabulously wealthy from his invention, but you become healthier in the process.

Somebody is going to lose out. The older companies that peddle remedies that don't work may undergo some creative destruction along the way, but that's how it works. We live in a better world when progress occurs.

Still, many people are threatened by China because of its cheap labor market and the way the country manipulates its currency. How can an American, say an automaker, compete? Some people argue we shouldn't even waste resources trying.

There is an element of that argument that is exactly true. But it has to do with the fact that they are so poor right now. But we still benefit from them being willing to work hard.

Our focus has to be on creating our own value.

I used to live in Tucson, Arizona and as an analogy, people there used to get ticked off when they would see Phoenix succeeding. It's human nature. There are sometimes folks who feel they are poor now because you became richer. It creates this downward spiral and you just want to shake them and tell them to snap out of it.

Even those of us who were around for the Japanese auto invasion in the 1970's never envisioned the collapse of the US auto industry and the bankruptcy of GM. Is this kind of change inevitable, and what other industries are vulnerable?

I think any business can become vulnerable. Right now, education is our second largest export. But even American universities are seeing global competition. We have got to stay creative. Our costs are going up faster than the rate of inflation. We can rationalize and tell stories about why that is happening. But at the end of the day, we are an industry, too. How do we use technology to teach more effectively, to stay more mindful? These are the things we need to be thinking about.

The same is true in health care and energy.

What are your thoughts about the health-care reform bill? From a business model, wouldn't it make sense to get health care off the backs of employers?

If we really want to achieve reform, I think a cleaner system would be to give everybody a tax break that they can spend however they want. If they wanted not to devote it to health care, let it be their choice. We need to provide flexibility.

The government option is sort of like having the federal government build cars. It just isn't very successful at these things. We tend to hamstring ourselves and limit innovation when we rely on government.

How has the government earned this reputation as a bungler? There was a time when the US government was a respected brand. Why can't that creative spirit that you refer to flourish within government?

When an organization gets too big, I think the magnitude of inefficiency becomes a problem. When government rallies around a single cause, whether it's to win World War II or to put a man on the moon, it's able to achieve that objective. But somehow those interests get locked in place after the problem has been solved. When interests get locked in, that creates systems that are hard to get rid of, and that puts weight on the whole organization.

Plus, I think that one thing that made the US government such a great brand compared to other governments was that it allowed its citizens to run with ideas. That is the American Dream. We run the risk of doing great harm when we want to see everything run through central hands.

Turning to the local economy, why has the Rochester region taken such a beating, and is there any hope for this area?

It's around the corner. Just through our alums, we are amazed at the number of venture capitalists who are interested in founding future companies. Money follows great ideas. It's there and it's coming. The biggest challenge is convincing our talent to stay in the area and to build their careers here instead of moving to Silicon Valley or Texas.

But it's more important that we have the ideas. And in that regard we are actually blessed with some incredible idea factories - RIT, Roberts Wesleyan, Colgate, and Cornell. We are surrounded by some really wonderful schools. We need to do more to help each other as a community. I'm pretty bullish, really.

The SimonSchool is expensive. What does this school offer that lesser expensive MBA programs don't?

The return on investment over time has been incredibly high.

We're the smallest private school in the top tier. We can offer more personal attention. I can still help students with their job searches. I couldn't do that at Stanford or Harvard. We're analytic economics based. We really believe you're going to need that in order to understand why, for example, the real-estate market collapsed. A lot of our peers don't even require economics.

And third, we're active proponents of markets and entrepreneurship. Over half of our alums 10 years out are entrepreneurs.

For a while, it seemed like everyone was going for an MBA. It was the graduate degree everyone wanted. Now it's not quite as popular. What is the value of an MBA today?

Just having an MBA doesn't mean anything by itself. You still have to push value. You still have to be an effective problem solver. There are no magic bullets with the certificate.

There was a guy at Stanford who argued that sometimes people will invest in activities just to show an employer that they are more productive, that they are a Type-A personality. One of his colleagues quipped jokingly that as soon as you get the admission to a top-tier school, don't attend. Just flash the MBA program to prospective employers to get past the screening process. Our faculty actively resists that kind of thinking. Here we believe in the pickling process.