Wednesday, July 23, 2014

The end of innovation?

An American scientist, Jan Vijg, from the Einstein College of Medecine of New York, revived the discussion on science which has traditionally opposed optimism and pessimism. In a book called "the American technological challenge",  he has elaborated a detailed graph, reproduced recently in a journal  which compiles a list of 300 macro-inventions from 500 B.C. until 2010 and which demonstrates that innovation reached a peak in the 70s then declined in following decades. 

The author of the research has, nevertheless pointed out that it is not technological decline but a slow down of the pace of innovation. This trajectory may have some commonality with other evolved civilizations, such as China under the Song dynasty or Islam in the Middle Age. One of the causes may be saturation. According to a study by Jones and Azoulay from MIT, an average R&D worker was seven times more productive in 1950 as one today in terms of contribution to innovation and growth, probably because he could focus on frontier research rather than keeping up with scientific developments in his own field - and this why there more people working in R&D than in the past. 

However, the main obstacles to innovation are cultural factors. Relative welfare improvements lead to a lesser aversion to risk, and the institutions tend to slowdown, rather than stimulating technological development.  Hence the question : what can be else invented? Are we really condemned to give the best of our intelligence and creativity to make small improvements to inventions made by others in the past? True, we cannot ignore the great transformation of the Seventies- the music, the desire to change the world, the civil rights and so on - and the big technological push with the invention of the personal computer (1975), the cellular phone (1978), the walkman (1979) and even the first project of Internet by Tim Berners-Lee (1980).  

R. Gordon supports the idea that big innovation is behind us:  in a recent article, he suggests that the process of economic growth as it happened over the last 250 years will not persist forever. The sources of economic progress may derive from other factors such as education, energy gains or demography rather than innovations.

Are pessimists such as Vijg and Gordon right? The Economist argues that there are strong arguments for a certain optimism. The first one is that there is a time lag of 5 to 15 years between the investments in technology and the improvements in productivity levels. Therefore, the most modern technologies are actually not reflected in current statistics (as Solow used to say about information and communication technologies which are everywhere but in productivity statistics). The second argument is that new technological developments are hindered by rigid institutions which block the potential for growth and productivity.

The debate is quite complex as it involves both historical and spatial dimensions. If they are more innovations, it does not mean that they will have a greater impact today. Moreover, globalization of technology has resulted in stagnant incomes and declining employment in the US and Europe. As Marx and Schumpeter explained, the crisis of capitalism generates a tendency toward technological progress as part of a process of 'creative destruction' but it does not mean that innovation alone will be enough to boost growth and may coexist with a prolonged period of stagnation. 

Just a final note. A few centuries ago, Niccolo Macchiavelli wrote: 

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. For the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order, this lukewarmness arising partly from fear of their adversaries … and partly from the incredulity of mankind, who do not truly believe in anything new until they have had actual experience of it.

Thursday, July 17, 2014

Noam Chomsky (2014) "How to Ruin an Economy; Some Simple Ways"

Noam Chomsky (2014) "How to Ruin an Economy; Some Simple Ways"

We should think about how to lay the foundations of a good society  based on market economy coupled with social justice starting from Adam Smith, Marx, Keynes and Galbraith.  Unfortunately, governments have not drawn the right lessons from the global crisis pursuing self interest and selfish policies without caring for the poor and unemployed.