Bernanke on the death of innovation

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Cross-posted from Kate Mackenzie at FTAlphaville.

Many factors affect the development of the economy, notably among them a nation’s economic and political institutions, but over long periods probably the most important factor is the pace of scientific and technological progress.

That’s Ben Bernanke addressing a graduating class at Bard College at Simon’s Rock, Massachusetts, on Saturday. He goes on to say that not everyone believes this advancement is going to continue at such a great pace.

Yes, he is talking about Robert Gordon and Tyler Cowen, and their arguments that much of the low-hanging fruit has been plucked and we face a lower-growth future, as evidenced by the incremental advancements of recent years. Here’s Bernanke again:

This provocative assessment of our economic future has attracted plenty of attention among economists and others as well. Does it make sense? Here’s one way to think more concretely about the argument that the pessimists are making: Fifty years ago, in 1963, I was a nine-year-old growing up in a middle-class home in a small town in South Carolina. As a way of getting a handle on the recent pace of economic change, it’s interesting to ask how my family’s everyday life back then differed from that of a typical family today.

Well, if I think about it, I could quickly come up with the Internet, cellphones, and microwave ovens as important conveniences that most of your families have today that my family lacked 50 years ago. Health care has improved some since I was young; indeed, life expectancy at birth in the United States has risen from 70 years in 1963 to 78 years today, although some of this improvement is probably due to better nutrition and generally higher levels of income rather than advances in medicine alone.

Nevertheless, though my memory may be selective, it doesn’t seem to me that the differences in daily life between then and now are all that large. Heating, air conditioning, cooking, and sanitation in my childhood were not all that different from today. We had a dishwasher, a washing machine, and a dryer. My family owned a comfortable car with air conditioning and a radio, and the experience of commercial flight was much like today but without the long security lines. For entertainment, we did not have the Internet or video games, as I mentioned, but we had plenty of books, radio, musical recordings, and a color TV (although, I must acknowledge, the colors were garish and there were many fewer channels to choose from).

(To which we say, dishwasher, huh? Aircon car? Bernanke seems to have had a more comfortable childhood in the US of the 1960s than some of us AVers had elsewhere in the western world in the 1980s… although we also note this US housing survey from 1985, which shows that 41 per cent of homes owned a dishwasher.)

Moving along, Bernanke’s next point is that this same comparison doesn’t hold going back another generation:

The comparison of the world of 1963 with that of today suggests quite substantial but perhaps not transformative economic change since then. But now let’s run this thought experiment back another 50 years, to 1913 (the year the Federal Reserve was created by the Congress, by the way), and compare how my grandparents and your great-grandparents lived with how my family lived in 1963.

Life in 1913 was simply much harder for most Americans than it would be later in the century. Many people worked long hours at dangerous, dirty, and exhausting jobs–up to 60 hours per week in manufacturing, for example, and even more in agriculture. Housework involved a great deal of drudgery; refrigerators, freezers, vacuum cleaners, electric stoves, and washing machines were not in general use, which should not be terribly surprising since most urban households, and virtually all rural households, were not yet wired for electricity.

In the entertainment sphere, Americans did not yet have access to commercial radio broadcasts and movies would be silent for another decade and a half. Some people had telephones, but no long-distance service was available. In transportation, in 1913 Henry Ford was just beginning the mass production of the Model T automobile, railroads were powered by steam, and regular commercial air travel was quite a few years away. Importantly, life expectancy at birth in 1913 was only 53 years, reflecting not only the state of medical science at the time–infection-fighting antibiotics and vaccines for many deadly diseases would not be developed for several more decades–but also deficiencies in sanitation and nutrition. This was quite a different world than the one in which I grew up in 1963 or in which we live today.

So, more amazing and useful developments took place early in the 20th century than late in the 20th century. Doesn’t that just underscore the arguments of Gordon and Cowen?

You can probably tell where this is going.

Bernanke reckons a Keynes quote is instructive here (our emphasis):

First, innovation, almost by definition, involves ideas that no one has yet had, which means that forecasts of future technological change can be, and often are, wildly wrong. A safe prediction, I think, is that human innovation and creativity will continue; it is part of our very nature. Another prediction, just as safe, is that people will nevertheless continue to forecast the end of innovation. The famous British economist John Maynard Keynes observed as much in the midst of the Great Depression more than 80 years ago. He wrote then, “We are suffering just now from a bad attack of economic pessimism. It is common to hear people say that the epoch of enormous economic progress which characterised the 19th century is over; that the rapid improvement in the standard of life is now going to slow down.”3 Sound familiar?

He goes on to list a bunch of things which will be familiar to readers of FT AV and particularly Izzy’s posts — namely robotscollaboration, improved medical diagnosis and surgery, and clean technology.

It’s a speech to graduating young ‘uns, so it’s hard to criticise him for adopting an optimistic tone. Plus, the speech isn’t that long. But we have a few quibbles.

Firstly, while some of the really significant advancements Bernanke speaks of in the first half of the 20th century were genuine technology breakthroughs — vaccines, washing machines and the like — many others (cars, electricity, and all the household labour-saving electrical devices) either partly or largely depended upon the distribution and harnessing of energy.

Secondly, we’re not completely convinced that clean-energy technologies, at least ones such as wave power, can be lumped in with developments in, say, robotics and communications. Changes in energy are just harder: the barriers are higher; infrastructure is an issue; path dependency is a problem. Bernanke’s surely heard of this. Again, it’s a speech to a bunch of clever fledgeling adults. If he was going to get detailed, he could have cited the Moore’s Law-like improvement in solar panel PV to boost the case for clean-energy technology that has both surprised in its rapid advancement, and had real-world effects beyond most long-term forecasts.

Furthermore, if technology is becoming resource-like in its “curse” potential, not all of us are necessarily better off for its advancement.

Without wanting to dampen the kids’ enthusiasm for their bright futures, the exciting future of innovation might depend on just where they end up in it.

Houses and Holes
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Comments

  1. Prof. John Jewkes’ book “The Sources of Invention” should have become a well-known classic.

    HERE is the 1958 article that the author later expanded into a book:

    http://www.economicthinking.org/technology/sourcesofinvention.html

    It describes how almost all of the most significant scientific breakthroughs have been made by independent geniuses who remained outside the establishment and indeed, had to overcome numerous obstacles presented by the establishment.

    Government funding of science, at considerable cost to taxpayers, has had very little to show by comparison, and has led down a slippery slope to political agendas governing science, just as it did for decades in the former USSR.

    The questions we should be asking now, are firstly, just how many Albert Einsteins have we been deprived of as a result of science being turned into a bureaucratic monolith by government funding; and how much more damage to humanity is politicized science going to do if we do not halt the bandwagon at this point.

    Science is now being selected as a career by starry-eyed youngsters motivated not by scientific curiosity and optimism for the future, but by Utopian “change the world” ideals for which the vehicle of science has been politically hijacked.

    • Dare I say that Science is also bordering on a propaganda mechanism.

      On one level, “its’ an indisputable fact, with scientific evidence that…”. Won’t get into any specific examples, it may cause a torrent of abuse.

      Another is a Government stating, because of us the invention of ____ happened. Or something like the Soviet Socialist Party sent a dog to space first.

      • drsmithyMEMBER

        Dare I say that Science is also bordering on a propaganda mechanism.
        Anything can be a “propaganda mechanism” in the right hands.

        On one level, “its’ an indisputable fact, with scientific evidence that…”. Won’t get into any specific examples, it may cause a torrent of abuse.
        What _scientists_ say that ?

        Another is a Government stating, because of us the invention of ____ happened.
        How is this any different to someone saying “because of $INVENTOR the invention of ____ happened” ?

        Or something like the Soviet Socialist Party sent a dog to space first.
        And the US Government put a man on the moon first (admittedly long before its massive shift away from “socialist” policy, but still). What’s your point ?

    • Maybe that is credible but the transistor (thence semiconductors) was developed by Bell Labs (not an independent genius though some of the people on the team believed they were) and the semiconductor is the technology that has transformed home and businesses in several ways.

    • Hmmmm… an interesting idea. I only partially agree. The biggest breakthrough ideas can often come from outside the orthodoxy but this is only enabled because of the work of the orthodoxy. The “mavericks” can leverage of that but aren’t then cobstrained by it and often have other complementary skill sets that haven’t been previously applied.

      The orthodoxy delivers constant slow growth which is still substantial progress. It just doesn’t look like a breakthrough. There are plenty of avenues of scientific that are just too resource intensive for the individual maverick. An eye on China will increasingly demonstrate this into the future, as Russia did in the past.

      But I agree with you that a lot of the bureaucracy doesn’t help.

      • drsmithyMEMBER

        But I agree with you that a lot of the bureaucracy doesn’t help.
        Most of the “bureaucracy” in Government-funded science comes from the attitudes of people like Phil who think only science that can be guaranteed to turn a profit should be pursued.

        For a real-life example, see CSIRO for the last decade or two.

      • Pfh007’s point below is good too, that it still requires the maverick’s ideas to be adopted and financed and commercialised.

        Look at the role of the so called “robber barons”, for example. Attacked from all sides by vested interests as they brought the cost of such things as rail travel and car travel within the reach of ever more of the masses. So they made truckloads of money in the process? Would we rather everyone stayed poor and un-free and a few rentiers stayed at the top of the social pile forever?

      • To put it another way: why would we prefer to pay out most of our incomes in “economic rents” of various kinds just to give ourselves the satisfaction that no “robber barons” are getting rich out of providing us actual “consumer surplus”?

        But this will be WAAAAY over the heads of the statists and environmentalists who make up “the establishment” today. Was it Mikhail Bakhunin who prophesied “woe to the great mass of uneducated ones” when a certain class of blind leadership came to power?

      • drsmithyMEMBER

        Look at the role of the so called “robber barons”, for example. Attacked from all sides by vested interests as they brought the cost of such things as rail travel and car travel within the reach of ever more of the masses. So they made truckloads of money in the process? Would we rather everyone stayed poor and un-free and a few rentiers stayed at the top of the social pile forever?
        Sounds like a false dilemma fallacy to me.

      • “….Sounds like a false dilemma fallacy to me….”

        Sounds like you don’t understand. Where is your example in the world, of an under-developed nation that is therefore not consuming resources etc, that does not have any competitive businesses providing goods and services at lower and lower real cost, and that does not also have an oligarchic “1%”?

        There is far more money in “economic rent” than there is in competing in free markets. And the economic rent tends to impoverish the many to enrich the few, whereas the competitive free market process lifts the many in the process of still enriching the few.

        It is often the case that the people who comprise political movements with the most strongly held opinions, are afflicted with total blindness to this, so they cannot see the role of “rent seeking” in the very policies they espouse, all the while they claim to care about ordinary people.

      • drsmithyMEMBER

        Sounds like you don’t understand. Where is your example in the world, of an under-developed nation that is therefore not consuming resources etc, that does not have any competitive businesses providing goods and services at lower and lower real cost, and that does not also have an oligarchic “1%”?
        Why would I need one ?

        There is far more money in “economic rent” than there is in competing in free markets.
        Indeed. Hence the reason the wealthy and powerful try as hard as they can to move into rentier positions and why laws should be in place to make it as difficult as possible for them to do so, rather than just making the world a free-for-all.

        It is often the case that the people who comprise political movements with the most strongly held opinions, are afflicted with total blindness to this, so they cannot see the role of “rent seeking” in the very policies they espouse, all the while they claim to care about ordinary people.
        A moment of introspection ?

      • Quote one post I have made, ever, that supports politics that lead to successful rent-seeking. I am the Joe McCarthy of rent-seekers. I don’t know what you think you are. Perhaps the “Baptist” to the rent-seeking “bootleggers”?

        There is far more money in “economic rent” than there is in competing in free markets.

        “Indeed. Hence the reason the wealthy and powerful try as hard as they can to move into rentier positions and why laws should be in place to make it as difficult as possible for them to do so, rather than just making the world a free-for-all.”

        So you’d share my belief that laws guaranteeing freedom of entry of competitors to all markets, are “good laws” then?

        And you’d share my admiration for Houston as a model local economy? Do you see the connection I am making between the presence or absence of “economic rent” and “consumer surplus” in urban land?

      • drsmithyMEMBER

        Quote one post I have made, ever, that supports politics that lead to successful rent-seeking.
        You sure seem to advocate a lot of Libertarian regulation-free politics, which inevitably massively favour the wealthy and lead to oligopolies, monopolies, disempowered employees, decreased social mobility and greater inequality.

        So you’d share my belief that laws guaranteeing freedom of entry of competitors to all markets, are “good laws” then?
        That would be rather dependent on what they actually said.

        And you’d share my admiration for Houston as a model local economy?
        I haven’t lived or visited there and thus can’t comment.

      • Economic libertarianism “….massively favours the wealthy and leads to oligopolies, monopolies, disempowered employees, decreased social mobility and greater inequality…..”

        So economic libertarianism and individual “rags to riches” opportunity was not the reason the young US economy attracted immigrants and grew so rapidly? And economic libertarianism did not result in rapid reductions in the cost of steel, aluminium, petrol, transport by rail and road, etc as innovative new competitors entered the markets? You reckon planning and regulation of markets has ever anything like matched this?

        Where do you stand on competition and freedom to enter the market for urban public passengers? Do you understand that this would actually reverse the current rent-riddled situation and create genuine consumer surplus in “public” transport again?

        If your knowledge is limited to “where you have personally been and observed” then you shouldn’t be taking such opinionated positions.

      • drsmithyMEMBER

        So economic libertarianism and individual “rags to riches” opportunity was not the reason the young US economy attracted immigrants and grew so rapidly? And economic libertarianism did not result in rapid reductions in the cost of steel, aluminium, petrol, transport by rail and road, etc as innovative new competitors entered the markets? You reckon planning and regulation of markets has ever anything like matched this?
        More logical fallacies. Can you make a post without them ?

        Where do you stand on competition and freedom to enter the market for urban public passengers? Do you understand that this would actually reverse the current rent-riddled situation and create genuine consumer surplus in “public” transport again?
        WTF are you rambling about now ?

        If your knowledge is limited to “where you have personally been and observed” then you shouldn’t be taking such opinionated positions.
        There’s more important things than statistics. The numbers for Houston might look nice to an economist, but it could be awful for the average person to live in. I don’t know, I haven’t been there, so I’m not going to make a comment about whether good numbers are “worth it”.

        Plenty of people actually familiar with living in Houston on this blog have disagreed with your opinion it’s nirvana.

    • drsmithyMEMBER

      Government funding of science, at considerable cost to taxpayers, has had very little to show by comparison, […]
      Rubbish. The bulk of science isn’t the “eureka”, it’s the long grind of turning brilliant insight into practical solution.

      A point that the link you gave seems to drive home repeatedly (if perhaps unintentionally).

      The questions we should be asking now, are firstly, just how many Albert Einsteins have we been deprived of as a result of science being turned into a bureaucratic monolith by government funding;
      This is called begging the question.

      However, I’ll go with “none”.

      and how much more damage to humanity is politicized science going to do if we do not halt the bandwagon at this point.
      Thus leaving the question of how much damage to humanity will be done when the primary driver of science is how much money can be made treating impotence and baldness.

      Science is now being selected as a career by starry-eyed youngsters motivated not by scientific curiosity and optimism for the future, but by Utopian “change the world” ideals […]
      Perhaps you can elaborate on the difference between being motivated by curiosity and optimism and trying to make the world a better place ?

      • Simple. Compare what Carnegie, Standard Oil, Henry Ford and the Levitt Brothers did for humanity compared to what the USSR accomplished.

      • drsmithyMEMBER

        Simple. Compare what Carnegie, Standard Oil, Henry Ford and the Levitt Brothers did for humanity compared to what the USSR accomplished.
        Another false dilemma fallacy.

        Thought it is kind of cute you think “Carnegie, Standard Oil, Henry Ford and the Levitt Brothers” were motivated by “curiosity and optimism”.

      • Someone was motivated by curiosity and optimism, and “the capitalists” were convinced enough by it, that they took the scientific progress “commercial” and thereby “democratised” it.

        Many people sadly lack knowledge of the history of competing political systems and the intellectual debates that lay behind them going back decades. Communism had its appeal in a claimed GREATER EFFICIENCY than “capitalism”, so that there would allegedly be GREATER PLENTY for all. Even as late as the 1950’s, Kruschev was boasting that the USSR would “bury the west economically”.

        It is not entirely true to say that masses of people who were appealed to by Communism at one time, wanted equality regardless if it meant a lower standard of living for virtually all. But it certainly is true of the small minority of people who still cling to sympathy for Communism now that it is known that it does NOT “out-produce” free market capitalism.

        But our history lesson would not be complete without a reference to the effect of the “planned economy” experiment on the environment and resource consumption. It is sad that the ire of the environmental movement is so focused on free market capitalism, when this not only out-produced the “planned economy” and brought all manner of “consumer surplus” to all within its purvey; but it left the “planned economy” for dead in improvement in “environmental indicators” and “resource intensivity”.

        I will post a bit of reference material down the bottom of the thread so as not to make this comment too long and skinny up here.

      • drsmithyMEMBER

        It is not entirely true to say that masses of people who were appealed to by Communism at one time, wanted equality regardless if it meant a lower standard of living for virtually all. But it certainly is true of the small minority of people who still cling to sympathy for Communism now that it is known that it does NOT “out-produce” free market capitalism.
        Why are we talking about Communism ?

      • Seeing you don’t understand why I am talking about Communism: I am talking about it in the context of the belief that central planning and intentions to make the world a better place, will out-perform free market capitalism as the essential political structure – on ANY measure.

        I am talking about it because it is an entirely appropriate illustration of a missed lesson of history by contemporary over-empowered central planners in our “mixed” economies. These contemporary planners are achieving very similar outcomes in terms of “the very opposite of their alleged intentions”. And rent-seeking vested interests are laughing all the way to the bank.

      • drsmithyMEMBER

        Seeing you don’t understand why I am talking about Communism: I am talking about it in the context of the belief that central planning and intentions to make the world a better place, will out-perform free market capitalism as the essential political structure – on ANY measure.
        So… It’s either Libertarian Anarchy or Communism then ? No good or benefit has ever come from people organised into groups to help each other ?

        Not police, education, healthcare, public housing, food stamps ?

        I am talking about it because it is an entirely appropriate illustration of a missed lesson of history by contemporary over-empowered central planners in our “mixed” economies.
        And you equate “mixed economies” – that is, I can only assume, economies with some level of economic regulation and publicly-funded services – with “Communism” ?

        This is why you extremists are so scary.

      • “….No good or benefit has ever come from people organised into groups to help each other ?….”

        And no people have ever voluntarily organised into groups to help each other far more effectively than Nanny, Big Brother State can? Like “the traditional family” that neo-Marxists so intentionally despise? And “church”? Blasphemy! Charity? Demeaning and tainted with association with the proselytisation of self-help by the bodies offering it – in contrast to the “dignity” of “entitlement”.

        Police and defence – yep, State does it. Education? Vouchers. Healthcare? Tax deductible health insurance and negative taxation subsidies of health insurance for persons of inadequate income. Public housing? Unnecessary if governments quit making housing criminally expensive. Food stamps? A bureaucratically cost-ineffective monstrosity. Essential foodstuffs are cheap thanks to the absence of economic rent built into the cost (in contrast to government-enabled rent-enabling in housing) and charities routinely hand it out on a daily basis.

        I did NOT equate “mixed economies” with Communism, I equated the unintended consequences of central planning as far as it exists in mixed economies, with the unintended consequences of central planning in Communism, and I certainly equate the ignorance of the central planners under both systems. Hayek was correct about the kind of mind that would be attracted to central planning. I have not yet encountered one single urban planner who had a clue about the basic reason his city exists; its need for primary income sources and what primary income sources even are; and the way “location” in the urban economy is “sorted” by “requirement for space relative to income” in each sector. “Central planning” is always all about the beauty of something that exists only in the planners head without regard to the constraints of reality.

        BTW I am all for market-enabling and market-following infrastructure planning, as described in “Making Room for a Planet Full of Cities” by Angel, Civco and Parent. It used to be done this way, back when economic land rent was an issue fresher in experts minds.

      • drsmithyMEMBER

        And no people have ever voluntarily organised into groups to help each other far more effectively than Nanny, Big Brother State can?
        Never even vaguely suggested that.

        Like “the traditional family” that neo-Marxists so intentionally despise? And “church”? Blasphemy! Charity? Demeaning and tainted with association with the proselytisation of self-help by the bodies offering it – in contrast to the “dignity” of “entitlement”.
        How the fuck is this even vaguely relevant ? Are you physically incapable of going for more than a few posts without shooting off on some tangent about marxists, or communists, or environmentalists ? Is it some strange manifestation of Tourette Syndrome ?

        The world is not a black and white, either/or proposition, despite your apparent inability to grasp this reality. It is filled with nuance. Noticing that services like healthcare and education have been best provided by publicly funded services is not an endorsement of communism. Identifying that private industry seeks to achieve and exploit monopoly is not an argument against all private industry.

        There is a middle ground between the unregulated free-for-all you want, and the communist, centrally planned bureacratic straw man you accuse anyone who vaguely suggests there might be some things the free market does poorly wants.

    • And the private sector has an “enormous” contribution to fundamental sciences, is that you would like to say when attacking government funded science?

      It is ridiculous to confuse bad government with what should be a responsibility of the whole society – the fundamental scientific development is not possible in private sector. Anything which is not able to be commercialized quickly is not of any private interest. But without fundamental sciences none of the greatest inventions and discoveries would have been achieved.

      It is better to see the problem and to attack any bad governance, which can be public as well as private, for example any private monopoly and big corporation could be as bad as a bad government, and not to dismissed the public funding for fundamental sciences which are always in the benefit of all people, not only private interests. Science and knowledge are the most social collective goods and their private monopoly exploitation sometimes is the real problem and constraint for further scientific development and progress.

      It is not of a surprise why today there are less inventions, but ever growing parasitic financial sector.

      • I am with you on the growing parasitism and rent-seeking that is killing the mixed economy today.

        I am also with you on governments taking the lead in certain areas of science – such as nukes and space programs. But it is possible to lurch far too far in the other direction, and I believe we have done so, and therefore scientific progress and its commercialisation is being hindered.

        Let’s look at the example of “driverless cars”. Government has not done a THING to help in this; all government involvement in personal transport “progress”, at the cost of ongoing budgets in the billions, has been in the direction of a “great leap backwards” to 19th-century technology – a private sector technology at that time, BTW.

        And what position will any politicians, bureaucrats, and public employees and their unions be taking on driverless cars right now? “In favour”? (Collapses with laughter, rolls around on floor slapping thigh).

      • drsmithyMEMBER

        But it is possible to lurch far too far in the other direction, and I believe we have done so, and therefore scientific progress and its commercialisation is being hindered.
        For example ?

        Let’s look at the example of “driverless cars”. Government has not done a THING to help in this;
        Why should they ? Weren’t you ranting five minutes ago about how any attempts at “central planning” are doomed to abject failure ? Or is it OK for “central planning” to help things you approve of ?

      • Let’s look at the example of “driverless cars”. Government has not done a THING to help in this

        Governments drove satellite technology.

        Governments initiative developed GPS technology for Werner von Brauns rockets, also driven by a central Euorpean government.

        Silicon Valley, and it’s two original big name sakes, Bell Labs and Hewlett industries, were living big on government largese during the cold war.

        I’d say Government has done a great deal to help this, and in fact the private sectors final iterations of contribution are quite minor, and will most most likely be beneficiaries of wealth that is not comensurate with their contribution to forming it.

        However, i do not oppose that latter assertion. Government does, and should contribute IMO to infrasutrcture that the private sector can leverage off.

      • When I defend government funding it is the funding for universities, where the intellectual power is, not in government administration. Isn’t that obvious?

        Driverless cars are not a government job to create or improve or what so ever. The universities have to have government funding without any central planning or determination of the field. This is a job for the academics, not for government. Only the funds are from the government.

      • My point about driverless cars is that the central “transport” planners in government will be implacably opposed to these and will seek to ban them on whatever possible pretext. Just as private para-transport was banned back in the 1930’s because it would have put the streetcars out of business and taken more riders closer to where they wanted to go, quicker, and at lower cost.

        The various bans on nuclear energy are another massive example of anti-science biases by watermelon activists and bureaucratic empires. And wait and see what happens to nascent private-sector space programs.

        Rusty, the spin-off benefits to the private sector, of the government’s efforts in “defence”, are great stuff because “defence” is something government exists for. But it is possible to have no such spin-offs even from defence, if the politics and culture are inimical.

      • drsmithyMEMBER

        My point about driverless cars is that the central “transport” planners in government will be implacably opposed to these and will seek to ban them on whatever possible pretext.
        You’re like a case study in right-wing paranoid delusion. Not that there’s any shortage of that particularly phenomenon.

        If the boogeyman “central planners” wanted to ban cars, they would have been banned decades ago.

        From the position you’re taking, the difference between a contemporary car, and a “self-driving” car, is almost entirely irrelevant.

        The various bans on nuclear energy are another massive example of anti-science biases by watermelon activists and bureaucratic empires. And wait and see what happens to nascent private-sector space programs.
        Because it’s not like _public safety_ might play any part in regulating nuclear power and putting stuff into space right ?

    • “…just how many Albert Einsteins have we been deprived of as a result of science being turned into a bureaucratic monolith by government funding.”

      Ooohh pleeeease spare me the croc tears, what do you think NASA is and just look at all the positive spin-offs from that goliath over the years…???

    • It describes how almost all of the most significant scientific breakthroughs have been made by independent geniuses who remained outside the establishment and indeed, had to overcome numerous obstacles presented by the establishment.

      I would then suggest it’s conclusions are not sound.

      I would suggest he’s pointing out the final iteration of development, and indicating it is all we need.

      Virtually every scientific breakthrough from 1946 to around 1978 came out of rapid harnessing of mental rigour during WWII.

      So what is more of a breakthrough? Microsfot Windows? or the GUI at Xerox labs in the late 60’s (still with government influence), or Alan Turing at Bletchley Park? (complete government influence).

      Also behind every Gates, Job or Turing who are individuals of exception, are swathes of scientists and innovators aggregated in a critical mass, which government tends to socialise the cost of.

      Likewise, whilst Carnegie did reform steel making when not sending in Pinkerton’s to massacre his own employees, he was able to find himself cheap access to relatively educated workers, capable of enacting instruction.

      U.S. Steel would never have lifted off the ground in the Belgian Congo and it’s prevailing (lack of) soft infrastructure.

      • “Defence” is something government exists FOR. “Science” and technology and its commercialisation, are not. Incentives to the private sector, yes. Bureaucratic management – are you KIDDING?????

        Even in Defence: were not all the best items of US military hardware the result of competitive tenders from the private sector?

        Carnegie himself does not deserve those slanders. He disciplined the managers responsible.

        Your point about the Congo and its lack of “soft infrastructure” is something that agrees with what I am saying about a culture that celebrates opportunity and progress and despises rent-seeking. You might get a steel mill set up in Congo but there will not be the “dialectics” of mutual benefit and systemic advance that exists from such things in free market economies. Some tinpot dictator will rake off 10% and the manufacturer will get cheap labour with no rights at all. And this will never change, in contrast to capitalism blended with Protestant ethics. This is not a fringe nutter position; it is academically authoritative.

      • “Defence” is something government exists FOR. “Science” and technology and its commercialisation, are not. Incentives to the private sector, yes. Bureaucratic management – are you KIDDING?????

        Well I think you’re making a false dichotomy there. Meddling bureaucracy is bad for innovation I agree, but they are likely to appear regardless of who writes the cheques. Virtually all of Australian business, operating as part of a duopoly is thoroughly plagued by this.

        The main difference is a government is explicitly protected from its fumbles, business has to capture the regulatory process to implicitly protect itself.

        What I would observe as evident is small but exceptional innovators have few barriers to entry and infrastructure to leverage off.

        Now someone like Steven Keen fits that bill, and he’s sucking on the government teat.

        Even in Defence: were not all the best items of US military hardware the result of competitive tenders from the private sector?

        Looking at U.S military hardware in WWII, compared to its peers, I’d say no. And now with qualitative advantage, it is a result of pentagon influence.

        Carnegie himself does not deserve those slanders. He disciplined the managers responsible.

        He personally authorised pinkerton’s to take that sort of action against strikers. It ain’t fair play.

        And I say this as someone who often commends Carnegie, and feel he had more positives than negatives.

        But still, the choice to slaughter working men to preserve a dividend is still the sign of a sociopath at least, and a psychpath at worst.

        Your point about the Congo and its lack of “soft infrastructure” is something that agrees with what I am saying about a culture that celebrates opportunity and progress and despises rent-seeking.

        And the major factor in such a successful outcome is governance.

        You might get a steel mill set up in Congo but there will not be the “dialectics” of mutual benefit and systemic advance that exists from such things in free market economies. Some tinpot dictator will rake off 10% and the manufacturer will get cheap labour with no rights at all. And this will never change, in contrast to capitalism blended with Protestant ethics. This is not a fringe nutter position; it is academically authoritative.

        I agree, but this culture of protestant ethics does not exist secular to governance. it’s a cultural legacy embedded in governance.

  2. A lack of innovation is not really the issue – the failure to apply the many many innovations and ideas currently available and easily accessible on the web is the problem.

    The commodity that is most rare are people who can explain the benefits of an innovation and have the charisma and thick skin to prevail over the determined rent seeker and those seduced by the rent seekers propaganda.

    The increasing resistance to open discussion of problems free from partisan rancour is a symptom of the problem.

    Good policy is not an exercise in tribal politics.

    The footy and footy clubs are the appropriate domain for exercising our ancient tribal reflexes.

    • +1,000,000 for that, Pfh007

      The economist Everett Hagen made a remarkable study, in the book “On the Theory of Social Change; How Economic Growth Begins”, of the introducers of industrial innovations in late 18th-century England, a critical period of economic growth. Almost all, he found, were of “dissenting” religions; that is, Protestants who nevertheless rejected the established Church of England. Hagen attempted to explain this correlation, all the more remarkable because of the numerical minority of the dissenters, in terms of the kind of mind that would both dissent religiously, and be inventive.

      But of course human history had not lacked such minds; what was lacking was a host culture in which they flourish rather than get suppressed. We ignore the role of the prevailing culture in our civilisation, at our peril.

      Here is a beaut quote from M. Stanton Evans, “The Theme is Freedom”:

      “…….The difficulties with the pagan mindset appear quite plainly in the case of Galileo, forced to recant his observation that the earth revolved about the sun, rather than the other way around. This is cited in the usual histories as an instance of Christian obscurantism, since the recantation came at the hands of the Roman Curia. Neglected in the standard treatment, however, is that the church authorities of the day were defending Aristotle’s ‘Physics’ and ‘On the Heavens’ – the principal sources of geocentric theory in the West – while Galileo invoked the authority of St. Augustine in his rebuttal.

      The hostility of pagan animism to ideas of systematic science is further evident in the modern epoch – most notably in disputes about environmental questions. The extreme environmentalists, as has been seen, are essentially neopagan, and their attitudes of nature worship result in hostility to science and economic progress – enforced by ever more rigorous compulsions from the state.

      The more traditional outlook of the West, grounded in the biblical idea of man’s dominion over nature, is hospitable both to new technology and economic freedom. It is Christianity, not paganism, that is congenial to Western science……”

      A classic example to my mind, is the “rigorous compulsions from the State”, along with massive wastage of public money, rent-seeking, and “unintended consequences”; of policies aimed at “saving the planet” by way of great leaps backwards in transport modes and urban form – when technological progress and rapid commercialisation of technological solutions is the obvious real solution to anyone with a true grounding in science and free markets. It is ironic that so many consequences of so-called “enlightenment” are in fact a descent into unreason and neo-religious absolutism.

      Dr Arnold of Rugby is quoted by Matt Ridley in “The Rational Optimist” as saying, on seeing the first steam train, “I rejoice to see it, and think feudalism is gone forever”. It is odd that minds were so much clearer once upon a time, about simple connections like those between mobility and democratic freedom and the end of the dominance of the rentier class.

  3. One of the reason for the lack of innovation IMHO is the spread of a highly pernicious form of ‘managerialism’ which openly discourages any form of independent thinking.

    It will often cover its nads in this area with glossy posters touting words like ‘innovation’ or ‘entrepreneurialism’ or whatever the key word of the day is, but you can be 100% sure that whenever you see these the nearest innovation will have been quietly ushered out the door stage left, usually with a question mark over its capacity to ‘align with strategic values’ or ’embody corporate behaviours’ or sometimes just ‘be a team player’

    Then once you go beyond the culture of most workplaces there is the simple fact that the crowding out of the economies of the western world by the finance sector has left lots of companies which might otherwise be fairly innovative in a position where they focus on percentage outcomes which will first and foremost lead to returns to the financial sector.

    Then at a more localised level in any given larger company you get those with technical and geuine innovation skills usually at the lower end of the rung and as they rise in seniority the focus becomes more ‘managerial’ as they become acultured to the bullshit of the select few or whatever form the myth of organisational politics takes.

    Real innovation is held to ransom. Any technician, or someone with a specialised skill will find it far more worth their while to sign up for an MBA or diploma of accounting or other forms of bullshit than to try and be innovative.

    • Schumpeter actually predicted, in “Capitalism, Socialism and Democracy”, that “capitalism” could become so “bureaucratised” and hence a stagnant failure, that its takeover by the State could be near-seamless. Not that any advantage comes about as a result.

      This is why he argued so strongly in favour of “creative destruction”.

  4. mine-otour in a china shop

    The ABS produces an excellent data set on innovation performance which is now harmonised with other countries so benchmarking can be carried out.

    http://www.abs.gov.au/AUSSTATS/[email protected]/DetailsPage/8158.02010-11?OpenDocument

    Not only does the survey focus on product innovation but it also focuses on process innovation and other types of innovation. Also the dataset includes data on barriers, costs and benefits of innovation to Australian businesses.

    This is an important dataset given the end of houses and holes, and the focus on innovation-driven productivity.

  5. Not sure I agree:
    A product matures when the product does everything the market expects it to (or in some cases limits it to) but that does not mean that it has reached its final form.

    Take for instance Cell phones. Back in 2003 there was very little perceived value in 3G/4G because the phone had stalled as a voice/SMS tool. Blackberry had a niche doing mobile corporate email but Nokia owned 50% of the market doing very good phones. The only real innovation was technically superior, I remember one Phillips phone that I had which would last about 30 days on one charge (naturally excluding call time). At this point nobody could really innovate because the product delivery channels were controlled by the service providers. These guys wanted the most profitable slice of everything (remember when you had to buy ringtones, only download music from the service provider…naturally for $$$)
    The lack of innovation was not because the industry had forgotten how to innovate but rather because the distribution channels were controlled (some might say by rent seekers) they limited the features that were allowed on a phone.

    Well along came Apple iPhone and the rest is history, suddenly the format for mobile data / mobile browsing was understood by all, the future of the phone had been decided by outsiders (Jobs/Ivvy). The interesting thing is that suddenly 3G and 4G mobile broadband data had a purpose and a whole period of technical innovation was born. Samsung was quick to see the value and equally quick to execute so Samsung became the sword that Nokia fell upon.

    At the moment we are again at a cross roads for mobile data. There are products coming out that basically expect the user to have a separate iPad (or similar) so the actual comms phone thingy is shrinking again. There is also the opposite school that believes Voice is just an application for a Pad, so we have 4G Pads, with Bluetooth headset support and full voice recognition phone function support.

    Suddenly the somewhat dead end technology of voice recognition is once again a hot bed of innovation. Everyone needs to learn/relearn Hidden-Markov-models and other voice recognition methodologies….So in my mind Technology innovation is about the timely execution of projects that for some reason resonate with the populace (define the zeitgeist if you like)

    • drsmithyMEMBER

      I am still waiting for one of the major telcos to start selling pooled-date mobile accounts to consumers.

      When you have a smartphone, 3G/4G tablet, a 3G/4G hotspot and maybe a SIM in your laptop, it’s ridiculous (well, from the customer perspective) to need separate accounts and data allowances for each of them.

      • As China-bob said:

        “….along came Apple iPhone and the rest is history….”

        Funny how quick these things happen when there are no barriers to them and indeed no central planners planning them or mandating them…….

        Funny how the argument that “the participants in a free market must be regulated, otherwise they won’t voluntarily provide buyers of their goods with safety measures such as air-bags, anti-lock brakes, etc”, taken to its extreme, gives consumers the Lada and the Trabant.

        I bet a similarly heavily-planned and regulated telecommunications market would still be insisting everyone uses phone boxes – which make about as much sense as insisting everyone use trains.

      • drsmithyMEMBER

        Funny how quick these things happen when there are no barriers to them and indeed no central planners planning them or mandating them…….
        Actually there was one significant barrier for the iPhone that has reared its head more than once since, and that’s data usage.

        Apple had to enter exclusivity arrangements with AT&T (a VERY unusual move for them) to be able to get the unlimited data plans for the iPhone that made it useful.

        Funny how the argument that “the participants in a free market must be regulated, otherwise they won’t voluntarily provide buyers of their goods with safety measures such as air-bags, anti-lock brakes, etc”, taken to its extreme, gives consumers the Lada and the Trabant.
        And the argument taken the other way leads to things like the Ford Pinto.

        I bet a similarly heavily-planned and regulated telecommunications market would still be insisting everyone uses phone boxes – which make about as much sense as insisting everyone use trains.
        I see you’re off in Libertarian Opposites World again.

        Here in reality, iPhones in the USA were initially tied exclusively to one provider, then locked in to contracts to specific providers. Then the “unlimited” data plans were either eliminated or made only available with phones and contracts locked to specific providers.

        This subscription model remains typical in the USA for most phones.

        Meanwhile, in those awful and oppressive “communist” countries, regulations against monopolies require phones to be unlocked at any time on request, if not preventing carrier locking outright. They also act to prevent putative charges against customers calling “across network” – ie: between different providers – and have finally started to begin controlling the utter rort that is “roaming”.

        Customers are far, far better off telecoms-wise in Australia, New Zealand, or most Euro countries, than they are in the USA, *precisely* because of extensive regulations in those countries against the type of behaviour their relatively unregulated USA counterparts engage in to screw their customers.

    • drsmithyMEMBER

      Well along came Apple iPhone and the rest is history, […]
      Also worth noting is that in Japan, the iPhone wasn’t particularly revolutionary, as phones there had been doing pretty much everything it did for years already.

      • The first iPhone like device that I ever held in my hands was developed by Intel about 1999/2000 time frame (yes the PC chip maker). It had a biggish screen and supported full motion video (MPeg2 from memory) naturally it incorporated full MP3 music functionality and many PC type functions.

        At the time the market just yawned and moved on to hyping the newest Nokia N series phone. The Intel offering was widely criticized for being completely impractical because the processor /screen used so much power that even a big battery would need to be re-charged at least daily. (At the time a typical cell phone would achieve 7 to 10 days connect with maybe 8 hours talk time)

        Today nobody would even flinch at the concept of needing to recharge their latest smartphone daily, yet exactly this was a big enough deal that Intel exited the phone chipset market and cheaply sold various parts of their phone business off, while closing the rest down.

      • drsmithyMEMBER

        My point was more that it was not so much the iPhone’s functionality that made it “revolutionary”, it was the unlimited data plan Apple managed to wrangle out of AT&T to go with it.

        So much so, that IIRC back in the day there were people buying iPhones to get the unlimited data plans for their other phones.

        Or to put it another way, it wasn’t the iPhone itself that drove the smartphone revolution [in the West], it was the effect it had on how mobile data was priced. Earlier phones were not so much limited by their raw functionality, but by how much of that functionality was practical when you were paying dollars per kilobyte to use it.

  6. Reference material supporting my history lesson above:

    Blacksmith Institute: “The World’s Worst Polluted Places”
    Elwood Carlson and Mikhail S. Bernstam: “Population and Resources Under the Socialist Economic System”
    Marshall Goldman: “The Spoils of Progress: Environmental Pollution in the Soviet Union”
    Ivan Volgyes: “Environmental Deterioration in the Soviet Union and Eastern Europe”
    Murray Feshbach and Alfred Friendly: “Ecocide in the USSR: Health and Nature under Siege”
    Philip Pryde: “Environmental Resources and Constraints in the Former Soviet Republics”
    Paul Josephson: “Environmental Justice and Sustainability in the Former Soviet Union”
    Walter Lacqueur: “The Dream That Failed: Reflections on the Soviet Union”

    David Horowitz quotes Feshbach and Friendly thus:

    “……In the name of progress, the Soviets devastated the environment to a degree unknown in other industrial states. More than 70% of the Soviet atmosphere was polluted with five times the permissible limit of toxic chemicals, and thousands of square miles of the Soviet land mass was poisoned by radiation. Thirty percent of all Soviet foods contained hazardous pesticides and six million acres of productive farmland were lost to erosion. More than 130 nuclear explosions had been detonated in European Russia for geophysical investigations to create underground pressure in oil and gas fields, or just to move earth for building dams. The Aral Sea, the world’s largest inland body of water, was dried up as the result of a misguided plan to irrigate a desert. Soviet industry operated under no controls and the accidental spillage of oil into the country’s eco-systems took place at the rate of nearly a million barrels a day…….”

    Mikhail S. BERNSTAM: “Comparative Trends In Resource Use and Pollution In Market and Socialist Economies”, is a chapter in “The State Of Humanity”, ed. Julian SIMON
    Not online, VERY unfortunately.

    It is discussed in the following essays:

    National Centre For Policy Analysis: “Progressive Environmentalism: A Pro-Human, Pro-Science, Pro-Free Enterprise Agenda For Change”

    “……With the opening of the communist countries to the Western media, we have been treated to a litany of environmental horror stories from behind the iron curtain. Mikhail Bernstam has shown that these are not isolated cases of misdirected policies. Higher levels of pollution are inherent in all socialist economies. Because they are so inefficient, socialist economies necessarily use more resources and emit more pollutants than market economies to produce a given amount of goods and services……”

    http://www.ncpa.org/studies/s162/s162b.html

    Jo KWONG; “Environment And Free Trade”

    “…..Perhaps the biggest reason for environmental gains in Mexico from freer trade, however, would result from increased economic prosperity. To some environmentalists, this seems backwards. Many argue against trade because it encourages industrialization, which in turn, is blamed for pollution. Yet the experience of Western developed countries is just the opposite. Over the long term, emissions eventually fall, even as economic growth continues to increase. Several years ago, Hoover research fellow Mikhail Bernstam detailed what he calls “the environmental split of the 1970s and 1980s”–a divergence between consumption and pollution involving Western market economies and the socialist world. He found that resource use and discharges began to decline rapidly in those nations with competitive markets, even as economic growth, continued. In contrast, during the same two decades, consumption and environmental disruption were rapidly increasing in the USSR and European socialist countries even though their economies slowed down and eventually stagnated.
    Bernstam’s conclusions are borne out by other studies as well……”

    http://www.thefreemanonline.org/columns/environment-and-free-trade/

    Jane S. SHAW: “Environmental Protection: The New Socialism”

    “……most people don’t know that economic growth and environmental protection are closely and positively linked. Economists are well aware of this. A study by Gene Grossman and Alan Krueger of Princeton University suggests that at low levels of income, economic growth puts initial stress on the environment, but after a certain level of wealth is reached the environment begins to improve. They indicated, for example, air pollution begins to decline when per capita income reaches between $4,000 and $5,000 (in 1985 dollars).
    Another indication of this link is the affluence of environmentalists. For example, members of environmental organizations tend to be among the more affluent Americans. A typical reader of Sierra, the magazine of the Sierra Club, earns twice the average American income.
    In other words, as people become more affluent, they become more interested in protecting environmental amenities. That doesn’t in itself eliminate pollution, which will continue as long as the air and water are, to some extent, “free goods.” But in a system based on private property rights, several factors encourage people to limit pollution…….”

    http://feetest.aristotle.net/publications/the-freeman/article.asp?aid=3312&print_view=true

    Richard L. STROUP and Jane S. SHAW: “An Environment Without Property Rights”

    “When Eastern Europe began to open up in the late 1980s, one of the great shocks was the severity of its environmental problems. Journalists reported on skies full of smoke from lignite and soft coal, children kept inside for much of the winter because of unsafe air, and horses that had to be moved away from the worst areas after a few years or they would die.
    Many of the environmental ills reflected an abysmally low level of technology. Old, polluting factories of the kinds that are dim memories in the United States were the mainstay of socialist industry. Smelly, sluggish automobiles polluted the roads.
    Energy waste was tremendous. Their own statistics showed that socialist economies were using more than three times as much steel and nearly three times as much energy per unit of output than market economies.1 One cannot look about in Warsaw or Moscow, Budapest or Zagreb, Krakow or Sarajevo, wrote economist W. W. Rostow in 1991, without knowing that this part of the world is caught up in a technological time warp.
    Not everyone realized it at the time, but the state of the environment was directly connected to the absence of property rights in the Soviet system. The authorities had refused to allow most resources to be privately owned. Most market exchanges were criminal acts, and entrepreneurship of most kinds was declared to be criminal behavior. Production was centrally planned, with land and other resources owned by the state, not individuals.
    Although there were many repressive acts in the former Soviet Union and the Eastern European nations, the absence of property rights, along with the absence of the markets that result from the exchange of property rights, was enough to devastate the environment.
    To understand why, it is helpful to look at the reasons why private property rights protect the environment. There are several:……”

    http://www.independent.org/publications/article.asp?id=196

    Warren T. BROOKES: “How Government Turns the Learning Curve From Green To Brown”

    “…..Tragically, we seem to need many reminders of the essential source of our greatness as a nation — namely liberty, and all the economic rights that go with it: property, mobility, innovation, individual expression, the pursuit of truth both scientific as well as spiritual.
    We tend to take these rights and the market economy they have generated so much for granted, we are always in danger of losing them. Even as it watched the collapse of the socialist planned economies of Eastern Europe, Washington was deeply in the grip of the most advanced case of regulatory fever I have ever seen in that city, as Republicans tried to outdo Democrats in demonstrating their concern that free markets are destroying the environment — and threatening our health and safety…..
    “……Eastern Europe is filthy today not because of too much technology, but of entirely too little; not because of too much economic growth, but entirely too little; not because of too few controls, but far too many. Its factories are not merely decades, but generations out of date. The older the equipment the higher the pollution; the cruder the products the higher the waste………”

    http://www.americanexperiment.org/publications/1991/19910418brookes.php

    • drsmithyMEMBER

      If anyone were advocating emulating the USSR, you might have had a point.

      Presumably you are aware of similarly catastrophic environmental damage that has happened out in the “free world”. Exxon Valdez and Deepwater Horizon, for example.

      • “…..similarly catastrophic environmental damage….”

        Not half missing the whole point. Imagine an entire system that was Exxon Valdez and Deepwater Horizon, every day, every year.

        Isolated incidents are unreasonable to expect to eliminate entirely, and are a justifiable cost within a massively beneficial system, without which the lost benefits to humanity would be orders of magnitude greater than the harm done by isolated incidents. The one system tends to self-correct. What car manufacturer with competitors really wants to get the reputation that a Pinto will get them, or will willfully repeat the mistake? Same goes for the reputation that an Exxon Valdez or a Deepwater Horizon will get them. The other whole system tends to self-worsen, and all the people prosecuted and sentenced tended to be the protesters and whistleblowers.

      • drsmithyMEMBER

        Not half missing the whole point. Imagine an entire system that was Exxon Valdez and Deepwater Horizon, every day, every year.
        When it’s being run without restraint or consequence by the kind of selfish, greedy psychopaths you and your ilk idolise, it’s not hard to do.

  7. Bernanke is almost funny in his simpleton stupidity.

    Lack of innovation? Technological change has continued to accelerate over the past 100 years, as can be illustrated by the ever increasing pace of technology penetration.

    WSJ chart on penetration of a technology http://bit.ly/12R1AUA

    • That is an extremely important point.

      It is interesting how free market developments in the free world, eventually make things so cheap and ubiquitious that people in oligopoly-crippled, backward-culture countries can take them up and leapfrog straight over decades of intermediate development. Like cellphone uptake in countries where only a privileged few ever had a landline.

      It is a great pity there isn’t a free market equivalent for water and waste infrastructure. Yet.

      • drsmithyMEMBER

        It is a great pity there isn’t a free market equivalent for water and waste infrastructure. Yet.
        Yep, there’d be nothing better for neighbourhoods of poor people than to have their clean water stop and toilets start backing up because they haven’t paid their bills.

  8. ..many other [advances] (cars, electricity, and all the household labour-saving electrical devices) either partly or largely depended upon the distribution and harnessing of energy.

    This is probably the most profound point in HnH’s comments.

    We will still have a lot of energy for quite a while, but as we wave goodbye to the era of cheap energy, the /form/ of innovation in the future will become quite different to what we are used to.