Graeme’s

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The innovation slowdown IS a serious crisis

Posted by Graeme in Economics at 11:25 am on Friday, 4 May 2012

Rick’s latest post on the creativity crisis raises the possibility that the current slowdown in technological advance is merely a period of adjustment rather than a permanent slowdown. I have three reasons for remaining pessimistic.

  1. The slowdown is historically unprecedented, not just part of a cycle.
  2. The reasons for the slowdown are built into our economy and politics, so it cannot easily be reversed.
  3. Even if this is just a temporary phenomenon, the results could still be catastrophic.

Slowing technological advance is unprecedented

How far back do we have to go to find a comparable period of slow advance? I have already looked at the rapid advances made from 1930 to 1970, so I need to look at earlier periods of the same length. Some inventions are hard to attribute to a particular period because their development overlapped two or more (the helicopter, for example,) so just sticking to those I can easily verify as belonging to each period

1891 to 1930

Penicillin (the first antibiotic), Bakelite (the first synthetic plastic), the liquid fuelled rocket, controlled and powered aircraft, insulin, the vacuum diode and triode, tunable radio (earlier radio communication took the entire radio spectrum for one channel), the tank, the zip, the arc-welder, neon lighting, dirigible airships, the diesel engine, huge advances in domestic appliances (many of which are hard to attribute to one period).

1851 to 1890

The Bessemer furnace (mass production of steel), liquefaction of gases through regenerative cooling and other major advances in cooling technology, incandescent light bulbs, the telephone, petrol powered cars, pasteurisation, gramophones, radio transmission, the machine gun, modern steam turbine and dynamite.

1811 to 1850

Electric telegraph (single wire), postage stamp, revolver, mechanical computers (Babbage), photography, stethoscope, raincoat, electromagnet, electric motor and generator, anti-sepsis (although not accepted by medical profession for another few decades), marine screw propeller, stapler, vulcanised rubber, closed compression cooling (used in fridges and air-conditioners), fax machine, sonar.

1771 to 1810

Electric arc-light, steamship, electric cell (battery), gas lighting, Jacquard loom, power loom, tin can, lithographic printing, precision lathe, vaccination (smallpox), telegraph (wire per letter, short range), hot air balloon, bleach, spinning mule.

1731 to 1770

Flying shuttle, Arkwright’s spinning frame, sextant, leyden jar, lightening rod, carbonated water, four field crop rotation, Watt’s steam engine (separate condenser), systematic selective breeding of livestock.

1691 to 1730

Seed drill, mercury thermometer, steam engine.

Go back three centuries

With the last of the above, we have finally come to a period where advances are slow enough to compare to the current rate of progress. Nearly three hundred years ago, before the industrial revolution took hold and, at best, in the early years of the agricultural revolution, we had a similar low rate of big break-thoroughs. Even then, I cannot think of any inventions of the last forty years that have had an impact comparable with the three above. If we adjusted for the greater impact of each advance on a lower technological base, then we could probably go back a few more centuries.

The consequences of slow progress are likely to be similar to those of slow progress before the industrial revolution, which will be my final argument for pessimism.

The other conclusion I draw from the above list, is a response to another possibility raised by Rick, that we have not yet recognised the importance of major advances made in the last 42 years. Most of the advances listed above, in all of the many phases of industrial development, were recognised as important fairly quickly. It is possible that we may not recognise major advances for ten or twenty years, but forty years is just to long.

Slow progress is built in

The mechanisms that favour slow progress are now built in to our society.

There seems to be a consensus that big businesses favour efficiency and incremental advances, whereas smaller players look for disruptive advances that could potentially make then big. In an economy now dominated by the big players, regulation tends to favour them. Their importance and articulate lobbying gives them influence on regulation.

The greatest single regulatory problem is patent law, which has increasingly evolved to allow patenting of minor advances, over a much broader range of fields (e.g. the introduction of software patents and, in the US, business method patents). This, combined with patent thickets (lots of patents covering the same machinery, process of mathematics) together with cross-licensing makes it much harder for small companies and new entrants to challenge the giants.

Patents are not the only problem: a high regulatory burden imposes costs (legal departments and litigations, for example) which are proportionately greater for small businesses: there very large economies of scale in dealing with law and bureaucracy. The question of increased regulation really needs a separate post to deal with, so I will leave specifics, aside from patents for another day.

Big businesses also have the advantage of more government help: tax breaks or subsidies to open in a particular location (usually to create employment: but a 100 small businesses will do that more reliably than one big one), bailouts when they fail, and tweaks to regulation.

I do not believe that this will change without massive changes to the structure of the global economy, which are unlikely and may well be painful if attempted.

Even a temporary slowdown will a catastrophe

Assume that my arguments above are entirely wrong, and the slowdown is just a temporary period of adjustment.

Consider what the industrial and agricultural revolutions achieved. By accelerating the rate if progress to far higher than the rate of population growth, humanity achieved sustained improvements in standards of living. The industrial revolution was not uniformly better for everyone, but at least the last 10 years or so have seen progress for most: even in poor countries there is some access to modern medicine, transport and communications.

Fast progress proved Malthus wrong. Not only did the output of feed increase fast enough to support a rapidly increasing population, but improvements in technology simultaneously improved standards of living in other ways.

Resource limits were overcome by new technology: more efficient farming, food storage and transport, were the start. Fuel wood was replaced by coal which was supplemented by oil and a host of methods of generating electricity. Metals were improved by new alloys and processes for using previously impractical or unknown metals (e.g. aluminium and titanium as well as steel) as well as new materials (plastics, fibre glass, carbon fibre) which partially replaced both wood and many metals. Efficiency improvements means we use less of many materials (e.g. in miniaturised electronics.

At the moment we have slow technological advance, but those technologies are are still being increasingly widely used as developing countries catch up. The demand curve will move up without supply increasing, which will mean higher prices: specifically prices will move up faster than incomes in developed countries, and developing countries will never achieve the current standard of living enjoyed in developed countries, because the resources to do simply do not exist.

We have already seen some of the effects of this, most obviously in oil and food prices. Soon it will be everything. Economic development will become closer to a zero sum game.

Although there have been advances, where are the new materials that promised to reduce need for metals? Nuclear fusion as a power source, or even really cost effective ways of using the great fusion reactor in the sky — my favourite alternative energy source, ocean thermal energy (its actually good for the environment) does not even seem to be being developed any more. Is there any technology that can save us from rising energy and materials prices in the offing? If not, the future looks bleak.

Comments (1)

Comments(1)

Comment by The death of equity growth at 1:36 pm on 10 February 2013 at

[...] have been arguing for sometime that the last few decades have seen little new invention. I have recently noticed that the message seems to be getting through to the mainstream media (a [...]