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Posted at 1:03 PM ET, 01/31/2011

'The Great Stagnation,' Part III: Is innovation really slowing?

By Ezra Klein

rateofinnovations1.jpg

The key to all of Tyler Cowen's arguments in "The Great Stagnation" is that innovation -- or at least innovation that boosts the economy -- is slowing. The graph above is reproduced in his e-book, and it comes from work (pdf) done by Jonathan Huebner. It uses a subjective measure of innovation -- essentially, advances historians consider important -- and divides them by world population. According to this measure, Cowen is both right and wrong -- right that innovation is slowing, but wrong that it'll pick up again. Huebner thinks there are limits, and we're reaching them.

His measure is imperfect, and the argument is controversial. In particular, I'm not convinced that dividing by world population is a sensible thing to do. But plenty of smart people believe that innovation is slowing. Paul Krugman, for instance:

I live in a house with a late-50s-vintage kitchen, never remodelled. The nonself-defrosting refrigerator, and the gas range with its open pilot lights, are pretty depressing (anyone know a good contractor?) — but when all is said and done it is still a pretty functional kitchen. The 1957 owners didn’t have a microwave, and we have gone from black and white broadcasts of Sid Caesar to off-color humor on The Comedy Channel, but basically they lived pretty much the way we do.

Now turn the clock back another 39 years, to 1918 — and you are in a world in which a horse-drawn wagon delivered blocks of ice to your icebox, a world not only without TV but without mass media of any kind (regularly scheduled radio entertainment began only in 1920). And of course back in 1918 nearly half of Americans still lived on farms, most without electricity and many without running water. By any reasonable standard, the change in how America lived between 1918 and 1957 was immensely greater than the change between 1957 and the present.

I'm not very familiar with the literature on this topic. On a gut level, it feels wrong: Surely the age of the Internet can't be considered a desert for new ideas. But intuition isn't the same as evidence. So does anyone know this literature a little better?

By Ezra Klein  | January 31, 2011; 1:03 PM ET
 
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Comments

The problem is that the future path of innovation is inherently only vaguely knowable, if at all. If some genius comes up with a machine that can transmute any element into any other (as a science fiction-esque example chosen only for simplicity), the possibilities it would unlock for practically every other field of science could keep innovators busy cracking out new 'events' at a pace that would blow that chart away.

I haven't read the Huebner paper, but something tells me that his measure of innovation is a bit off. It may be that innovations are becoming less obvious, if no less productivity- or welfare-enhancing. The iPod (a virtually infinite leap over the Walkman) may be only one product, but a package of thousands of not-so-obvious innovations, whereas the internal combustion engine may have only represented (I don't know) dozens in its first iterations.

Posted by: TheodoreLittleton | January 31, 2011 1:40 PM | Report abuse

Besides dividing by population, I think another problem with the innovation measure is that it will suffer from primacy bias. It's hard to tell which recent innovations will turn out to be significant, but for older innovations we've already had time to see results. There may be many significant recent innovations even though, at present, we have an epistemic problem in determining which those are.

Posted by: jginsbu | January 31, 2011 1:44 PM | Report abuse

As a Kindle reader I can only say: So THAT's what that graph was supposed to look like.

Posted by: zimbar | January 31, 2011 2:07 PM | Report abuse

Have the changes in the last 50 years in this country matched the profoundness of the 50 before that? Hardly.

There are probably *more* ideas now, but they are generally more focused and specialized than before and as are smaller in effect.

It was also easier to 'do' things of scale. There weren't the laws and restrictions in place that we have today. Not necessarily a bad thing to have but it does slow down implementation of grand scale type changes.

And of course, upgrading something is always harder than building it the first time. Making the water system 'fail less often' isn't as sexy or grand a change as providing running water for the first time.

Posted by: rpixley220 | January 31, 2011 2:11 PM | Report abuse

In 1960, the overall infant mortality rate was 26 per 1,000 live births. Today it is about 7, even as maternal age has increased. Deaths from heart disease have decreased likewise, from 559 per 100,000 to 160 per 100,000, even as our population has aged. Men and women can have sex without being afraid they will get pregnant. Smoking was discovered to be a major health hazard, as were many other environmental exposures.

Healthcare is actually an area where there have been major innovations in many areas since 1957. And with the IT revolution we should actually be heading into a second massive revolution in health care, but sadly we have thus far been unable to adjust our healthcare system to use this new scientific/technical knowledge and tools (we need a 21st Century Flexner report).

Posted by: theorajones1 | January 31, 2011 2:24 PM | Report abuse

I think Krugman greatly discounts the advances of the last 50 years, probably because he lived through them and applied them gradually. I think this is a natural bias. I find it hard not to do it.

But it's a horribly unscientific way of measuring.

Innovations in medicine alone in the past 50 years have made profound differences for far more people than in the prior 50 years. Same for food production. For materials and manufacturing.

Also, it's easier to discount more abstract concepts like computing, but the effects of that ripple throughout everything we do. There is not a single industry that hasn't been transformed by computing.

I think if Krugman were placed in 1957, he'd suddenly realize how many advances he'd forgotten to consider.

It's easy to attach undue importance to easily identifiable products like planes and cars. It's also easy to forget that, after 1957, we did small things like send humans to the moon, discover the building blocks of life, nearly eradicate many diseases, feed more additional people than even existed at that time -- and finally build Dick Tracy's wristphone.

Posted by: dpurp | January 31, 2011 2:30 PM | Report abuse

The kitchen test doesn't work because innovation largely isn't happening for objects that are placed in the kitchen.

If I'm walking around and hear a song in a store that I like, my phone can listen to it, identify the song, and I can buy it then and there for $0.99. My phone can then tell me other songs which I'd like given that I like that song.

I can also put that song into Pandora and have it generate a series of free songs which are based on my liking that particular song.

While at that same store, I can check my bank account on my phone to make sure I have enough money on my debit card to make a purchase. While at my bank's site on my phone, I see a small balance on my credit card and decide to pay it off.

I see a product I'd like to buy, but I want to make sure I'm getting a good deal. I can put that product into my phone and find prices for that product at competing locations.

I can also read Ezra Klein's thoughts on innovation through my phone if there's a long checkout line. Maybe check Facebook and see what my friends are up to. I can also check emails and send quick responses to things which require my immediate attention.

When I make the purchase, I pull out my credit card, put it next to the card reader and the payment occurs. I can go online in the future and track my spending by store and type of purchase.

After shopping, I go back to my car. My car can sense the key, and so I can open the doors without even pressing a button. I can then enter my next destination into the car's GPS, and it will give me turn by turn instructions on how to get there. I plug my phone into the car and I have my whole library of music at my disposal. The car monitors my tire pressure so I can spot leaks or refill them if they're getting a bit low. If it starts to rain, the car senses the rain and starts the wipers automatically. If I'm involved in a crash, there's a massive array of safety features built into the car to protect me - but there are also other features which make it less likely to get into a crash at all (anti lock brakes, stability control, etc). If I do end up injured in the crash, medical technology is more advanced today and I have a better chance of surviving.

Now, maybe that list isn't as important as having a dishwasher or refridgerator or TV, but it's still real change since 1957. And all of those objects are much better today (try and find me a 23 year old guy who would trade his 50in Plasma TV and Xbox for a 13in black and white TV).

Innovation is awfully hard to measure, and it's hard to tell where we go from here. If you ask people like Ray Kurzweil, there's a tremendous amount of innovation coming soon, and much of it will be the result of computers which are more intelligent than human beings.

Posted by: justin84 | January 31, 2011 2:45 PM | Report abuse

the present age is a cornucopia of ideas... about the internet. full stop. Apps are nice, but they are not internal combustion, powered flight, or antibiotics. Automation, simulation and logistics tools have added value (see Krugman's other blog post about productivity gains, http://krugman.blogs.nytimes.com/2011/01/28/the-wal-mart-decade/ ). Krugman does mention the medical advances.

Posted by: bdballard | January 31, 2011 2:46 PM | Report abuse

How did they control for bias in that graph? (historians don't typically study very recent events and it is easier to identify very important innovations after a time delay.)

How does dividing by population normalize the data set? If two vaccines saved the same number of lives (as percent of world population) wouldn't you want them to have the same relative weight on your metric? For example, 5 vaccines that save the lives of 5% of population in the graph above is worth more to "innovation" than one vaccine that saves 5% of population that is developed at a later date.

Am I understanding this wrong? Again, I need to read the book and think/put numbers to the arguments properly.

@Chris_Gaun
chrisgaun@gmail.com

Posted by: chrisgaun | January 31, 2011 2:52 PM | Report abuse

Does not make sense...

- We have started to live without 'land line phones'.
- Without newspapers.
- More eBooks sellting on Amazon than physical books.
- More things are bought 'online' than visiting to shops.
- Difference between TV and Internet will be gone in next couple of years. Look at Google TV.
- You pay by your iPhone or other mobile device at Starbucks.
- Golden Gate Tolls and other Bay Area Bridge Tolls will be totally electronic in next few years saving Billions to CA State.
- You do surgeries without using hands, all robotic and your house is cleaned by Rambo.
- So many 'exo-planets' are discovered.
- Private parties are making as powerful rockets as like NASA used to send Apollo missions and Private Parties are forming companies for Space Tourism.

Where is there no change? Not believable. We are not looking where things have changed dramatically.

Posted by: umesh409 | January 31, 2011 2:53 PM | Report abuse

"and divides them by world population." !!

You're right Ezra, this is very wrong.

An idea, an understanding, is not like a bushel of wheat that must be split up and shared for many to enjoy it. An idea, an understanding, can be enjoyed by an unlimited number of people at zero additional marginal cost.

So of course it's the total amount of advancement in ideas/understanding that counts for the benefit of each individual person, not the ideas/understanding per person.

This is how it's put by the famous growth economist Paul Romer of Stanford:
As just one example, recall that the increasing returns to scale that is implied by nonrivalry leads to the failure of Adam Smith’s famous invisible hand result. The institutions of complete property rights and perfect competition that work so well in a world consisting solely of rival goods no longer deliver the optimal allocation of resources in a world containing ideas.

– Forthcoming American Economic Journal paper, page 8, at:

http://www.stanford.edu/~promer/Kaldor.pdf

And
"Think about the basic science that led to the discovery of the structure of DNA. There are some kinds of ideas where, once those ideas are uncovered, you'd like to make them as broadly available as possible, so everybody in the world can put them to good use. There we find it efficient to give those ideas away for free and encourage everybody to use them. If you're going to be giving things away for free, you're going to have to find some system to finance them, and that's where government support typically comes in...Because everybody can use the idea at the same time, there's no tragedy of the commons in the intellectual sphere. There's no problem of overuse or overgrazing or overfishing an idea. If you give an idea away for free, you don't get any of the problems when you try and give objects away for free. So the efficient thing for society is to offer really big rewards for some scientist who discovers an oral rehydration therapy. But then as soon as we discover it, we give the idea away for free to everybody throughout the world"

– 2001 interview with Reason magazine, at:

http://reason.com/archives/2001/12/01/post-scarcity-prophet

But Ezra, Cowen and gang are extreme libertarians. They are willing to have tremendous loss, suffering, and decreased growth in wealth, science, and medicine to avoid losing even a little bit of economic freedom that hardly anyone will even notice. Luckily, very few voters would agree with this philosophy, so Cowen and gang are forced to try to deceive voters to get them to support libertarian, or more libertarian policy. You have to always keep this in mind. This recent column by Cowen is just another attempt to use deception to get people to support less government.

Posted by: RichardHSerlin | January 31, 2011 2:54 PM | Report abuse

Now as far as TOTAL advancement of science and medicine. It depends how you measure it and think about it. By some – important – measures it's increasing exponentially. Here is an excellent Washington Post Op-Ed on this by famed inventor and scientist Ray Kurzweil:

http://www.washingtonpost.com/wp-dyn/content/article/2008/04/11/AR2008041103326.html

Make no mistake about it, there are tremendous advances that can occur over the next generation or sooner if we are willing to make abundant high return public investments in basic science and medicine, infrastructure, education, etc., nanobots that act as digital red blood cells, destroying all cancer cells before they can even form microscopic clumps, cheap limitless solar, controlling genes so we can eat as much as we want without getting fat, and much, much more, but a hardcore libertarian will throw all of this in the trash for billions of people to avoid losing even small bits of economic freedom that hardly anyone would even barely notice.

Posted by: RichardHSerlin | January 31, 2011 2:55 PM | Report abuse

I'm a big Krugman fan, but I think looking at the kitchen gives a somewhat slanted look at things.

Here's a modest example:

Weekend before last, my toddler went to a friend's birthday party. I used a camera that would fit in the palm of my hand to take dozens of still pictures, plus a bunch of video clips with audio. One evening last week, I sat down at the computer, edited the still pix, and burned the ones I liked, plus the video clips, to discs for us and the other parents of kids at the party. My kid's been watching it on his DVD player (the size of a smallish book) over and over again for the past several days. It's something he can operate skillfully, at the age of 3. Try doing any part of that back in 1957.

Oh, and the camera, the DVD player, and the laptop I did the photo editing and disc burning on, cost ~$450 combined, new - about what you'd have paid for a TV in nominal dollars (but definitely not inflation-adjusted money) in 1957.

We've had a bit of innovation lately. Just not as much in the kitchen as in other parts of our lives.

Posted by: rt42 | January 31, 2011 3:36 PM | Report abuse

going from no TV to TV: big change
going from old TV to internet TV: big woo

going from no snapshot camera to snapshot camera: big change
going from brownie camera to digital camera: little bit bigger woo

going from no pictures to laughing over pictures and funny memories about them: big change
going from laughing over pictures and funny memories about them to pristine photoshopped pictures that have had the life scrubbed out of them: not so great in my view.

I use all this modern stuff myself, all the time, but I find the continual waxing over their significance at best amusing. Especially the idea that a 3 year olds ability to learn about buttons and push them to effect is somehow revolutionary. 3 year olds have always done such stuff, just not with little DVD players.

Posted by: bdballard | January 31, 2011 5:15 PM | Report abuse

We're badly due for a revolution in transportation. We're almost 200 years from modern railroad, over 100 years from the automobile, 65 years from commercial jet ... I guess we'll start hearing more about commercial space flight. But, what about down on the ground? You'd think we'd find a way to render the "traffic jam" obsolete by now. You'd think crowded buses and subways and the concomittant delays would be old-fashioned. And air travel is as unpleasant as they come. Is high-speed rail all we really have to look forward to?

I want matter transport. I want "Beam me up, Scotty!"

Posted by: pbasso_khan | January 31, 2011 6:08 PM | Report abuse

The person above who talks about his phone being a real innovation makes me think that maybe most of the innovation has brought about within the idea of a business model or strategy, not in terms of necessity.
Krugman brings up a man delivering ice in 1890 and in 1957 the home having a refrigerator. I wouldn't compare using a phone to buy a song that you hear on the radio instantly, to the innovation of a refrigerator. No longer is the necessity the mother of invention. Most of the innovations effecting our daily lives have to do with companies finding new, innovative, ways to sell us things. Without a doubt there are other things that have made world better, but the innovations that help our daily lives are now just ways to make products easier to buy

Posted by: kobewarhol | January 31, 2011 8:17 PM | Report abuse

It's ridiculous to represent innovation over the last 50 years as merely improving upon already existing products.

Since the '50s, we have not merely made better cars and cameras. We have not merely invented Facebook. We have innovated in ways that would have seemed almost supernatural to those in the first half of the 20th century.

We have put humans on the moon. We have launched a rocket outside our solar system.

We have transplanted organs. We have artificially inseminated humans. We have cloned mammals.

We have created machines that can see the insides of our brain in real time.

We discovered the structure of DNA and have mapped the entire genomes of many organisms.

We have harnessed nuclear energy.

We have created environments 1 billionth of a degree above absolute zero.

We have discovered black holes. We have created a machine, the large hadron collider, that may answer the most fundamental questions in physics.

From Wikipedia:

"questions concerning the basic laws governing the interactions and forces among the elementary objects, the deep structure of space and time, especially regarding the intersection of quantum mechanics and general relativity, where current theories and knowledge are unclear or break down altogether."

Not to mention nano-materials, quantum computing and genetic engineering.

This is probably the most innovative period in the history of civilization.

Oh, and the cameras are nice.

Posted by: dpurp | January 31, 2011 8:45 PM | Report abuse

Yes, innovation is slowing. The experiments that lead to the discovery of the electron, for example, would cost about $30,000 in today's money, including equipment and the time of a Ph.D. physicist. The construction of the Large Hadron Collidor will cost more than $12 billion, mostly to reveal a fleeting glimps of a Higg's boson, which will vanish almost instantly. 400,000 times the cost, for a lot less return. Likewise, a new fabrication plant for a company like Intel or Samsung now costs on the order of $5 billion, and their annual research budgets are similar or higher. We are still advancing, but only through enormous effort and energy. The difficulty of the problems is scaling faster than the amount of manpower, money, energy, and resources we can throw at them.

One interesting related factoid: over the last 40 years, world economic growth has been about 5%. About 2% of that growth was population growth, and resource utilization growth has been about 4%. So basically, every year, 2% more people use 2% more stuff per person 1% more efficiently. Only the latter can continue indefinitely, and unfortunately, it appears to be slowing.

Posted by: brickcha | January 31, 2011 9:23 PM | Report abuse

@brickcha, you're comparing apples to apple carts. There was not just one single physicist studying atoms. There were thousands. There is only one LHC.

It's valid to question whether any scientific endeavor is worth the investment, especially at the the levels of theory rather than application, but the LHC is more on par with financing the Apollo program or Columbus's voyage.

Meanwhile, there are other groundbreaking experiments being done all over the world all the time that are as relatively inexpensive as the early atomic experiments.

Not to mention that, while the Higgs boson will vanish almost instantly, we've never been able to determine precisely where an electron is and is going at any given moment. Fat lot of good that discovery did!

Posted by: dpurp | January 31, 2011 10:53 PM | Report abuse

It looks to me like this plot is actually measuring historians per capita.

Posted by: zosima | February 1, 2011 12:18 AM | Report abuse

Since the 1980s, the cost of sequencing one person's DNA has gone from $30B down to $6000.

The cost of a gigabyte of storage has gone from tens of thousands of dollars down to pennies.

The cost of some number of transistors on a circuit is cut in half every eighteen months.

The cost of a given amount of solar energy has been falling by 50% about every six months since the 1950s.

3D printing is following the same exponentially falling cost curve.

The era of cheap sensors, cheap networking, and cheap data storage is ushering in what Tim O'Reilly calls "the era of Big Data."

Over the last few years, "cloud computing" has gone from a hype-driven business buzzword to a practical set of tools and principles that lets anyone rent vast amounts of computing power for short jobs. Mobile computing is also maturing rapidly.

The amount of music on my hard drive right now would, if copied to vinyl, weighed about 300 lbs. The books on my hard drive would have weighed about a ton in dead tree format.

We've gone from "three broadcast networks" to "500 channels and nothing on" to "watch whatever whenever, all the way down to some stranger's home videos."

I don't think we're in danger of innovation stagnation. Which is good, because rising populations + declining resources + stagnating innovation = oh crap.

Posted by: darth_schmoo | February 1, 2011 9:27 AM | Report abuse

I'm afraid dpurp confuses cool or profound stuff with important stuff. There may be important stuff that will be enabled by the list of cool and profound things, but as of yet, I don't think so. And either sort of progress would seem like magic or the supernatural to those living a few generations before.

Posted by: bdballard | February 1, 2011 9:30 AM | Report abuse

I am 23 years old and I honestly cannot imagine going back and living in 1957. I'm sorry, but I seriously don't know that I would function in day-to-day life without the Internet and cell phones. That sounds silly, but no sillier than Paul Krugman imagining how hard and how different life must have been in the time before he was born.

Posted by: madjoy | February 1, 2011 11:14 AM | Report abuse

@bdballard, I'm not confusing it at all. The important stuff is easy to see and has been commented on by many others. Therefore, I was focusing on the profound because others seemed to say we've only managed to make existing products better.

And, yes, some of the profound (and cool) will lead to important stuff, and some may not. But all important stuff emanates from profound discoveries.

I absolutely agree that either sort of progress is magical and wonderful. I look forward to more.

Posted by: dpurp | February 1, 2011 9:28 PM | Report abuse

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