[P2P-F] Fwd: Stanford scholars say big ideas are getting harder to find

[Michel Bauwens]

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From: albert lundquist <agltucs1 at gmail.com>


SEPTEMBER 14, 2017Stanford scholars say big ideas are getting harder to find

Research from Stanford economists finds that productivity has not matched
the exponential increases in research development, suggesting the next big
idea may be harder to formulate.

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BY MAY WONG

Modern-day inventors – even those in the league of Steve Jobs – will have a
tough time measuring up to the productivity of the Thomas Edisons of the
past.
[image: Illustration of woman with new ideas]
<https://s3-us-west-1.amazonaws.com/stanford.ucomm.newsms.media/wp-content/uploads/2017/09/13100211/ideas_shutterstock.jpg>

Stanford economists say tremendous continual increases in research and
development will be needed to sustain even today’s low rate of economic
growth.(Image credit: Shutterstock)

That’s because big ideas are getting harder and harder to find, and
innovations have become increasingly massive and costly endeavors,
according to new research from economists at the Stanford Institute for
Economic Policy Research <http://siepr.stanford.edu/>.

As a result, tremendous continual increases in research and development
will be needed to sustain even today’s low rate of economic growth.

Nicholas Bloom <http://siepr.stanford.edu/scholars/nicholas-bloom>, a SIEPR
senior fellow and co-author of a paper
<http://www.nber.org/papers/w23782>released
this week by the National Bureau of Economic Research, contends that so
many game-changing inventions have appeared since World War II that it’s
become increasingly difficult to come up with the next big idea.

“The thought now of somebody inventing something as revolutionary as the
locomotive on their own is inconceivable,” Bloom said.

“It’s certainly true if you go back one or two hundred years, like when
Edison invented the light bulb,” he said. “It’s a massive piece of
technology and one guy basically invented it. But while we think of Steve
Jobs and the iPhone, it was a team of dozens of people who created the
iPhone.”

To better understand the nation’s sluggish economic growth, Bloom and his
three co-authors – SIEPR senior fellow Chad Jones
<http://siepr.stanford.edu/scholars/chad-jones>, Stanford doctoral
candidate Michael Webb, and MIT professor John Van Reenen – examined
research productivity at an aggregate national level as well as within
three swaths of industry: technology, medical research and agriculture. For
another measure, they also analyzed research efforts at publicly traded
firms.

Their paper follows a common economic concept that economic growth comes
from people creating ideas. In other words, when you have more researchers
producing more ideas, you get more economic growth.

But Bloom and his team find a not-so-rosy imbalance. While research efforts
are rising substantially, research productivity – or the ideas being
produced per researcher – is declining sharply.

So the reason the U.S. economy has even grown at all is because steep
increases in research and development have more than offset the decline in
research productivity, the study found.

Specifically, the number of Americans engaged in R&D has jumped by more
than twentyfold since 1930 while their collective productivity has dropped
by a factor of 41.

“It’s getting harder and harder to make new ideas, and the economy is more
or less compensating for that,” Bloom said. “The only way we’ve been able
to roughly maintain growth is to throw more and more scientists at it.”

The paper spelled it out bluntly in numbers: “The economy has to double its
research efforts every 13 years just to maintain the same overall rate of
economic growth.”
New data, new perspective

Bloom initiated this research a year ago, inspired to dig deeper after
speaking on a panel at the SIEPR economic summit that discussed “Is the
Productivity Slowdown for Real?”
<https://www.youtube.com/watch?v=uRSZr0cbHyM> He admits the paper – and its
somewhat pessimistic analysis – has dampened his previous, more optimistic
stance.

“I’ve changed my mind,” Bloom said. “Pretty much all mainstream economists
have become rather depressed about productivity growth.”

At the 2016 SIEPR Summit, Bloom was more positive about the nation’s
productivity, saying its declining rate was only a temporary effect of the
financial crisis of 2008. He even caricatured ways of looking at U.S.
productivity levels and contended the up-and-down swings between 1950 and
2010 did not necessarily signal a long-running trend of slow productivity
growth.

A year ago, Bloom recalled, “I thought we were recovering from a huge
global recession and we’re about to turn around.”

Now, his perspective takes into account new insights that research
productivity – one of the underlying components of economic growth – has
been clearly dropping for decades.

“This paper says productivity growth is slowing down because ideas are
getting harder to find,” Bloom said.

While the study builds on the earlier work of Jones and others on R&D, the
new paper also weaves a tight connection between empirical data on what’s
happening in the real world and growth models.

The robust finding of declining idea productivity has implications for
future economic research, the paper concluded. The standard assumption in
growth models has historically been a constant rate of productivity, and
“we believe the empirical work we’ve presented speaks clearly against this
assumption,” it states.
Moore’s Law and beyond

Everywhere they looked, the researchers said they found clear evidence of
how exponential investments in R&D have masked the decline in productivity.
The tech industry’s signature guidepost, Moore’s Law, which marked its 52nd
year in April, is a prime example.

Introduced in 1965 by Gordon Moore, the co-founder of computer chip giant
Intel, the theorem postulates that the density of transistors on an
integrated circuit would double roughly every two years, doubling computing
power.

Moore’s Law has certainly played out – the computing power on a chip today
is remarkable compared to even a decade ago – but the study found that the
research effort behind the chip innovations rose by a factor of 78 since
1971.

Put another way, the number of researchers required today to maintain that
innovative pace is more than 75 times larger than the number that was
required in the early 1970s.

“The constant exponential growth implied by Moore’s Law has been achieved
only by a staggering increase in the amount of resources devoted to pushing
the frontier forward,” the paper stated.

Other industries also exhibited falloffs in idea productivity.

For instance, to measure productivity in agriculture, the study’s
co-authors used crop yields of corn, soybeans, wheat and cotton and
compared them against research expenditures directed at improving yields,
including cross-breeding, bioengineering, crop protection and maintenance.

The average yields across all four crops roughly doubled between 1960 and
2015. But to achieve those gains, the amount of research expended during
that period rose “tremendously” – anywhere from a threefold to a
more-than-25-fold increase, depending on the crop and specific research
measure.

On average, research productivity in agriculture fell by about 4 to 6
percent per year, the study found.

A similar pattern of greater input but less output followed in medical
research. The study’s authors analyzed R&D spending on new, federally
approved drugs against life expectancy rates as a gauge of productivity.
They also examined decreases in mortality rates of cancer patients against
medical research publications and clinical trials.

The empirical findings on breast and heart cancer suggest that at least in
some areas, “it may get easier to find new ideas at first before getting
harder,” the paper stated.

Turning its focus to publicly traded companies, the study found a fraction
of firms where research productivity – as measured by growth in sales,
market capitalization, employment and revenue-per-worker productivity –
grew decade-over-decade since 1980. But overall, more than 85 percent of
the firms showed steady, rapid declines in productivity while their
spending in R&D rose.

The analysis found research productivity for firms fell, on average, about
10 percent per year. It would take 15 times more researchers today than it
did 30 years ago to produce the same rate of economic growth.

Policy Research: (650) 724-0614, agorlick at stanford.edu



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