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Innovation Shortfall, Low Hanging Fruit, and the Frontiers of Knowledge

January 24, 2011

Tyler Cowen has a new ebook coming out this week. It’s called the Great Stagnation.  I’m eager to read it, but based on Tyler’s own description, it appears he echoes some claims Peter Thiel has been making about the lack of innovation we’ve seen since the early 70s. For Thiel’s take here’s a TED talk on the topic and a WSJ interview. iPhones and laptops are palpable, so people tend to doubt these arguments. After all the unseen–what hasn’t happened–is difficult to adduce. But back in 2009 Michael Mandel pointed to some telltale signs:

The Age of Innovation?

Cowen explains why median wages in the U.S. have been stagnating since the 70s:

I’m also persuaded by the median income numbers because they are supported by related measurements of other magnitudes. For example, another way to study economic growth is to look not at median income but at national income, gdp, or gross domestic product, the total production of goods and services.  Charles I. Jones, an economist at Stanford University, has “disassembled” American economic growth into component parts, such as increases in capital investment, increases in work hours, increases in research and development, and other factors. Looking at 1950–1993, he found that 80 percent of the growth from that period came from the application of previously discovered ideas, combined with heavy additional investment in education and research, in a manner that cannot be easily repeated for the future. In other words, we’ve been riding off the past.

I’d like to add to Cowen’s argument. An economist named Benjamin Jones at Northwestern University looked back over the last 100 years and delved into some interesting data sets on Nobel Prizes, patent filings, and almanac entries. He collected data on the age at which an inventor brings about his first discovery, the average age of a scientist’s greatest accomplishment, and the productivity lifespan of innovators and scientists.

Here are some facts worth considering from the Jones research, that I believe supports the Thiel-Cowen thesis that technological progress has not been proceding apace:

  • Innovators today are older than they used to be. Over the last century, the mean age at greatest achievement for both Nobel Prize winners and great tech inventors rose by about 6 years.
  • The mean age at which innovators launch their first inventions has increased by 8 years over the course of the century, rising from a mean age of about 23 in 1900 to approx 31 in the year 2000.
  • Despite the later and later start, there has been no compensating shift in the productivity of innovators beyond middle age, meaning the late start has truncated careers. We do not see any rise in innovating among 50 and 60 year olds, although people are now more productive in their 40s.
  • His data suggests innovation potential is highest approx between the ages of 27 and 42. But the peak has shifted from about age 32 in 1900 to 40 by end of century.
  • He estimates a 30 percent decline in life-cycle innovation potential over the 20th century.
  • Death of the renaissance inventor: specialization has increased in patent filing. More and more people are working in teams that require a greater division of intellectual labor. And fewer and fewer inventors are making jumps from one patent category to another.

Big takeaway: “The shorter the period that innovators spend innovating, the less their output as individuals over their lifetime. If innovation is central to technological progress, then forces that reduce the length of active innovative careers will reduce the rate of technological progress. This effect will be particularly strong if innovators do their best work when they are young.”

These facts ought to give us pause. Jones postulates that the main reason we see an age shift is because the frontiers of knowledge are farther and farther away. The shoulders of giants are higher. The low fruit has been taken. Because of how complex and specialized our knowledge has become, Jones says the young must spend more and more years training and acquiring knowledge to reach the cutting edge.

Now it may be that the “burden of knowledge” is heavier than it used to be.  But my own take is that we shouldn’t confuse the accumulation of credential crud for the difficulty of reaching the frontiers of knowledge. On the macro scale, we often cite the Mancur Olson thesis that special interests sap the dynamism of economic growth over time. I believe the Jones data and Cowen’s arguments present further evidence supporting the Olson story.  For instance, why should we believe PhD programs are designed to efficiently move students from ignorance to the frontier of knowledge as quickly as possible? Academics are not mainly truth-seekers. They’re incentivized to pursue other aims such as pleasing their advisors, their tenure review panel, or a grant making body. These aims do not coincide with discovering new and useful knowledge. Secondly, we can go back further. A lot of education from K-12 to college core requirements is a waste of time. How much of this knowledge is relevant to future work making discoveries? If anything, Jones should suggest we try to make education more efficient.

But I digress. In all this discussion, Cardwell’s Law looms in the background. No country stays technologically superior forever. As yesterday’s innovators becomes today’s vested interests, stagnation follows. There are reasons for that. All of these arguments–Thiel’s, Cowen’s, Jones’s–suggest we may need a thousand nations sooner than we think. We will soon find not the singularity, but the stagnation is near.

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28 Comments
  1. January 24, 2011 7:50 am

    Shouldn’t the increasing number of researchers counter this effect, at least to some extent?

    Michael Kremer has a fun paper on the link between population and innovation, “Population Growth and Technological Change: One Million B.C. to 1990”.

    • January 26, 2011 7:06 pm

      > Shouldn’t the increasing number of researchers counter this effect, at least to some extent?

      Sure, absolutely. This may explain why people are so intuitively opposed to the stagnation thesis – they’re comparing an America with population 300 million to some older America (like colonial America with a few million) and saying the former has greater absolute innovation and progress than the latter. Which is true, but it misses the point that we’ve hit seriously diminishing returns since we’re not seeing 150x innovation in the former compared to the latter.

      Diminishing returns means that all you can do is postpone the day of reckoning. As Paul Krugman notes in one of his essays, Singapore may have bought itself decades by pushing education and doubling or more its college graduates.

      But you can only do that trick a few times. How do you bring back the era of high growth rates when *everyone* has a PhD and you’re still growing slowly?

  2. Brett permalink
    January 25, 2011 5:26 pm

    But my own take is that we shouldn’t confuse the accumulation of credential crud for the difficulty of reaching the frontiers of knowledge.

    That’s true, but you can’t deny that it has become more expensive and difficult to do research in a number of fields. Empirical investigation in physics needs gigantic particle accelerators, chemists need laboratories, geneticists need expensive equipment, and so forth.

    • January 25, 2011 9:20 pm

      But for every particle physicist stuck waiting on data from multi-billion, there’s a geneticist – there’s been a truly shocking fall in the cost of genetic research with things like whole gnome sequencing going from >millions of dollars to a thousand or less. Genetics research is incomparably cheaper and easier today than it was in the 1960s.

  3. Highgamma permalink
    January 25, 2011 6:58 pm

    I’m reminded of the old Star Trek Next Generation episodes where second graders are complaining about their calculus homework. In mathematics, my first grader is as advanced as I was in the first grade. My high school sophomore is LESS advanced as I was as a sophomore in high school, but she can put together a Powerpoint presentation.

    I’m pretty sure that if we looked at the data on innovation that we would not see a single instance of innovation in primary and secondary education in the United States, which remains a government monopoly, resistant to innovation.

    • January 26, 2011 11:55 am

      New ideas and different perspectives many times are unfairly treated and ridiculed in the academic world of innovation. Climate change issues are a good example of this, going against the grain creates friction. Ego of allowing expansion of new thoughts has always been a difficult process, historically speaking just look at the Inquisition. As much as we live in an age of greater reach, people in power ultimately haven’t changed. New ideas are difficult to accept for many, regardless of the facts presented.

    • Steve Hopkins permalink
      January 26, 2011 7:20 pm

      I’d consider unions as more of a block to innovation in k-12 education than the gov’t. …Short school year, ineffective teachers kept on the payroll too long, etc

  4. January 26, 2011 3:18 pm

    It’s ridiculous to use 1998 as a frontier. We were in a tech bubble, and tech is an industry that needs young talent because, bluntly, older workers (especially at that point) were not comfortable with computers. But equity valuations made absolutely no sense then – earnings have continued to rise, it’s just multiples that have dropped- admittedly a measure of the prospects for future growth, but those opinions in 1998 were LUDICROUSLY high, not “reasonable measures of future anticipated growth”. Hiring of workers 25-34 was largely funded by those ridiculous equity valuations. I don’t think this is a big “innovation” point, I think this is probably an artifact of a bubble – especially comparing a prior peak to a current trough.

    I agree to an extent that younger inventors need more of a chance to flex their intellectual muscle, as it were, but the magnitude and recency of the problem is distorted horribly by Mandel’s cherrypicked data.

  5. hugh moon permalink
    January 27, 2011 3:14 am

    Perhaps, we should see this as a world problem rather than national, thus, we could form international enclaves, beyond multinational corp. If several pundits are correct, the US may be reduced to serving a “consumer” China. How about a different kind of competition–long range—

  6. Tony Dreher permalink
    January 27, 2011 10:17 pm

    It doesn’t seem that increasingly draconian intellectual property regimes get enough blame for hindering innovation. It’s one of the driving forces behind rising research costs, and it pushes firms into spending more time and money on stopping competition than on further innovation.

  7. Abelard Lindsey permalink
    January 28, 2011 7:40 pm

    Speaking of innovation and seasteading, I’m reading a book about China’s investment into Africa. The book is “China into Africa: Trade, Aid, and Influence”:

    http://www.amazon.com/China-into-Africa-Trade-Influence/dp/081577561X/ref=sr_1_3?s=books&ie=UTF8&qid=1296243307&sr=1-3

    One of the chapters in this book details how China is creating SEZ’s in various place in Africa as well as other developing country regions. These are similar to the SEZ’s the Chinese created in places like Shenzhen and the like when they first opened up to international trade and business in the late 70’s. This is essentially China’s version of Romer’s “Charter Cities” and I think its absolutely frigging brilliant.

    Now do you think our state department could ever think of anything like this?

    • January 28, 2011 8:21 pm

      > Now do you think our state department could ever think of anything like this?

      Absolutely. There are similar things in its tributary states like Panama or the Philippines. They’re no longer popular because they’re, well, classic colonial mechanisms.

      • Abelard Lindsey permalink
        February 1, 2011 2:04 am

        Well, if the Chinese SEZ’s work out better, more power to them.

  8. Abelard Lindsey permalink
    January 29, 2011 1:42 am

    There has been discussion about the possibility that existing governments might not allow the creation of politically independent seasteads in the open ocean. Would not such opposition to seasteading be considered a form of colonialism?

  9. Joe Thorpe permalink
    January 31, 2011 10:22 pm

    The poor can’t patent. Especially worldwide. And certainly can’t try to enforce patents. I have tons of ideas, and have sat on them for decades now.

  10. February 12, 2011 4:04 pm

    I’m really surprised that a discussion of inflation doesn’t play a larger role in the debate about stagnating living standards in the U.S. I often hear its plausibility as a causal factor dismissed through some sort of undisaggregated price level analysis: “Well, wages rise along with the price level.” That may be true in the long run, but if it were true immediately, there would be no advantage to printing more money. Haven’t Austrians like Guido Hulsmann shown that inflation shifts resources towards the holders of newly printed dollars? Wouldn’t a class of people that live off of such a shift of resources simply eat up our productivity gains and lead to the sort of wage stagnation we’ve seen. For more, see:

    http://actualanarchy.blogspot.com/2011/02/why-arent-you-as-rich-as-you-should-be.html

    http://blog.mises.org/9098/deflation-and-liberty/

    • February 12, 2011 9:40 pm

      Also, what about the many innovations of Buckminster Fuller that have yet to be implemented on a wide scale? I’m not familiar with the technical aspects of that situation, but I do recall Fuller’s claim that Earth has enough resources to allow its entire population to live as billionaires.

  11. February 17, 2011 4:13 pm

    Could this approaching stagnation relate to the demise, ie. fall, of the Greek & Roman empires?

  12. gary permalink
    March 20, 2011 11:12 pm

    The stagnation in growth is being fed by the enormous amount of money that is wasted by the world on the massive bloated world-wide military budgets of all countries that buy into this meme of war.

    Carl Segan (and many others) have stated that we would have a truly Star-Trek technological level (nanotech replicators, nanotech fed life-extension technologies (no aging)) by now if we had not destroyed the ancient library of Alexandria over 1000 years ago.

    No need to fuss, we can still develop advanced nanotech/biotech now (Aubrey de Grey of the SENS foundation estimates 1-billion spent over 10 years can counter the damage of aging in a mouse model, with the human breakthrough soon after (see Time magazine’s Feb issue “Immortal by 2045”)).

    So here we are, over 10 years into the 21st century and spent, what, 5 or more trillions of dollars in endless wars etc, since Reagan go into power and started one of the biggest military build ups in history??

  13. fritz33 permalink
    March 25, 2011 1:01 am

    Maybe the US needs a new war against a technological advanced nation.

    Theft of German Scientific Research Fueled Post-War Technology Boom

    http://www.disclose.tv/forum/theft-of-german-patents-fueled-post-war-technology-boom-t35026.html

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