From Pethokoukis at AEI, August 4:
Looking at the Silicon Valley today, you might think the US is poised
for a technological explosion. That expectation is certainly animating
many of the fears of mass joblessness once artificial intelligence
arrives in the workplace, and why many people are beginning to advocate a
universal basic income. But my podcast guest believes these
techno-optimists have far too rosy of an outlook.
Fredrik Erixon is an economist and the director of the European
Centre for International Political Economy, a Brussels-based think tank.
He’s also the coauthor of the recent book, “The Innovation Illusion: How So Little is Created by So Many Working So Hard.”
He joined me to discuss why we’re no longer as innovative as we used to
be, why we’re not close to recapturing that dynamism, and what
policymakers can do about it. Listen to our full conversation at Ricochet, or read an abbreviated transcript here.
PETHOKOUKIS: I’ll give you a chance to lay out your thesis,
which I will try to sum up briefly. As the title suggests: innovation is
not what we think it is. In fact, it’s been getting worse and worse,
decade after decade since the 1970s. I wonder if you could explain that.
Now, keep in mind that I would rather live — and I think this may argue
against your thesis — in 2017 than in 1967, 1977, or 1987. And frankly,
I’d probably rather live in 2017 than last year. So that to me suggests
that maybe things are getting better. How can you say innovation,
change, and progress have been slowing down for decades?
ERIXON: Like you, I would pick 2017 over any other year that you
could come up with. The argument of the book isn’t that I’d prefer to
live in the 1970s or 1940s or even 2006 or 2007 before the big economic
crisis in the West. The point is basically that the innovation
acceleration, or the pace of change in Western economies, has slowed
down and that this slowdown is connected to our increasing inability to
actually change our economies. And to change our economies in a way
where we increasingly incorporate much more technology, much more human
capital, and get people to stop doing things that they did yesterday in
order to do something better tomorrow. That’s the whole point of the
book. The point is to say we need more innovation, we need faster
innovation. The illusion that the book is trying to counter is this
perception, which has been spreading like wildfire over the past year,
that we’re living in the most innovative age ever.
What we’re trying to say in the book is no, that’s an illusion. If
you actually look at the pace of innovative change throughout history,
you’re going to find lots of periods when change happened faster, when
people were prepared to change in a way most people today aren’t. And
the other part of the illusion is this perception itself provokes a lot
of political reactions. It provokes human reactions and fears about
technologies that are about to demote us to permanent low economic
expectations. That we’re going to get unemployed because intelligent
machines, robots, are going to eat our lunch, and perhaps our dinner as
well.
And if you listen to Elon Musk, they might eat us as well. Or
at least kill us. Before we go forward or even look at where we are
today, just take one step back. So when was the golden age of
innovation? And, whenever that was, why was it? Why can’t we just do
what they did and follow that same recipe today?
The concept of innovation has basically two elements. The first one
is technology creation; that we have scientists and inventors that
generate new and bold inventions that are going to help to solve
problems in better ways. That’s the first component. And I would argue
at least that I’m not capable of making a judgment whether the
technology creation we’re seeing today is better, worse, or similar to
what we’ve seen in previous parts of history. But the other component of
innovation, following the concept of innovation from economists Joseph
Schumpeter and many others, is about the economy, and it’s about the
capacity of the economy to basically take the technologies that are
being created and run with them and make them basically ripple through
the economy in a way which forces everyone — labor, capital, investors,
governments — to perform better. And it’s in that second part where I
think we’ve seen, in many parts of our modern economic history, we’ve
been much better and where our economy has been much better equipped in
order to run with these technologies and actually make something out of
them.
So the problem here isn’t that we need to reinvent our economy, or
start to come up with different economic systems. My argument is
basically that we’ve had a system called capitalism which has been
extraordinarily good at generating this type of economic change that I’d
like to see more of. The problem that we’ve seen gradually growing over
the past 50 years is that core concepts of capitalism have been eroded.
And we have less of them in our economy today than we’ve had in the
past. And that is the main reason why the economy isn’t generating that
much innovative change or productivity growth as it did in the past.
You’re dividing things up. Maybe you have invention, the
ability to come up with new ideas, new technologies, new ways of doing
things. And then there’s the diffusion of those ideas throughout the
economy, so they’re broadly helpful and broadly productive for people.
So are you saying there’s a time when we did that better? These
technologies or inventions or innovations, as you said, we were able to
run with them better? When was that time? And if there wasn’t a time
then maybe that’s just the way things are. When did we do it better? The
50s, 60s, 20s?
I think we can point to specific periods in economic history going
back to the early 1800s, and point to decades or perhaps longer periods
where we’ve seen faster change in our economy and our society. I think
the period — it depends whether you look to America or Europe — before
the early 1900s was a period of immense change in the European economy.
We had the period just after the Second World War, a period when America
as well as Europe saw enormous innovative change in the economy. Partly
because the economy got better at exactly the thing you pointed to —
diffusing all the new technologies that already existed and making
organizations use them. I can think about my pretty short life, I’m just
43 years old, but I can point to periods when I think I’ve been living
in far more exciting times than I do today. I’d say 1990s and 1980s was
such a period, where the propensity of people to actually change and do
something different than what they were doing was much greater than it
is today....
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