- A brash high-school student discovers — maybe by accident — how much famous writers, such as Ralph Ellison, Norman Mailer, and John Updike, don’t want to write. Any excuse to avoid writing will do.
- A pretty good talk by John Cochrane, a University of Chicago professor of economics, called “Restoring Robust Economic Growth in America”. What’s most interesting is what’s missing. At one point he asks: “Why are we stagnating? I don’t know. I don’t think anyone knows, really. That’s why we’re here at this fascinating conference.” In spite of this topic, his talk contains nothing about what controls the rate of innovation. Not only does he not know anything about this (judging by this talk), he doesn’t even realize the gap in his knowledge (judging by this talk). Shades of Thomas Sargent. It’s as if a Harvard Medical School professor spoke about how to fight disease without mentioning the immune system, without even appearing to know that the immune system exists. (Which happens.)
- Garum, a fermented fish sauce. It was the “supreme condiment” of ancient Rome.
Thanks to Allan Jackson and Peter Couvares.
So what does control the rate of innovation?
Isn’t one reason we are stagnating because in order to generate wealth, to innovate, somebody — wealthy corporations, entrepreneurs borrowing from banks, the state — has to take risks, has to invest, has to believe in a possible future with a payoff; this requires a certain psychological orientation, of groups of people who believe. Americans lost maybe 20% of their wealth in recent years; no one really understands the world economy, or the intricacies of capital flow and investment; and corporations are sitting on huge amounts of money and are still playing it safe. So there are reasons for such caution. Everyone knows we don’t know as much about economic processes as we thought we did.
There is some principle of herd pluralistic ignorance/knowledge at work. The tide may be changing as people get over the freak-out of the last few years and corporations start to invest…. I sure hope so…
So what does control the rate of innovation?
I don’t know. But I can guess: 1. The heavier the regulatory burden, the less innovation. For example, certain FDA regulations require that businesses have a ROOM for the FDA inspector. 2. Lower crime, more innovation. 3. The easier it is to leave your employer and set up your own business, the more innovation. So, for example, universal health insurance –> more innovation. 4. The easier it is for a small business to advertise, the more innovation. 5. Cultural values. The more value placed on innovation, the more innovation. 6. The larger the percentage of people that live in cities, the more innovation. 7. The greater the education level, the more innovation. 8. The greater access to a wide range of information, the more innovation. (I think #7 and #8 were behind the Industrial Revolution. Printed books changed everything.)
Okay, you’re in my area of interest now but where to start? I started working on my own inner economic dialogue about seven years ago but am only beginning to learn the many languages of economics, especially the macro I’ve been so fascinated with. Consequently my ideas sound pretty loony. I don’t believe that money is capable of doing all the things that people try to make it to do, not even close. But what it can’t do, people still need and for me that’s the place to begin – human capital. Just the same, ownership needs to be far more flexible and markets need to be completely opened up so as to offer what people actually need to work and live, as well as a ‘floor’ of survivability one can actually progress from.
Seth
Are you reading the book Launching the Innovation Renaissance by Alex Tabarrok of Marginal Revolution fame?
Are you reading the book Launching the Innovation Renaissance by Alex Tabarrok of Marginal Revolution fame?
yes, I am reading that book. It’s very good.
Possibly of interest: 7 Secrets of the Prolific by Hillary Rettig. It’s specifically about writing, though there’s also advice which would apply to anything, like getting yourself good tools.
In any case, there’s a description of making writing into a pleasure, and at least some of it overlaps with your self-experimentation. The idea is to make writing into a bunch of small experiments, so that the cost of failure is made lower.
I am not sure why you think understanding the rate of innovation is central to understanding the movement of the business cycle since 2007. The 1930s was an extremely innovative time period*, but alas we still had the great depression. It doesn’t seem like changes in the level in innovation are a good explanation for large changes in the unemployment rate. Why do you think this should be in his talk?
*Source
https://marginalrevolution.com/marginalrevolution/2011/04/a-great-leap-forward-1930s-depression-and-u-s-economic-growth.html
If you read between the lines of Collapse by Jared Diamond, you will see that every case of collapse that he describes happened because the society stagnated badly — failed to innovate, kept doing the same thing over and over and over. In each case, just before the society collapsed, the level of unemployment became very high.
“happened because the society stagnated badly — failed to innovate, kept doing the same thing over and over and over.”
Those are very strange examples, because it’s very hard to show that the societies he chooses ever innovated at all. The Norse, Easter Island, Polynesians, the Mayan, it’s very hard to show that these societies ever innovated. Like most of human history, these societies had next to no innovation, as it was very rare in pre-industrial societies to innovate (see Greg Clark’s Farewell to Alms for the data). Collapse argues for environmental causes to societal breakdown, and while I agree that these societies didn’t adapt to these conditions by innovating, since they weren’t innovating before that seems completely beside the point. It almost appears that you might believe that if a society stops innovating that unemployment will follow, but most of human history is a counter example to that. There is no reason new technology or ideas are necessary to create new jobs.
It’s funny that Australia is one of the only modern western examples in Diamond’s book as a cautionary tale of problems to come, and yet, Australia has been one of the best faring countries. Is there any evidence that Australia has markedly kicked up their innovation or is much more innovative than the U.S.? Taking a longer view, it’s extremely difficult to pin today’s unemployment on a lack of innovation in the U.S.(https://www.washingtonpost.com/business/economy/economists-explain-2011-in-charts/2011/12/21/gIQAT3lg9O_gallery.html#photo=16), much less trying to pin cross country differences by innovation.
The lesson of Diamond’s book is that as societies are collapsing there ability to generate output (food, clothing, shelter, goods, services…) collapses with it, as well as there ability to utilize their resources (like labor). In some sense, saying a society that is collapsing will “fail to innovate” is much more accurate than saying a society that fails to innovate will collapse.