In a recent article , he points out, correctly, that total factor productivity growth has "steadily fallen" since its peak in the 's and 60's. According to Ip, rising research costs and greater regulatory burdens have reduced our ability to innovate. Airplanes fly no faster than in the 's. None of the 20 most-prescribed drugs in the U. This is not a new argument. However, while the issues that both Ip and Gordon raise are very real, they are only part of the story.
Innovation is not about the past, but the future and, we may very well be entering a new era of accelerated innovation. We tend to see inventions as events. Thomas Edison invents the light bulb. Alexander Fleming discovers penicillin. Steve Jobs launches the Macintosh. A single spark leads to transformational change and our lives are improved. However, that's not how innovation really happens.
To see why, let's look at each of those examples in turn. Edison built his first power plant in , but electricity didn't begin to affect productivity until the 's. Alexander Fleming discovered penicillin in , but the drug didn't become commercially available until The ideas that led to the Macintosh were first presented in , but computers didn't impact productivity growth until the late 's.
Total factor productivity grew substantially in the middle of the 20th century, but started slowing in This slow growth continues today, with productivity lower than it was more than years ago, despite increased investment in scientific research. What explains this?
Research suggests that the U. If we want to see greater productivity growth, we need to explore alternative ways to translate science into invention. Is American innovation sputtering? The data suggests so: Productivity growth in the United States, which is powered by innovation, has been decelerating. This slow growth continues today, with productivity lower than it was more than years ago. This slowdown has occurred despite increased investment in scientific research. Why is there little productivity growth to show for this?
Some dispute this , however, pointing to advances in quantum physics quantum computing , plasma physics thermionic conversion , and molecular biology CRISPR Cas Our research finds that the U. Our analysis also shows that Venture Capital VC -backed scientific entrepreneurship has helped to bridge this gap between corporate science and academia — but only in a couple of sectors.
These findings suggest that if we want to see greater productivity growth, we need to explore alternative ways to translate science into invention. Up until the s, some large American corporations invested in scientific research to such an extent that corporate science resembled — and sometimes exceeded — university research in caliber. By the s, a combination of shareholder pressure, heightened competition, and public failures led firms to cut back investments in science.
Corporations instead began to look to universities and small start-ups for new ideas. Xerox PARC was spun off into a separate company in IBM under Louis Gerstner redirected research toward more commercial applications in the mids. Productivity growth is slowing down in the US see Figure 1 and other developed countries see Figure 2. This period of incredible progress was driven by the rapid expansion of research universities like Harvard, MIT, and Stanford; research labs in firms like General Electric and Ford; and the commercialization of technologies developed in World War II.
This slowdown has sparked a debate among economists over the sources of the problem. Are statisticians underestimating output? Or are recent innovations simply not as productive as those of the past? Innovation is slowing down. The creation of ideas is central to economic growth. This is driven by two things: the number of researchers scientists and engineers and the productivity of these individuals ideas per researcher.
Our analysis found that while there are a rising number of researchers, each one is becoming less productive over time see Figure 3. The only way the US has been able to maintain even its current lackluster GDP growth rate has been to throw more scientists and engineers at research problems. The US economy has had to double its research efforts every 13 years just to sustain the same overall rate of economic growth.
The acceleration of computer processing power is a telling example. Bush nearly doubled the foreign aid budget, with a particular focus on combating AIDS in Africa, and it has further increased, though less dramatically, under Obama. The U. That makes it the world's largest dispenser of aid in absolute terms, but still puts it far behind the world leaders in this category, Sweden and Norway, who spend about 1 percent of GDP on aid.
Still, he said, "the way that money's being spent has gotten more intelligent every year" since As the practice of buying friends in foreign capitals with development aid has faded with the end of the Cold War, he argued, the impact per dollar of assistance has become easier to track. And almost 40 percent of U. Gates also addressed the debate over the Common Core education standards that 46 states have now adopted. Textbooks in Asian countries are often less than half the size of U.
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