What is Innovation and How Much is it Worth?
In the 1980s some economists worked to build endogenous-growth models that stated where innovation came from. They explained it as the consequence of investment in research and development, increases in the stock of human capital, or the extra profits that can be acquired by firms with new technologies. Other economists have focused more on data than on theory. identifies factors that seem to encourage young people to become innovators.
Research has also made apparent, though, that technological innovation is not straight, but veers about depending on economic circumstances. Early inventors were not simply discovering nature’s truths , but trying to solve specific problems. Work on such technological bias blossomed in the 1990s as economists attempted to explain why the wage premium earned by college graduates kept rising even as the supply of graduates increased. We see how nonlinear has proven to be in the 2000s. The answer was that technological change in the 20th century was “skill-biased”, boosting the productivity of workers with degrees, but not of others.
Technological improvement, he suggested, is affected by the relative scarcity of factors such as labor and capital; by how easily one factor can be substituted for another; and by the path of past innovation. Research on a particular technology may reduce the cost of developing complementary innovations in the future. If the direction of progress is not set in stone, policy choices could lead an economy down one technological path rather than another.
The critical question: if innovation can be directed, should it be, and if so, how?
Since 2000, published work on directed technical change has centered largely on environmental challenges. There are more experts in the relevant disciplines, better-funded research labs and an established complementary economic infrastructure. Economical decarbonization might thus require subsidies for clean-energy research, as well as a carbon price. Indeed, efforts to slow global warming represent a massive attempt to realize one technological future.
Some futurists, and a few economists, worry that rapid progress in artificial intelligence could lead to mass displacement of labor and social crisis. But in a recent paper, Anton Korinek of the University of Virginia writes that not all uses of ai are alike. Clever machines could indeed replace human workers or might instead be engineered to assist human labor.