Has Innovation Peaked? (Transcript)

Public Affairs Forum

July 24, 2013

An interview with Joel Mokyr, Robert H. Strotz Professor of Arts and Sciences, Northwestern University

Will Roberds: Today we are honored to have with us Professor Joel Mokyr, Strotz Professor of Economic History at Northwestern University. And we'll be talking about a subject that you've emphasized in your career—the relationship between technology, technologic progress, and economic growth. I'm going to start off with a pretty big question. What would you say have been the biggest lessons from your study of the relationship between technology, technologic progress, and economic growth?

Joel Mokyr: There's a variety of ways of bringing about economic growth. You can, for instance, accumulate capitol per worker—get more tools, more shovels for each worker. Eventually that is going to run into diminishing returns as we've known for, I don't know, 200 years. As far as technology is concerned, there doesn't seem to be any evidence in the past that we have run into diminishing returns. We are in fact opening up new horizons, you know, over and over again and there seems to be no evidence that this is running into diminishing returns.

The other lesson, however, is that we need to find new ways of measuring growth. Our current accounting practices were designed for an economy that's of a wheat and steel economy in which you produce, you know, goods of, more or less, standardized quality and then you just look at how much your factors of production are producing each year, and you say, "Oh wow, you know total factor productivity has increased 2 percent this year and that is too low" or whatever.

The classic example is the emergence of antibiotics after World War II. Now the contribution of antibiotics to GDP [gross domestic product] isn't very large, in fact, I'd be surprised if it could be noticed in the statistics. The impact of antibiotics on our daily life has been enormous—complicated, but vast. Here's another example that I kind of like of something that never shows up in the GDP statistics that we couldn't do without: anesthesia. So doctors operate on people and in economics you could go and try to go to figure out how much is it worth by asking you, "How much would you demand to be paid if you had to do without?" So you can go to the surgery department of any hospital and ask any patient, "How much money would it take me to convince you to have that appendix taken out without anesthesia?" And I don't think you are going to get a lot of takers. And that gives an idea that the way we measure things traditionally and what we call consumer surplus, which is the actual contribution of an invention to the well-being of people, are two very different things.

So for me growth is not just in the GDP statistics. It's measured by things that don't enter it, all the way from life expectancy to the quality of life that people can expect to enjoy in terms of being free of pain, allergies, and discomforts, and so on and so forth. But also in the access, say, to information, to the amount of leisure that they consume, and the quality of the leisure that they consume. These things, I think, are captured very poorly in our national income statistics because they weren't designed for that. They were designed in the 1930s and 1940s.

Roberds: How would we modify that framework to take into account those sort of innovations that you're discussing?

Mokyr: Well, the truth is, I don't really know. If it were an easy answer I'm sure somebody would have implemented it already. What I would like to see is—you know, we had this in this country as you may recall, we had the Boskin Commission, what was it 15 years ago maybe, and basically the conclusion of the Boskin Commission was that yes, we're not really estimating the rate of inflation correctly because we don't take into account the fact that the products are getting better and better, and we are not taking into account the fact that new products are being introduced. How would I redesign my national income accounting? I don't know, but it has to be done because if you don't do that you will very, very, very seriously underestimate the impact that technology has on our lives. And that I think is absolutely critical.

Roberds: So another question I'd like to ask you. As I recall from reading your, I believe, 2002 book, The Gifts of Athena, you make a pretty convincing argument that there're essentially two kinds of technology. A sort of technological knowledge, one of which I forget the exact term that you use in your book, is something like general knowledge or systematic knowledge or...

Mokyr: ...Propositional knowledge.

Roberds: Propositional knowledge. And the other being something like more applied knowledge.

Mokyr: Prescriptive knowledge.

Roberds: Yes. So when you say that we are not about to run out of technological progress, do you think that is equally true for both types of technological knowledge right now?

Mokyr: Absolutely, absolutely. I'm not sure which one is going to grow faster but they keep reinforcing one another and the degree of reinforcement is getting stronger all the time, and so you get this ever-stronger virtuous circle. So we create these tools to observe nature and as we learn more about nature we use that knowledge to make better and better tools.

And so there's classic examples in both remote and modern history of science, OK, the best example that everybody knows is, "How would we ever have discovered the structure of DNA without X-ray crystallography?" Once we have this science, then we can use it to develop further technology. So the examples are really endless.

So we should think of the progress of science as not just only conditioned by the incentives given to it and how much we pay scientists, but also by what kinds of instruments are at their disposal? Had Aristotle had a telescope he may have written a very different image of the universe, and the same would be true for all classical antiquity. These people had nothing but their eyes and ears and they did amazingly well with that. But the human eye, the naked eye, and the eye armed with a telescope are two very, very different entities.

Roberds: I'd like to ask if you think that there are some policies or some policy changes that could be made that would speed the pace of technological progress?

Mokyr: Well, the one thing that I want to say about policy, of course, is that most countries have taken a fairly liberal attitude toward technology in the sense that almost everything, but not everything, is now allowed. Now that, I think, is important because there still are areas of modern technology which are considered to be in some sense inappropriate. Playing God, OK? Human cloning is like playing God or genetic modification. You know technology is about altering the environment irreversibly, so if you really want, this is what we do. We are playing God. We've taken a planet that looked one way and when Homo sapiens appeared and started to create agriculture we changed it and it's not going to go back to the way it was. Did we play God? You bet it is; you bet we did. And that is the nature of technology; without that we would still be hunters and gatherers. We don't want to go back to that society.

And so my sense is, to be a little bit more specific, of course, there is no question that one of the biggest issues about pure science is that it's very hard to fund it by itself because the knowledge in principle is not appropriateable. So I think certainly since 1945 and the famous document that Vannevar Bush produced, Science, the Endless Horizon—that's not quite right, but a famous document [Science, the Endless Frontier, written at the request of President Franklin D. Roosevelt]—and he basically said, "Look, science is where, is a source of further economic and political progress and the government has to fund it because it's not going to pay for itself." And we all now understand that unless some outside agency is going to fund it, it won't be done in the same degree that it should be done. Now should it be the government or should it be somebody like Bill Gates? And the answer is probably a little bit of both.

But the debt is, I think, where we need in some sense an active policy to compensate for the other obvious problem, that it is very hard to establish property rights in knowledge, and in fact, you don't want to establish property rights in knowledge. Once you create it, you want to put it out there in the open so that anybody who can use it will use it.

So we have a patent system. And it turns out designing a patent system that really works well is very difficult, but it may not be impossible. That is, I think, where the government can play an important role, and if the function of the patent system, I believe, is to encourage innovation, then we should have a system that is geared toward that and not necessarily toward the protection of the rents of people who have in the past either made an invention or bought one from somebody who has. This is not an easy problem, but it is a problem that we should be thinking about a lot more than we are.

Roberds: That leads me to my last question for you today and that is, are there places that are doing a better job of promoting technological progress, technological research either through their patent system or through government policy or through the activities of private industry?

Mokyr: They are run by people who are basically growing up in a culture where thinking outside the box is the norm. In fact, there is no box; everybody is outside the box, OK.

This willingness to think outside the box is largely a function of cultural institutions. If you think that by writing a book that debunks some early authority that can trigger a knock on the door, and a bunch of guys from the Inquisition are standing out there and threatening to take you in for interrogation, if you think there is a good chance of that happening, you're going to keep quiet. You need to feel that the only risk you're taking is, "you're wrong." There is no other cost associated with it. You are not going to be accused of black magic or heresy or apostasy or something like that.

But a tolerance toward this kind of thinking outside the box is quite critical. It doesn't come natural to us. We are not hardwired to be tolerant, we are hardwired to be respectful. It's an acquired skill to be disrespectful and I think we should think a hymn to disrespect, not, you know, necessarily being rude, but basically willingness to question. You know these old truths that we thought were true, let's try and figure out—design a new experiment, apply new instruments to them, and see if they are right or if they are not right.

So in that sense I think innovation doesn't come natural to us, it's a cultural attribute, and it can be gained and it can be lost. Now I don't know how to—what kind of policy we should have to encourage that, but certainly if you're thinking about what you do in teaching high school, OK, trying to get to teach kids to think critically, teach them to think for themselves and teach them to be rebellious, and teach them to be in that sense, that very narrow sense, disrespectful or at least skeptical. OK, skepticism is really important and I think a lot of societies haven't actually got that. You're not supposed to be skeptical, you're supposed to take the word of your teacher or your parent and say yes, and then learn it by heart, recite, that's what learning was all about. As long as that's what learning is all about, you're not going to get very, very much progress.

Roberds: So Joel, we'd like to thank you for this very wide-ranging and informative conversation.

Mokyr: Thank you.