Sunday, January 13, 2013

Technological Innovation and Socio-Economic Growth

The Economist has an article titled "Has the ideas machine broken down?" in its current issue. It questions whether the long period of technology innovation fueled growth in GDP per capita is over in America. The graph suggests a 150 year long increase in productivity in Great Britain associated with the Industrial Revolution. The rate was further stepped up from about 1850 to the early 20th century with electrification, assembly line production and internal combustion engines. The Information Revolution added to the growth rate in the second half of the 20th century.

Is the perceived slow down real, or is it a transient phenomenon. That is, will the ICT revolution continue to parallel the electrification revolution as suggested in the graph above, or will there be a slow down?

Ray Kurzweil, a pioneer of computer science and a devotee of exponential technological extrapolation, likes to talk of “the second half of the chess board”. There is an old fable in which a gullible king is tricked into paying an obligation in grains of rice, one on the first square of a chessboard, two on the second, four on the third, the payment doubling with every square. Along the first row, the obligation is minuscule. With half the chessboard covered, the king is out only about 100 tonnes of rice. But a square before reaching the end of the seventh row he has laid out 500m tonnes in total—the whole world’s annual rice production. He will have to put more or less the same amount again on the next square. And there will still be a row to go. 
Erik Brynjolfsson and Andrew McAfee of MIT make use of this image in their e-book “Race Against the Machine”. By the measure known as Moore’s law, the ability to get calculations out of a piece of silicon doubles every 18 months. That growth rate will not last for ever; but other aspects of computation, such as the capacity of algorithms to handle data, are also growing exponentially. When such a capacity is low, that doubling does not matter. As soon as it matters at all, though, it can quickly start to matter a lot. On the second half of the chessboard not only has the cumulative effect of innovations become large, but each new iteration of innovation delivers a technological jolt as powerful as all previous rounds combined.

The third graph from the article suggests that there was a temporary slow down in GDP per capita growth in the Great Depression followed by a rapid growth associated with World War II, but a return to the long term trend. Thus there is a precedent for believing that the Great Recession may introduce a transient, and growth may return to the trend line.

I wonder, however, if some of the problem may be over reliance on GDP as a measure. I think of how much access I have to information now as compared to say 50 years ago, and the difference is awesome. However, I am paying very little for that access. Massive open online education may make more and better education available to huge populations with decreases in the numbers of teachers, much as recording made better music available with fewer musicians and movies made good acting available with fewer actors.

The article mentions:

Life expectancy at birth in America soared from 49 years at the turn of the 20th century to 74 years in 1980. Enormous technical advances have occurred since that time. Yet as of 2011 life expectancy rested at just 78.7 years. Despite hundreds of billions of dollars spent on research, people continue to fall to cancer, heart disease, stroke and organ failure. Molecular medicine has come nowhere close to matching the effects of improved sanitation. 
To those fortunate enough to benefit from the best that the world has to offer, the fact that it offers no more can disappoint.
It seems likely to me, however, that humans have evolved with intrinsic limitations on life expectancy and that there will be decreasing returns to improving health care. (Not to mention that our poorly organized health care system is not as efficient in delivering longevity as the systems in other countries.)

If I am right that we are likely to see a major improvement in the way we think in the next generation through the applications of neuroscience and cognitive science, I would doubt that it would show up in GDP. The French have used increased worker productivity to provide more leisure time, also an outcome that does not show up in GDP per capita. It may be that GDP was a great indicator for agricultural and manufacturing societies, but not so much for the society of America's future.

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