A new study by the Stanford Institute for Economic Policy Research suggests big ideas are nowadays getting harder to find, whereas innovations have become increasingly massive and costly endeavors. Thus, tremendous continual increases in research and development will be needed to reduce today’s low rate of economic growth.
Nowadays, inventing something revolutionary on their own is inconceivable.
Nicholas Bloom, a SIEPR senior fellow said, “It’s certainly true if you go back one or two hundred years, like when Edison invented the light bulb. It’s a massive piece of technology and one guy basically invented it. But while we think of Steve Jobs and the iPhone, it was a team of dozens of people who created the iPhone.”
Understanding nation’s heavy economic growth requires examining research productivity at an total national level. Here, scientists also examined other sectors like technology, medical research, agriculture, and publicly traded firms.
Scientists simply followed a concept that economic growth comes from people creating big ideas. Means, if you have a more growing idea, you will have more economic growth.
Bloom said, “It’s getting harder and harder to make new ideas, and the economy is compensating for that. The only way we’ve been able to roughly keep up growth is to throw more and more scientists at it.”
Scientists started their study a year ago. They wanted to know, ‘Is the Productivity Slowdown for Real?’ He admits the paper and analysis has dampened his earlier, more optimistic position.
After speaking on a panel at the SIEPR economic summit, Bloom seems more positive about the nation’s productivity. He even caricatured ways of looking at U.S. productivity levels and contended the up-and-down swings between 1950 and 2010 did not necessarily signal a long-running trend of slow productivity growth. He thought we are far near to recover a huge global recession.
But now, he came to know that the research productivity is actually dropping for decades. They found that the standard assumption in growth models is associated with a constant rate of productivity.
While looking at other sectors, such as in agriculture, scientists used crop yields of corn, soybeans, wheat, and cotton. They then compared all these crop yields with research expenditures directed at improving yields, including cross-breeding, bioengineering, crop protection, and maintenance.
They found the research productivity in agriculture fell by about 4 to 6 percent per year. A similar pattern found in the medical fields too.
When turning to publicly traded companies, there was a continuous rise in research productivity since 1980. But, almost 85 percent of the firms showed steady, rapid declines in productivity while their spending in R&D rose.
Means, this overall study suggests research productivity for firms fell, on average, about 10 percent per year. Scientists think it may take 15 times more researchers today to produce the same rate of economic growth.