July 13, 2010
IT IS HARDLY AN EXAGGERATION...:
Ideas Having Sex: How prosperity and innovation exceeded the expectations of John Stuart Mill and Adam Smith (Matt Ridley, July 2010, Reason)
The phrase diminishing returns is such a cliché that few people give it much thought. Picking out the pecans from a bowl of salted nuts gives diminishing returns: The pieces of pecan in the bowl get rarer and smaller. The fingers keep finding almonds, hazelnuts, cashews, or even—God forbid—Brazil nuts. Gradually the bowl, like a moribund gold mine, ceases to yield decent returns of pecan.Now imagine a bowl of nuts that has the opposite character. The more pecans you take, the larger and more numerous they grow. That is the human experience for the last 100,000 years. The global nut bowl has yielded ever more pecans.
Nobody predicted this. The pioneers of political economy expected eventual stagnation. Adam Smith, David Ricardo, and Robert Malthus all predicted that diminishing returns would eventually set in, that the improvement in living standards they were seeing would peter out. “The discovery, and useful application of machinery, always leads to the increase of the net produce of the country, although it may not, and will not, after an inconsiderable interval, increase the value of that net produce,” said Ricardo, who perceived an inexorable tendency toward what he called a “stationary state.” John Stuart Mill, conceding that returns were showing no signs of diminishing in the 1840s, put it down to luck. Innovation, he said, was an external factor, a cause but not an effect of economic growth.
Even Mill’s modest optimism was not shared by his successors. They feared that as discovery began to slow, competition would drive profits out of the increasingly perfect market until all that was left was rent and monopoly. With Smith’s invisible hand guiding myriad market participants possessing perfect information to profitless equilibria and vanishing returns, neoclassical economics gloomily forecast the end of growth.
To explain the modern global economy’s bottomless nut bowl, you must explain where the perpetual innovation machine and its increasing returns came from. They were not planned, directed, or ordered. They emerged, evolved, bottom up, from specialization and exchange. The accelerated exchange of ideas and people made possible by technology fueled the accelerating growth of wealth that has characterized the last century. [...]
It used to be popular to argue that the European scientific revolution of the 17th century unleashed the rational curiosity of the educated classes, whose theories were then applied in the form of new technologies, which in turn allowed standards of living to rise. But history shows this account is backward. Few of the inventions that made the industrial revolution owed anything to theory.
It is true that England had a scientific revolution in the late 1600s, but the influence of scientists like Isaac Newton and Robert Hooke on what happened in England’s manufacturing industry in the following century was negligible. The industry that was transformed first and most, cotton spinning and weaving, was of little interest to scientists. The jennies, gins, frames, mules, and looms that revolutionized the working of cotton were invented by tinkering businessmen, not thinking boffins. It has been said that nothing in their designs would have puzzled Archimedes.
Even the later stages of the industrial revolution are replete with examples of technologies that were developed in remarkable ignorance of why they worked. This was especially true in the biological world. Aspirin was curing headaches for more than a century before anybody had the faintest idea of how. Penicillin’s ability to kill bacteria was finally understood around the time bacteria learned to defeat it.
Most technological change comes from attempts to improve existing technology. It happens on the shop floor among apprentices and mechanics or in the workplace among the users of computer programs, and only rarely as a result of the application and transfer of knowledge from the ivory tower. [...]
It is the ever-increasing exchange of ideas that causes the ever-increasing rate of innovation in the modern world.
Innovators are in the business of sharing. It is the most important thing they do, for unless they share their innovation it can have no benefit for them or for anybody else. And the one activity that got much easier to do after about 1800, and has gotten dramatically easier recently, is sharing. Travel and communication disseminated information much faster and further. Newspapers, technical journals, and telegraphs spread ideas as fast as they spread gossip. In a recent survey by the economists Rajshree Agarwal and Michael Gort of 46 major inventions, the time it took for the first competing copy to appear fell steadily from 33 years in 1895 to three years in 1975. And the speed has increased ever since.
When Hero of Alexandria invented a steam engine in the first century A.D. and employed it in opening temple doors, news of his invention spread so slowly and to so few people that it may never have reached the ears of cart designers. Ptolemaic astronomy was ingenious and precise, if not quite accurate, but it was never used for navigation because astronomers and sailors did not meet. The secret of the modern world is its gigantic interconnectedness. Ideas are having sex with other ideas from all over the planet with ever-increasing promiscuity. The telephone had sex with the computer and spawned the Internet.
Technologies emerge from the coming together of existing technologies into wholes that are greater than the sum of their parts. Henry Ford once candidly admitted that he had invented nothing new: He had “simply assembled into a car the discoveries of other men behind whom were centuries of work.” Inventors like to deny their ancestors, exaggerating the unfathered nature of their breakthroughs, the better to claim the full glory (and sometimes the patents) for themselves.
...to say that science has added no value to the modern world. Technological innovation is a function of intelligent tinkering, not intellectual theory.