Modern-day inventors – even those in the league of Steve Jobs – will have a tough time measuring up to the productivity of the Thomas Edisons of the past.
That’s because big ideas are getting harder and harder to find, and innovations have become increasingly massive and costly endeavors, according to new research from economists at the Stanford Institute for Economic Policy Research. As a result, tremendous continual increases in research and development will be needed to sustain even today’s low rate of economic growth.
SIEPR senior fellow Nicholas Bloom, a Stanford GSB professor of economics by courtesy and co-author of a paper released this week by the National Bureau of Economic Research, contends that so many game-changing inventions have appeared since World War II that it’s become increasingly difficult to come up with the next big idea. “The thought now of somebody inventing something as revolutionary as the locomotive on their own is inconceivable,” Bloom says. “It’s certainly true if you go back one or two hundred years, like when Edison invented the light bulb,” he says. “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.”
To better understand the nation’s sluggish economic growth, Bloom and his three co-authors – SIEPR senior fellow and Stanford GSB professor Chad Jones, Stanford doctoral candidate Michael Webb, and MIT professor John Van Reenen – examined research productivity at an aggregate national level as well as within three swaths of industry: technology, medical research and agriculture. For another measure, they also analyzed research efforts at publicly traded firms. Their paper follows a common economic concept that economic growth comes from people creating ideas. In other words, when you have more researchers producing more ideas, you get more economic growth.
But Bloom and his team find a not-so-rosy imbalance. While research efforts are rising substantially, research productivity – or the ideas being produced per researcher – is declining sharply. So the reason the U.S. economy has even grown at all is because steep increases in research and development have more than offset the decline in research productivity, the study found.
Read more: https://www.gsb.stanford.edu/insights/big-ideas-are-getting-harder-find