Bryan Caplan  

How Globalization Will Save Your Life

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I second Arnold's recommendation of Alex's column in Forbes. But for me, the highlight is the way that he explains the link between population and economic growth, and the demand and supply of innovation.

First, demand:

The cost of developing drugs for rare and common diseases are about the same, but the revenues aren't. Pharmaceutical companies concentrate on drugs with larger markets because larger markets mean more profits.

As a result, there are more drugs to treat diseases with a lot of patients than to treat rare diseases, and more drugs means greater life expectancy...

So imagine this: If China and India were as wealthy as the U.S., the market for cancer drugs would be eight times larger than it is today.

Of course, China and India are not yet as wealthy as the U.S., but their economies are growing rapidly, and with them, the market for new drugs.

Second, supply:
[T]here are only about 6 million scientists and engineers in the entire world, nearly a quarter of whom are in the U.S. Poverty means that millions of potentially world-class scientists today spend their lives trying to eke out a subsistence living, rather than leading mankind's charge into the future. But if the world as a whole were as wealthy as the U.S. and were devoting the same share of population to research and development, there would be more than five times as many scientists and engineers worldwide.
In short, many of the American protectionists of today will one day be alive thanks to Chindian technology. Markets are short on poetic justice, but long on irony.


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COMMENTS (2 to date)
KDeRosa writes:
But if the world as a whole were as wealthy as the U.S. and were devoting the same share of population to research and development, there would be more than five times as many scientists and engineers worldwide.

Presently this is not a valid assumption. Engineers and scientists are drawn from the small group of high IQ, specifically high math IQ, persons at the right tail of the distribution. Having a low math IQ, basically excludes you from pursuingthese fields of study, much like being short excludes you from a career in the NBA.

The mean IQ outside the western world is considerably lower than it is in the western world and, for that matter, we've probably brain drained at least some of the high IQ talent that exists from non-western countries already. So, the supply of high IQ people needed to sustain all these budding engineers and scientists does not exist in outside of the western countries. The pool of qualified people is going to be considerably smaller (per capita) than the current pool and the end result will be less engineers and scientists per capita than the present number. The supply is simply not there.

Now, poverty is a harsh envirnmental factor that depresses IQ, but lifting these people out of poverty will not bridge the current IQ gaps. We see these gaps persist today even in the west where poverty is far less severe.

N. writes:

...but we don't need to know exact numbers to recognize that increasing wealth worldwide will lead to an increase in scientists and engineers, not to mention the market for innovation. All the excitement is at the margin!

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