Arnold Kling  

Innovations and Resistance

David Friedman on Markets vs. ... The One-Party State...

Matt Rognlie writes,

an Apple or Google could come along and bargain with several national newspapers to assemble a cheap bundle of online subscriptions. Since the bundler would have a very strong incentive to provide a reasonable price for customers, it would put in the effort to determine what each paper really contributed.

This is not a new idea. See The Club vs. the Silo, which I wrote ten years ago.

Thanks to Tyler Cowen for the pointer. However, I want to say that this example helps explain why I am skeptical of the Great Stagnation thesis. Innovation does not come in "aha" moments. The innovations that are needed to deal with "information wants to be free, but people need to get paid" have still not matured. We are still arguing about the same possible business models we were arguing about when Varian and Shapiro wrote Information Rules. What looked like low-hanging fruit back then has still not been picked.

While I'm at it, let me reiterate that Tyler is playing things both ways in TGS. On the one hand, he wants to complain about a lack of productivity. On the other hand, he wants to complain about a lack of job creation. I buy into the view that we have been seeing a high ratio of job destruction to job creation. But to me that is a symptom of ongoing innovation.

COMMENTS (5 to date)
ed writes:

Where does Tyler complain about lack of "job creation?" I believe he thinks we will return to full employment, and that in the long run the number of jobs depends on the number of workers. His complaint is that the sectors with high productivity growth have few jobs.

Lord writes:

Gross innovation vs net innovation? The permeation of existing innovations rather than the production of new ones. Destruction has been behind us for awhile. Creation is what has really been lagging. I don't think short term ZMP is that relevant to long term TGS though.

mgoodfel writes:

One of Tyler's points is that the notoriously unproductive health, education and government sectors have been growing fast during the post 1970 period. A lot of reviews seem to skip over this point, in favor of this "blame the nerds for lack of innovation" idea.

What's more, in the post-1970 period, we have seen huge productivity improvements. They've been in manufacturing, electronics and retail (big box stores). Computers alone have enabled outsourcing, global supply chains, global finance, various kinds of automation, from cars to ATMs to phone menus. We've created new industries like video gaming and the internet, and improved productivity of everything from publishing to movie making.

So I'm not convinced there's been any drop in innovation. And I think it's deliberate blindness to ignore the lack of productivity in health, education and government. We're paying more and more for even basic primary care and getting little for the money. We're paying more and more for education despite stagnant test scores and high dropout rates.

If you were looking for a productivity problem, why would you focus on technology (which has been booming) and not education/health care?

Because it's easier to blame the nerds for not innovating instead of blaming known black holes like education and health.

Doc Merlin writes:

I don't accept it, his conclusion is its on its face absurd (1), and also doesn't necessarily follow from his premises (2).

1) Innovation isn't something that just happens based on time and if we use up too much innovation now we will have less in the future. The more innovation we make now, easier it becomes to make more.

2) Just because we have a slow down in growth doesn't mean that its caused by what he claims. There are much simpler likely reasons. Bruce Yandle talks abut a couple of them here in his talk, although that isn't by any means the main focus of his talk.

In the shortish run (I mean like a generation or so) institutions matter so much more than technologic change, so I suspect that institutional and regulatory shifts are much more to blame than Tyler's lack of technological innovation.

Chris T writes:

Accounting for the relative shares of the economy of different industries and their individual productivity measures, now versus 'high growth' eras suggests it is more a failure of certain sectors to take advantage of technology rather than a slow down in technological innovation itself.

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