62 Finance & economics The EconomistFebruary 29th 2020
A
bout a decadeago, a few economists began asking whether
the rich world’s prolonged spell of lacklustre growth might
have something to do with a shortage of new ideas. Tyler Cowen of
George Mason University suggested that when it came to discov-
ery, humanity may well have plucked all of the low-hanging fruit.
Robert Gordon of Northwestern University scoffed at recent tech-
nological contributions, noting that none was nearly as important
to human welfare as the humble toilet. Progress since—in gene ed-
iting, artificial intelligence and even rocketry—seems impressive.
But the radical change and roaring growth enabled by the innova-
tions of the 19th and 20th centuries continue to elude rich econo-
mies. Before abandoning hope, though, it is worth considering
that it may be the motivation we provide our innovators, rather
than a shortage of ideas, that is the problem.
The argument that humanity has run out of big ideas (or nearly
so) makes a degree of intuitive sense. Fundamental forces of na-
ture, like the theory of electromagnetism, can only be discovered
and exploited once. Scanning through available evidence, it cer-
tainly seems like breakthroughs are ever harder to come by. In a pa-
per by Nicholas Bloom, Charles Jones and Michael Webb of Stan-
ford University, and John Van Reenen of the Massachusetts
Institute of Technology (mit), the authors note that even as discov-
ery has disappointed, real investment in new ideas has grown by
more than 4% per year since the 1930s. Digging into particular tar-
gets of research—to increase computer processing power, crop
yields and life expectancy—they find that in each case maintain-
ing the pace of innovation takes ever more money and people.
Humans, though, have mistakenly believed their understand-
ing of the universe to be complete many times before. In a new pa-
per by Jay Bhattacharya of Stanford University and Mikko Packalen
of the University of Waterloo, the authors quote the Nobel-win-
ning physicist Albert Michelson, who, in a speech in 1894, reck-
oned that “the more important fundamental laws and facts of
physical science have all been discovered”. Within a few years of
his remarks, theories of relativity and quantum mechanics revolu-
tionised physicists’ understanding of the universe. We do not
know what we do not know.
If there are more powerful ideas waiting to be discovered, whyis investment in new research experiencing such diminishing re-
turns? One factor could be the growing burden of knowledge. In-
tellectual progress has created a mound of know-how which must
be mastered before an innovator can even begin to push the fron-
tier forward. Benjamin Jones of Northwestern University has
found that the average age at which great scientists and inventors
produce their most important work rose by six years over the
course of the 20th century, thanks to the need for more early-life
investment in education. But although important thinkers begin
their careers later than they used to, they are no more productive
later in life. Education, while critical to discovery, shortens the
working lives of great scientists and inventors.
Yet it is also worth assessing the incentives researchers experi-
ence during their careers. Most of the benefits of new knowledge
flow to people other than those responsible for discovering it, such
as those who build on new ideas or make use of inventions. Societ-
ies therefore come up with ways to motivate researchers who
might otherwise labour at more self-serving tasks. Patents and
copyrights, for instance, grant creators temporary monopoly con-
trol over their work so they can capture at least some of the mone-
tary gains it generates. Universities and research institutes link
promotions and pay to research productivity, as measured by the
number of citations published papers receive. Prizes and awards
create additional incentives to do exceptional work.
But these schemes do not always have the desired effects. Intel-
lectual-property protections make it more difficult for others to
make their own contributions by building on prior work. Barbara
Biasi of Yale University and Petra Moser of New York University
studied the effects of an American wartime policy that allowed do-
mestic publishers to freely print copies of German-owned science
books. English-language citations of the newly abundant works
subsequently rose by 67%.Too closely linking career progress to
success in publishing can also skew behaviour. Over the past half
century, Messrs Bhattacharya and Packalen note, promotions and
pay for research scientists have increasingly been determined nar-
rowly by the numbers of citations their works have received. Such
metrics probably push research in a more conservative direction.
While novel research is more likely to be cited when published, it
is also far more likely to prove a dead end—and thus to fail to be
published at all. Career-oriented researchers thus have a strong in-
centive to work towards incremental advances rather than radical
ones. Similarly, Pierre Azoulay of mit, Gustavo Manso of the Uni-
versity of California, Berkeley, and Joshua Graff Zivin of the Uni-
versity of California, San Diego, find that medical researchers
funded by project-linked grants, like those offered by the National
Institutes of Health, an American government research centre, of-
ten pursue less ambitious projects, and thus produce break-
through innovations at a much lower rate, than researchers given
open-ended funding.The social sciences
Not all incentives must be material in nature. Some economic his-
torians, such as Joel Mokyr of Northwestern University, credit cul-
tural change with invigorating the innovative climate in industri-
alising Britain. A “culture of progress” made intellectual
collaborators of commercial rivals, who shared ideas and tech-
niques even as they competed to develop practical innovations.
Changing culture is no easy matter, of course. But treating innova-
tion as a noble calling, and not simply something to be coaxed
from self-interested drudges, may be a useful place to start. 7Free exchange Motive power
How to get more innovation bang for the research buck