You claim to be an economist, and yet you spout at least 2 major economic fallacies, the 'lump of labour' one being the classic one.
Zav wrote: Valuethinker wrote:
Sorry, I am an economist. We tend too assume to much, and one thing we always assume too much is our assumption that everyone readily understands our terms :lol:
A macro innovation is something that is so revolutionary that it completely changes the entire landscape. A good example is a virtually costless energy source or light technology.
I am not saying that these are panaceas. But, they would help substantially.
Now I am really confused. Economists AFAIK do not distinguish between 'macro' and 'micro' innovations. All innovations are 'micro'.
We have instantaneous and virtually costless telecommunications. *that* is an incredible innovation over 50 years ago. Over even 25 years ago in fact-- the cost of a long distance call has fallen by 90-100% (100% fall if we consider Skype).
Light technology has increased more or less 10 fold in 20 years. That's pretty damned good.
Even a highly mature technology like the motor car is 30-50% more efficient than it was 20 years ago. That improvement has manifested itself as greater horsepower and acceleration, and a greater degree of standard equipment (airbags, ESC, anti lock brakes, stereos, air con etc.) but it's there. The hedonic improvements are massive.
Artificial joint replacements are commonplace now, contrast that to 25 years ago. Or heart bypasses.
Think about online stockbroking, or banking, or WalMart's distribution chain. Compare that to 30 years ago.
Or just universal bar coding. And now, you can scan a bar code in a store, and order the same item off the web at a cheaper price.
Yes probably the biggest innovation of the postwar years was containerization and that was mostly done by the early 1980s, but intra modal transport has grown by leaps and bounds, and that's fundamentally a follow on from containerization.
Track the amount of high speed rail in use in the world vs. 30 years ago. 30 years ago we did not yet have the French TGV. Now most major countries in the world (save the USA) have high speed rail lines travelling at 150mph+.
Britain produces *more* industrial output than it did 20 years ago, but with something like half the workers.
The examples I have given are all pretty good examples of increases in Total Factor Productivity in the last 30 years.
Economists rarely talk about micro innovations because they are exceptionally rare. Anyways, I think you are missing the point. I never said that we are not innovating. I am merely stating that we have the potential to do so much more.
A very basic economic fallacy that there is some 'lump of work' which if fewer people do it, leaves more unemployment.
In fact we have personal trainers, web developers, feng shui consultants, personal shoppers, nannies, housecleaners, gardeners....
the list is endless. Robot repairmen? Look at the percentage of household budgets spent now paying other people to cook (eating out or takeaway) vs. eating at home 40 years ago.
Note also working hours may have risen in America (data not entirely clear) but, largely, they have not in western Europe outside the UK.9
So, you are saying that we should not worry because, for example, unemployed engineers can work as a robot repairmen?
Setting aside your straw man about what I said (see Alan Blinder for genuine economic worrying about outsourcing) the reality is that yes, those unemployed coal workers (or their children) have gotten jobs in call centres-- studies show the Leeds accent is the most trusted in England, and that is Yorkshire, the centre of the former 500,000 man coal mining industry (now under 20,000). No surprise, Yorkshire is now a centre for call centre activity in the UK.
Consider the economy of Atlanta or Phoenix against the economy of Scranton Pennsylvania. The one emblematic of the rust belt, the other two of the growing Sun Belt.
There is no finite 'lump of labour' an economy can always find uses for slack resources-- however the current period is typical of post bubble shocks (in that there is sustained unemployment at below equilibrium, due to price and wage rigidity and confidence issues). That's not to say that there is not structural unemployment (wrong people, wrong jobs, wrong places) of that losing your job at GM and taking one at WalMart is not personally a serious financial problem both in salary, healthcare and benefits. But there are, or there can be, jobs down to full employment when the economy is functioning normally. It's not a shortage of innovation-- Cisco, WalMart etc. are innovating all the time.
You still have not defined 'micro innovations' vs. 'macro innovations'. Terminology I have certainly never heard.
All innovations are by definition micro. It is hard to measure their impact on the macroeconomic level (see Robert Gordon, the doyen of same). But it's clearly there. The economy of 100 years ago barely had motor cars, did not have telephones, universal electricity, aviation, containers (the US used to have something over 500,000 port workers, handling a volume of trade a fraction of the current one), the internet etc. etc. etc. Let alone the improvements in disease treatment: polio and smallpox anyone?
We could not argue the US economy is the same as it was 100 years ago-- it is completely transformed by technological and social innovation.
As to untapped innovations:
- it's not at all clear that there are strong barriers to innovation in private sector activity (public sector is another matter BUT the US Department of Defence is a technological leader-- aviation, atomic power and now things like drones; the VA is a significant innovator in healthcare delivery and patient management)
- the big unadapted innovations (like single payer healthcare) are unadapted because of institutional barriers. And if they were adapted, the US economy might do better, but big chunks of the US stock market might do worse. Every big change brings winners and losers, and it tends to lower profit margins
I am aware there is a current in the literature that innovation is falling (it's all about measurement of patent rates etc.) *howevever* I am not convinced by that thread and evidence, I think there are significant measurement issues, changes in patent legislation etc.
Big technological swings take decades. Consider the internet, designed in the mid 1960s. It's only in the last 10 years or so that it has begun to have a real impact.
Online sales are still c. 5% of total retail sales I believe. End to end supply chain reconfiguration is still not universal.
Containerization is more or less 100% of world goods trade (ex bulk commodities). That took 40 years or so to achieve- -and, in fact, the Vietnam war was a huge driver (whatever one says about William C. Westmoreland, he was a logistician-- the US could not get the supplies to the 500,000 troops in the 'Nam, and so the US military backed one of the first containerization entrepreneurs to do it-- war is an important stimulus to innovation, as the last 10 years will prove in drone technology and robotics at the very least*).
As always, I counsel to read David Egerton ("Shock of the Old") it's not the innovation that matters so much, it is the *adoption*. Most of the key inventions of the 14th-15 century had been invented in China centuries earlier (printing press etc.) but they did not see widespread adoption.
If you look at the speed of spreadout of something like shale gas, or CCGT, it really is quite striking: 0 to 100% in less than 25 years. That's an incredible rate of change.
Technological change gets embedded in an economy via investment. That takes decades. And changing working practices takes longer. Henry Ford introduces the per hour wage in 1910 (1914?) and in the late 1960s British Leyland in the UK is still paying by piecework (see 'The Machine that Changed the World')-- that's a 60 year time lag for a basic organisational practice.
* i Robot makes a cute vaccuum cleaner robot, but it's a toy. I believe the core of its business has been in supplying bomb robots to the US military. The technological innovation of the IED begats the robot, and so the spiral of innovation and response in war continues....