Archive for the ‘General’ Category

Innovation, research, and the UK’s productivity crisis – part 3

Thursday, August 27th, 2015

This the third and final in a series of three posts. The first part is here, and this follows on directly from part 2

(Added 2/9/2015: For those who dislike the 3-part blog format, the whole article can be downloaded as a PDF here: Innovation, research and development, and the UK’s productivity crisis).

Quantifying the productivity benefits of research and development

The UK’s productivity problem is an innovation problem. This conclusion follows from the analysis of Goodridge, Haskel and Wallis, at least if one equates the economist’s construction of total factor productivity with innovation. This needs some qualification, because when economists talk about innovation in this context they mean anything that allows one to produce more economic output with the same inputs of labour and capital. So this can result from the development of new high value products or new, better processes to make existing products. Such developments are often, but not always, the result of formal research and development.

But there are many other types of innovation. People continually work out better ways of doing things, either as a result of formal training or simply by learning from experience, they act on suggestions from users, they copy better practises from competitors, they see new technologies in action in other sectors and apply them in their own, they work out more effective ways of organising and distributing their work; all these lead to total factor productivity growth and count as innovation in this sense.

There has been a tendency to underplay the importance of formal research and development in recent thinking about innovation, particularly in the UK. (more…)

Innovation, research, and the UK’s productivity crisis – part 2

Tuesday, August 25th, 2015

This the second in a series of three posts, and continues directly from part 1.

Analysing the UK’s productivity slow-down

There are many theories of why the UK’s productivity growth has stalled, and in the absence of proper analysis it’s all too easy to chose a favoured hypothesis on the basis of anecdotes or a single data point, picked out to fit one’s ideological predilections. Indeed, I could be accused of doing just that, by drawing attention the UK’s weak R&D record; others might immediately start looking at a lack of competitiveness in the economy, or insufficient deregulation, as the root of the issue. But it would be surprising if such a striking occurrence had just a single cause, so a more careful analysis should help us not just by ruling possible causes in or out, but by ascribing different weights to multiple causes.

A better analysis needs both to consider what we mean by productivity and its different causes in more detail, and to look at the economy on a finer scale, looking both at the productivity performance of different sectors and the balance in the economy between those different sectors. (more…)

Innovation, research and development, and the UK’s productivity crisis – part 1

Monday, August 24th, 2015

This is the first of a series of three posts in which I bring together some thinking and reading I’ve been doing about the UK’s current productivity problem, and its relationship to innovation and to research and development.

(Added 2/9/2015: For those who dislike the 3-part blog format, the whole article can be downloaded as a PDF here: Innovation, research and development, and the UK’s productivity crisis)

In part 1, here, I take stock of the scale of the UK’s productivity problem and discuss why it matters so much, both economically and politically. Then I’ll set the context for the following discussion with a provocative association between productivity growth and R&D intensity.

In part 2, I’ll review what can be said with more careful analyses of productivity, looking at the performance of individual sectors and testing some more detailed explanations of the productivity slowdown. I’ll pick out the role of declining North Sea oil and gas and the end of the financial services bubble in the UK’s poor recent performance; these don’t explain all the problem, but they will provide a headwind that the economy will have to overcome over the coming years.

Finally in part 3 I’ll return to a more detailed discussion of innovation in general and the particular role of R&D, finishing with some thoughts about what should be done about the problem.

The scale of the UK’s productivity problem

The UK’s current stalling of productivity growth is probably the UK’s most serious current economic problem. In terms of output per hour, the last five years’ productivity performance has been by far the worst period in the last 45 years. Many other developed economies have had disappointing productivity growth in recent years, but the UK’s record is particularly bad. Amongst other developed economics, only Luxembourg and Greece have done worse since 2007, according to a recent OECD report on the future of productivity (see table A2, p83).

labourproductivity
Labour productivity since 1970. The fit is an exponential corresponding to constant growth of 2.3% a year. ONS data.

My plot shows the UK’s labour productivity – defined as the GDP generated per hour worked – since 1971. (more…)

I chose to graduate

Thursday, August 20th, 2015

I’m sure there are some people who, very early on in their lives, work out what they want to do and then set out single-mindedly to achieve their aims. For the rest of us, choices are made and paths are set without us really being conscious of those junctions, so we look back and wonder how was it that our lives unfolded in this way and not in another. And yet, looking back, we sometimes can see moments, or short periods, that were decisive in setting us down one path and cutting off other possibilities. For me, the summer of 1982 was the time that determined that I was going to end up being a scientist, and to some extent what sort of scientist I would end up being, though I don’t suppose at any moment at the time I had any idea that this was the case.

Mont Blanc du Tacul

The East Face of Mont Blanc du Tacul, a 4,248 m peak in the French Alps

It began on the bus to Chamonix, in the French Alps, in the summer vacation after my second year at University. (more…)

Does transhumanism matter?

Tuesday, April 7th, 2015

The political scientist Francis Fukuyama once identified transhumanism as the “the world’s most dangerous idea”. Perhaps a handful of bioconservatives share this view, but I suspect few others do. After all, transhumanism is hardly part of the mainstream. It has a few high profile spokesmen, and it has its vociferous adherents on the internet, but that’s not unusual. The wealth, prominence, and technical credibility of some of its sympathisers – drawn from the elite of Silicon Valley – does, though, differentiate transhumanism from the general run of fringe movements. My own criticisms of transhumanism have focused on the technical shortcomings of some of the key elements of the belief package – especially molecular nanotechnology, and most recently the idea of mind uploading. I fear that my critique hasn’t achieved much purchase. To many observers with some sort of scientific background, even those who share some of my scepticism of the specifics, the worst one might say about transhumanism is that it is mostly harmless, perhaps over-exuberant in its claims and ambitions, but beneficial in that it promotes a positive image of science and technology.

But there is another critique of transhumanism, which emphasises not the distance between transhumanism’s claims and what is technologically plausible, as I have done, but the continuity between the way transhumanists talk about technology and the future and the way these issues are talked about in the mainstream. In this view, transhumanism matters, not so much for its strange ideological roots and shaky technical foundations, but because it illuminates some much more widely held, but pathological, beliefs about technology. The most persistent proponent of this critique is Dale Carrico, whose arguments are summarised in a recent article, Futurological Discourses and Posthuman Terrains (PDF). Although Carrico looks at transhumanism from a different perspective from me, the perspective of a rhetorician rather than an experimental scientist, I find his critique deserving of serious attention. For Carrico, transhumanism distorts the way we think about technology, it contaminates the way we consider possible futures, and rather than being radical it is actually profoundly conservative in the way in which it buttresses existing power structures.

Carrico’s starting point is to emphasise that there is no such thing as technology, and as such it makes no sense to talk about whether one is “for” or “against” technology. On this point, he is surely correct; as I’ve frequently written before, technology is not a single thing that is advancing at a single rate. There are many technologies, some are advancing fast, some are neglected and stagnating, some are going backwards. Nor does it make sense to say that technology is by itself good or bad; of the many technologies that exist or are possible, some are useful, some not. Or to be more precise, some technologies may be useful to some groups of people, they may be unhelpful to other groups of people, or their potential to be helpful to some people may not be realised because of the political and social circumstances we find ourselves in. (more…)

Responsible innovation and irresponsible stagnation

Sunday, November 16th, 2014

This long blogpost is based on a lecture I gave at UCL a couple of weeks ago, for which you can download the overheads here. It’s a bit of a rough cut but I wanted to write it down while it was fresh in my mind.

People talk about innovation now in two, contradictory, ways. The prevailing view is that innovation is accelerating. In everyday life, the speed with which our electronic gadgets become outdated seems to provide supporting evidence for this view, which, taken to the extreme, leads to the view of Kurzweil and his followers that we are approaching a technological singularity. Rapid technological change always brings losers as well as unanticipated and unwelcome consequences. The question then is whether it is possible to innovate in a way that minimises these downsides, in a way that’s responsible. But there’s another narrative about innovation that’s growing in traction, prompted by the dismally poor economic growth performance of the developed economies since the 2008 financial crisis. In this view – perhaps most cogently expressed by economic Tyler Cowen – slow economic growth is reflecting a slow-down in technological innovation – a Great Stagnation. A slow-down in the rate of technological change may reassure conservatives worried about the downsides of rapid innovation. But we need technological innovation to help us overcome our many problems, many of them caused in the first place by the unforeseen consequences of earlier waves of innovation. So our failure to innovate may itself be irresponsible.

What irresponsible innovation looks like

What could we mean by irresponsible innovation? We all have our abiding cultural image of a mad scientist in a dungeon laboratory recklessly pursuing some demonic experiment with a world-consuming outcome. In nanotechnology, the idea of grey goo undoubtedly plays into this archetype. What if a scientist were to succeed in making self-replicating nanobots, which on escaping the confines of the laboratory proceeded to consume the entire substance of the earth’s biosphere as they reproduced, ending human and all other life on earth for ever? I think we can all agree that this outcome would be not wholly desirable, and that its perpetrators might fairly be accused of irresponsibility. But we should also ask ourselves how likely such a scenario is. I think it is very unlikely in the coming decades, which leaves for me questions about whose purposes are served by this kind of existential risk discourse.

We should worry about the more immediate implications of genetic modification and synthetic biology, for example in their potential to make existing pathogens more dangerous, to recreate historical pathogenic strains, or even to create entirely new ones. (more…)

What the UK government should do about science and innovation

Wednesday, November 12th, 2014

I have a new post up at the Sheffield Political Economy Research Institute’s blog – Rebuilding the UK’s innovation economy. It’s a more tightly edited version of my earlier post on Soft Machines with the same title.

Rebuilding the UK’s innovation economy

Friday, July 18th, 2014

The UK’s innovation system is currently under-performing; the amount of resource devoted to private sector R&D has been too low compared to competitors for many years, and the situation shows no sign of improving. My last post discussed the changes in the UK economy that have led us to this situation, which contributes to the deep-seated problems of the UK economy of very poor productivity performance and persistent current account deficits. What can we do to improve things? Here I suggest three steps.

1. Stop making things worse.
Firstly, we should recognise the damage that has been done to the countries innovative capacity by the structural shortcomings of our economy and stop making things worse. R&D capacity – including private sector R&D – is a national asset, and we should try and correct the perverse incentives that lead to its destruction. (more…)

Why R&D matters

Friday, May 9th, 2014

The takeover bid for the UK/Swedish pharmaceutical company AstraZeneca by US giant Pfizer has given rare political prominence to the issue of UK-based research and development capacity. Underlying much opposition to the deal is the fear that the combined entity will seek to cut costs, and that R&D expenditure will be first in the firing line. This fear is entirely well-founded; since Pfizer took over Wyeth in 2009 it has reduced total R&D spend from $11bn to $6.7bn, and in the UK Pfizer’s cost-cutting reputation was sealed by the closure of its Sandwich R&D facility in 2011. Nor is the importance of AstraZeneca to UK R&D capacity overstated. In the latest EU R&D scoreboard, of the top world 100 companies by R&D expenditure, only 2 are British. One of these is AstraZeneca, and the other GSK. And, if the deal goes ahead and does result in a significant reduction in UK R&D capacity, it wouldn’t be an isolated event. It would be the culmination of a 30 year decline in UK business R&D intensity, which has taken the UK from being one of the most R&D intensive economies in the developed world, to one of the least.

My recent paper “The UK’s Innovation Deficit and How to repair it” analysed this decline in detail and related it to changes in the wider political economy. One response I’ve had to the paper was to regard this decline in R&D intensity as something to be welcomed. In this view, R&D is a legacy of an earlier era of heavy industry and monolithic corporations, now obsolete in a world of open innovation, where valuable intellectual property is more likely to be a brand identity than a new drug or a new electronic device.

I think this view is quite wrong. This doesn’t mean that I think that those kinds of innovation that arise without formal research and development are not important; innovations in the way we organise ourselves, to give one example, can create enormous value. Of course, R&D in its modern sense is just such a social innovation. (more…)

The economics of innovation stagnation

Saturday, May 3rd, 2014

What would an advanced economy look like if technological innovation began to dry up? Economic growth would begin to slow, and we’d expect the shortage of opportunities for new, lucrative investments to lead to a period of persistently lower rates of return on capital. The prices of existing income-yielding assets would rise, and as wealth-holders hunted out increasingly rare higher yielding investment opportunities we’d expect to see a series of asset price bubbles. As truly transformative technologies became rarer, when new technologies did come along we might see them being associated with hype and inflated expectations. Perhaps we’d also begin to see growing inequality, as a less dynamic economy cemented the advantages of the already wealthy and gave fewer opportunities to talented outsiders. It’s a picture, perhaps, that begins to remind us of the characteristics of the developed economies now – difficulties summed up in the phrase “secular stagnation”. Could it be that, despite the widespread belief that technology continues to accelerate, that innovation stagnation, at least in part, underlies some of our current economic difficulties?

G7 Real GDP per capita plot
Growth in real GDP per person across the G7 nations. GDP data and predictions from the IMF World Economic Outlook 2014 database, population estimates from the UN World Population prospects 2012. The solid line is the best fit to the 1980 – 2008 data of a logistic function of the form A/(1+exp(-(T-T0)/B)); the dotted line represents constant annual growth of 2.6%.

The data is clear that growth in the richest economies of the world, the economies operating at the technological leading edge, was slowing down even before the recent financial crisis. (more…)