In Are Ideas Getting Harder to Find? (NBER Working Paper No. 23782), Nicholas Bloom, Charles I. Jones, John Van Reenen, and Michael Webb argue that, to maintain a given rate of economic growth, resources devoted to research must increase over time.
In many growth models, economic growth arises from people creating ideas, and the long-run growth rate is the product of two terms: the effective number of researchers and their research productivity.
The authors present a wide range of evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. They cite both aggregate evidence and measures of R&D productivity in specific industries, in particular computers, agriculture, and medicine.
A good example is Moore’s Law. The number of researchers required today to achieve the famous doubling every two years of the density of computer chips is more than 18 times larger than the number required in the early 1970s. Across a broad range of case studies at various levels of (dis)aggregation, they find that ideas — and in particular the exponential growth they imply — are getting harder and harder to find. Exponential growth results from the large increases in research effort that offset its declining productivity.
They argue that a single-minded focus on the quantity of undiscovered ideas is unhelpful. It is not just how many ideas for productivity growth are left, but what it would cost to get them out of the ground – and, crucially, how much we’re prepared to spend to do it. For a long time, geologists have been forecasting ‘peak oil’, only to be surprised by new deep-sea discoveries and shale oil. We, likewise, see a continuing stream of innovations. But, just as newer oil sources are increasingly costly to extract, coming up with new ideas is getting more expensive. There have been technological improvements, but these require the devotion of ever-growing amounts of resources to the research process to maintain steady rates of improvement
These days, pushing the frontier of knowledge out requires mastering an ever-larger body of knowledge, meaning that students have to stay longer in university, and researchers increasingly work in larger teams whose members are more specialised. This all pushes up costs. Returning to the oil metaphor, we are digging deeper into a trickier part of the rock.
Access to the article (pdf): Are Ideas Getting Harder to Find?
Commentary from the authors: Ideas aren’t running out, but they are getting more expensive to find
photo: Until our two activists and our members of the Catalonia Cabinet could come back to Catalonia and will be released from jail I'll publish a dark photo.
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