Innovation Is Not Enough

By Dani Rodrik – We seem to be living in an accelerated age of revolutionary technological breakthroughs. Barely a day passes without the announcement of some major new development in artificial intelligence, biotechnology, digitization, or automation.

The debate is about whether these innovations will remain bottled up in a few tech-intensive sectors that employ the highest-skilled professionals and account for a relatively small share of GDP, or spread to the bulk of the economy.

The consequences of any innovation for productivity, employment, and equity ultimately depend on how quickly it diffuses through labor and product markets.

The economic historian Robert Gordon argues that today’s innovations pale in contrast to past technological revolutions in terms of their likely economy-wide impact.

Electricity, the automobile, airplane, air conditioning, and household appliances altered the way that ordinary people live in fundamental ways. They made inroads in every sector of the economy.

Perhaps the digital revolution, impressive as it has been, will not reach as far.

On the supply side, the key question is whether the innovating sector has access to the capital and skills it needs to expand rapidly and continuously.

In a world of premature deindustrialization, achieving economy-wide productivity growth becomes that much harder for low-income countries. It is not clear whether there are effective substitutes for industrialization. more> https://goo.gl/XAB6Ti

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