Category Archives: Economic development

Eleven facts about innovation and patents

By Jay Shambaugh, Ryan Nunn, and Becca Portman – It is difficult to overstate the importance of technological progress for living standards. Consider the example of Argentina and Austria, as shown in figure A. These countries have roughly the same level of per capita inputs (labor and capital), but there is a vast gulf between them in economic output: Austria’s per capita income is more than double Argentina’s.

Labor and capital play vital roles in generating economic output and helping to explain differences in national incomes, but large disparities in per capita national income—in other words, national living standards—are due to the various ways that economies use their resources, and not just to the quantities of resources available.

In the language of growth accounting, total factor productivity (TFP) is the measure of how effective an economy is at producing economic output with a given amount of inputs. Across developed and developing economies, the majority of per capita income differences are due to total factor productivity variation (Hall and Jones 1999; Klenow and Rodríguez-Clare 1997).

In other words, most of per capita income differences are not explained by differences in available capital and labor. Moreover, sustained growth over time in per capita incomes requires growth in TFP (Solow 1957). Without technological progress, increases in labor and capital have a bounded potential to raise per capita income. more>

A Nobel laureate explains why we get the bad economic policies we deserve

BOOK REVIEW

Economics for the Common Good, Author: Jean Tirole.

By Eshe Nelson – The relationship between economics and politics is starting to unravel. Over the past year, many have sought to explain Brexit, the election of Donald Trump, and the rise of far-right and far-left politics in Europe using economic arguments. But it’s becoming clear that economics alone does not explain the situation. If the questions at the root of public life are no longer answered by the famous political dictum, “It’s the economy, stupid,” where does that leave economists?

First we have to make sure people respect intellectuals. For that, the intellectuals have to do the right thing. Then, you have to limit frustrations. People who voted for Trump, or Brexit, or Le Pen and Mélenchon in France are by and large very concerned about their future with robots, with rising debts, with inequality and unemployment. We have neglected some people, the losers of globalization, and we have a society that’s more and more unequal. It might get worse, unfortunately, with new technology.

When people are afraid or upset, they also tend to dismiss their current governments and the experts. They want a big change, which is often supplied by populists who offer fairytales and the wrong policies. People are trying to grab something that will give them hope.

.. No, we are not moving in the right direction. more>

Network industry is operating on flawed foundational principles


By George Mattathil – In a nutshell, the current situation with cyber security [2] is the direct result of the developments during the the “internet bubble,” in the 1990s. Collapse of the Bell Labs permitted the unchecked growth of the “internet bubble” and related hype.

The divestiture and the collapse of the Bells Labs left a vacuum for network technology leadership, that was substituted by hype that surrounded the “internet mania.” As a result, current network industry is operating on flawed foundational principles.

This added to the deficiencies in economic decision systems for (network) technology adoption, with the results we are seeing today: cyber security [2] challenges, internet malware [2] attacks and political controversies [2].

One of the consequences of the flawed network foundations is that the Broadband [2] adoption (which includes IoT) is progressing much slower than it could.

Another side effect is that ongoing network deployments are architecturally incoherent, resulting in enhanced complexity and cost. more>

Updates from Georgia Tech

Imaging Technique Unlocks the Secrets of 17th Century Artists
By John Toon – The secrets of 17th century artists can now be revealed, thanks to 21st century signal processing. Using modern high-speed scanners and the advanced signal processing techniques, researchers at the Georgia Institute of Technology are peering through layers of pigment to see how painters prepared their canvasses, applied undercoats, and built up layer upon layer of paint to produce their masterpieces.

The images they produce using the terahertz scanners and the processing technique – which was mainly developed for petroleum exploration – provide an unprecedented look at how artists did their work three centuries ago. The level of detail produced by this terahertz reflectometry technique could help art conservators spot previous restorations of paintings, highlight potential damage – and assist in authenticating the old works.

Beyond old art, the nondestructive technique also has potential applications for detecting skin cancer, ensuring proper adhesion of turbine blade coatings and measuring the thickness of automotive paints.

Without the signal processing, researchers might only be able to identify layers 100 to 150 microns thick. But using the advanced processing, they can distinguish layers just 20 microns thick. Paintings done before the 18th century have been challenging to study because their paint layers tend to be thin, Citrin said. Individual pigments cannot be resolved by the technique, though the researchers hope to be able to obtain that information in the future. more>

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An Economic Sugar High


By Andrew Soergel – As recently as Wednesday, President Donald Trump was quoted during a Cabinet meeting as saying he sees “no reason why we don’t go to 4 percent, 5 percent and even 6 percent” gross domestic product expansion in the months and years ahead.

Economists have broadly doubted these claims – though few quibble with the idea that the GOP-constructed tax plan would have a modestly positive impact on markets and the economy over the near term. Analyses from the Joint Committee on Taxation, the Tax Policy Center and the University of Pennsylvania’s Wharton Budget Model have all predicted a final bill, in a best case scenario, would add a few fractions of a percentage point to the country’s GDP growth rate over the course of the next 10 years.

A growing number of experts are using the term “sugar high” to describe what the tax bill is likely to do to the U.S. economy – provide some short-term energy for growth before petering out or, even worse, pushing the country toward a crash. more>

The Costly Zero Sum Game That’s Fueling The Skills Gap

By Jake Schwartz – Bureau of Labor Statistics estimates suggest, for example, that there will be 1 million more computing jobs than applicants to fill them by 2020.

Of course, the skills gap is about more than just supply and demand. It stems from what economists call “friction,” exacerbated by megatrends like the shrinking shelf life of skills and persistent equity gaps in K-12 and higher education systems struggling to keep up with the pace of change. But it also reflects decades of self-inflicted wounds within corporate America.

I’ve observed three troubling drivers of the economic friction fueling the skills gap:

  1. a surprising lack of visibility and long-term planning around concrete skill and talent needs within the enterprise;
  2. incredible inertia around and adherence to old-school hiring practices that perpetuate growing equity gaps through a search for new skills in conventional places; and
  3. a tendency to misplace hope that our higher education and workforce development systems can somehow “solve” the problem with minimal corporate involvement or responsibility.

Imagine the possibilities if just a fraction of that spending was allocated to investments in re-skilling existing workers.

And yet, corporate training fads, from an obsession with online training (it’s cheaper), to a belief that all employees should spend their off-hours being “self-guided learners,” only exacerbate the delta between average investments in talent acquisition ($20,000 to $40,000 per head) and corporate training ($1,000 per person per year). more>

Humanity’s fight against climate change is failing. One technology can change that.

By Akshat Rathi – The optimism surrounding renewable energy masks some harsh realities. Despite decades of progress, about 80% of the world’s energy still comes from fossil fuels—the same as in the 1970s. Since then, we’ve kept adding renewable capacity, but it hasn’t outpaced the growth of the world’s population and its demand for energy.

Today, about 30% of total world energy (and 40% of the world’s electricity) is supplied by coal, which emits more carbon dioxide per unit of energy produced than nearly any other fuel source.

The hugely valuable oil and gas industries, accounting for 33% and 24% of total world energy use, respectively, are also entrenched. “Based on what we know now, we would need major technological breakthroughs or weak world growth, including for large emerging and developing economies, for oil demand to peak in the next 20 years,” says Gian Maria Milesi-Ferretti of the International Monetary Fund. Despite the growth in electric vehicles, most oil companies agree that peak oil is “not in sight.”

If you’re still not convinced, consider this: there are a handful of industries essential to the modern way of life that generate large amounts of carbon dioxide as a side product of the chemistry of their manufacturing process. These carbon-intensive industries—including cement, steel, and ethanol—produce about 20% of all global emissions.

If we want to keep using these products and reach zero emissions, the only option is to have these industries deploy carbon capture. more>

Don’t be fooled by China’s grand plan to rule the world

By Gwynn Guilford – The “China is taking over the world” meme is a perennial one.

As usual, this argument overlooks what’s happening within China’s borders. That includes: a credit-driven growth model that has left debt growing faster than the economy, the continued dominance of inefficient state-owned enterprises (SOEs) at the expense of dynamic private firms, and a fiscal system that depends on a housing bubble to sustain it.

David Ignatius bemoans the rail line buildout connecting China to Europe and Eurasia while bypassing US-controlled sea lanes, but by exporting its short-term growth formula for wasteful investments abroad, Xi Jinping is compounding the already huge risk that befouls China’s financial system.

Thanks to China’s size, running even a slight surplus means foisting massive deficits on its trade partners, as well as the debt and unemployment that accompany those, as we’ve argued before. And as Xi’s goal of self-sufficiency and manufacturing-export dominance—articulated in the Made in China 2025 plan, which focuses on Chinese dominance of artificial intelligence, robotics, and other high-tech sectors—makes clear, it’s not just BRI (Belt and Road Initiative) countries that will be on the receiving end of Chinese mercantilism.

The core problem for China is: Power doesn’t guarantee competence. And Xi’s handling of the domestic economy in the past half-decade suggests a dearth of the latter. more>

Why The World Is Getting Better And Why Hardly Anyone Knows It

By Steve Denning – Read the news and you can see that the world is going to hell in hand-basket—and fast! Terrorism, nuclear weapons, economic stagnation, social unrest, autocratic leaders, structural unemployment, deskilling, growing hopelessness, the opioid epidemic, increasing inequality, xenophobia, economic migrations, recessions, financial bubbles and crashes, recessions, depressions—the list goes on.

And yet the facts show otherwise. In a powerful study entitled “The short history of global living conditions and why it matters that we know it” by Max Roser, an economist at the University of Oxford and the founder of Our World in Data, we learn that on virtually all of the key dimensions of human material well-being—poverty, literacy, health, freedom, and education—the world is an extraordinarily better place than it was just a couple of centuries ago.

  1. Poverty – 1950 75% of the world were still living in extreme poverty. But today, those living in extreme poverty are now less than 10%.
  2. Literacy – world population that is literate over the last 2 centuries has gone from a tiny elite to a world where 8 out of 10 people can read and write.
  3. Health – In 1800, more than 40% of the world’s newborns died before the age of five. Now only a tiny fraction die before the age of five.
  4. Freedom – In the 19th Century almost everyone lived in autocratically ruled countries. Today more than half the global population lives in a democracy.
  5. Population – Global life expectancy doubled just over the last hundred years.
  6. Education – All these gains were enabled by improvements in knowledge and education. There will never be more children on the planet than today.

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Updates from GE

By Maggie Sieger – When Hong Kong started planning a road tunnel 50 meters (164 feet) below sea level in 2012, local engineers had to find a way to keep the cutters in the massive boring shield in shape and the blades sharp enough to cut stone. Workers would squeeze between the shield, which is 17 meters in diameter, and the living rock to inspect the business end of the machine — a tight spot the Hong Kong team wanted to avoid as much as possible.

The founders of OC Robotics, a U.K.-based builder of “snake arm” robots, thought they could help. They suggested replacing the human inspectors entirely with OC’s innovative machines that can thread their 6-foot-long mechanical limbs into tight spots.

Today, an OC robot not only inspects the shield but also cleans it with a high-pressure water jet and measures the sharpness of the cutting surface with a laser. “This is faster and easier, and it keeps people safe,” says Andrew Graham, OC Robotics co-founder.

The robot’s dexterity and skills so impressed engineers from GE Aviation that they acquired OC Robotics last summer. The company believes snake-arm robots will be useful for jet engine maintenance, allowing workers to do as much work with the engine still on the wing as possible. That’s because removing an engine not only takes time, but also could take a plane out of service for days, impacting an airline’s bottom line. more>