People like Tyler Cowan, for example, predict a diminished trajectory for GDP growth because our economy is not innovating as well as it once did. According to Cowan, our latest inventions have a far smaller impact on future wealth creation than did those of a century ago. This conclusion feeds into his standard right wing cry for freeing up enterprise and the reduction of social entitlement programs. He says we cannot afford those programs because of the diminished future, and if we want to move the growth curve back upwards we need to reduce government controls.
But my narrative produces a different interpretation: the cause of our diminished future resides in the private sector’s single minded pursuit of profit being extracted from efficiency rather than from innovation. We have succeeded mightily in squeezing profits from our current set of ideas. But at the cost of thinking about and finding the innovations that build the future.
We have become overly bureaucratic, technocratic, and reliant on primary knowledge.
I think the Golden Age of Human Capital is yet to come. The age of problem solving, that is. Not the age of rote learning.Real-World Economics Review Blog
Human capital – The knowledge dimension
Peter Radford
Peter Radford's analysis is interesting to compare with Joseph Schumpeter in Capitalism, Socialism and Democracy. Schumpeter saw the failure of capitalism based on economic liberalism and its replacement by social democracy as coming from the decline of entrepreneurship and innovation. His work is dated in that the context and changed greatly so the path that Schumpeter predicted based on then current trend has shifted considerably.
The path that Peter Radford describes is characterized by a push for efficiency and cost-cutting over innovation and entrepreneurship. This has become the driving force in US business. While Radford foresees a resurgence of innovation and entrepreneurship, the evidence is thin. Instead what we are seeing is the social reaction that Schumpter foresaw, but for different reasons.
It is not government responding to popular desire that is causing the shift away from innovation and entrepreneurship, but rather it is the current business model based on efficiency that is resulting in social unrest and a call for greater social democracy to deal with the effects of inequality, which the wealthy and powerful brush off as class envy if they are even aware of it, being isolated in a bubble.
