Andrew Batson — Capacity to transform

Important. Andrew Batson summarizes Charles Kindleberger's insight into development in terms of ability to transform the economy — what promotes it and what hinders it.

Neoclassical economics assumes flexibility among the factors of production and also flexibility within them, resulting in immediate response to economic "laws," e.g., based on natural market forces that automatically generate spontaneous order (general equilibrium).

However, economic forces are not independent of social and political factors in society. Neoclassical assumptions generate an idealistic model that doesn't necessarily correspond to actual conditions. As a result there are market failures and idle resources.

There are different rates of transformational capacity and reasons for them. Charles Kindleberger considered them.

Andrew Batson's Blog
Capacity to transform

Andrew Batson

On the Economy — How Innovative Is China?

A few years ago, China overtook the U.S. and other innovative countries in terms of patent applications. More recently, it also became the leader in patent grants. But does this mean China is now the world leader in innovation? A recent Economic Synopsesessay explores this idea....

Short and informative.

FBRSL — On the Economy
How Innovative Is China?

macromon — Karl, The Comeback Kid?

Why do we think the world is about to see the resurrection of the “comrade culture club” over the next ten years? 

Make no mistake; there will be a visceral political reaction to the coming acceleration of labor disrupting technology. We got a little taste of it in the 2016 election.

Just wait until it hits the doctoring, lawyering, and accounting class....

Technology replaced the farmers. Now it is coming for the industrial workers and many types of service workers, too. Soldiers and sailors are also increasingly being replaced by robots and drones and that is set to take off.

What are the new redundant people going to do?

Global Macro Monitor
Karl, The Comeback Kid?
macromon

Eugene K. Chow — China May Have Solved the One Thing That Was Poised to Stop Its Military Rise

Chinese engineering has become so advanced that German jet engines could soon get a major boost from China.

Officials in China have begun talks to sell sophisticated aerospace technology and manufacturing equipment to Germany for the production of high-performance jet engines....

Discussions for the sale are still in the early stages, but even the possibility of an agreement with Germany, which created the world’s first production-ready jet engine and has long been revered for its design and manufacturing prowess, is a major victory for China as it seeks to shift its reputation away from cheaply made knockoffs to high-end innovation. 

China on track to follow Japan and South Korea?

The National Interest
China May Have Solved the One Thing That Was Poised to Stop Its Military Rise

Eugene K. Chow

Also

The Chinese Are on the Verge of Dominating a New Domain: Near Space

Robert Work | US deputy secretary of defense from 2014 to 2017

China Daily — Xi's bookshelf illustrates goal of developing AI powerhouse

Two books on President Xi Jinping's shelf drew public attention from both home and abroad immediately after they were seen in the video of Xi's New Year speech.

The two books were about artificial intelligence－The Master Algorithm: How the Quest for the Ultimate Learning Machine Will Remake Our World by Pedro Domingos and Brett King's Augmented: Life in the Smart Lane.

The Master Algorithm, published in 2015, describes how machine learning is remaking business, politics, science and war.

Augmented describes how society will be impacted by technologies that will change the world more in the next 20 years than it has been changed in the past 250 years....

Ecns

Xi's bookshelf illustrates goal of developing AI powerhouse

China Daily

The dragon spreads its wings.

Asia Times
Demand for AI talent in China doubles in 2017

China tops mobile game market worldwide

China aims to lead international industry standards

Anatoly Karlin — Chinese Science

China coming on strong. It still has a way to go though.

The Unz Review
Chinese Science

Anatoly Karlin

Kai-Fu Lee and Jonathan Woetzel — Dynamism by design: China as digital giant

China has firmly established itself as a global leader in consumer-oriented digital technologies. It is the world’s largest e-commerce market, accounting for more than 40% of global transactions, and ranks among the top three countries for venture capital investment in autonomous vehicles, 3D printing, robotics, drones, and artificial intelligence (AI). One in three of the world’s unicorns (start-ups valued at more than US$1 billion) is Chinese, and the country’s cloud providers hold the world record for computing efficiency. While China runs a trade deficit in services overall, it has lately been running a trade surplus in digital services of up to US$15 billion per year....

Interesting read. Chinese entrepreneurs are on a roll.

Most people in the West don't realize this yet, but US tech giants like Google, Apple, and Amazon are getting some real competition from Chinese dragons like Alibaba, Baidu, and Tencent. China is taking its place along side of Japan and South Korea as a tech powerhouse and owning to its size is beginning to dwarfs the US, which has only a third of the population of China even though it one of the world's most populous countries.

The EU was political and economic alliance designed to combing the population of Europe, which is comparable to the size of the US. But the US (325 million) and Europe (510 million) added together (835 million) doesn't come close to matching China in population (1.4 billion).

Change in GDP tracks population and development. As China continues to develop, it is pulling away from the pack, already exceeding the US on a PPP basis. China is also committed politically to taking distribution effects into account and addressing asymmetries, while the West is not and instead of largely ignoring the increasing economic asymmetry.

I am reminded of Japan after WWII as it started to rebuild and come back on line. I am old enough to remember the poor reputation of Japanese goods and the lack of market power as a result. But the Sixties that was a thing of the past and not long after, Japanese companies began to dominate in electronic and then automobile manufacturing with the high-quality products Japan is now famous for.

Asia Times
Dynamism by design: China as digital giant
Kai-Fu Lee, co-founder and CEO of Sinovation Ventures, a leading venture capital firm investing in China and North America, and Jonathan Woetzel, Shanghai-based senior partner of McKinsey & Company and a director of the McKinsey Global Institute

CGTN — How smart are China's electric toilets?

Giving "innovation" new meaning.

Ecns
How smart are China's electric toilets?

CGTN

See also

'World's first cargo drone' shows off 'one-click landing' in China

Also

A Chinese manufacturer's bittersweet bite of innovation

Also

Firm modifies violent mobile game to include socialist core values

Will Knight — China’s AI Awakening – 中国 人工智能 的崛起

Qing Luan, director of SenseTime’s augmented-reality group, previously developed office apps for Microsoft in Redmond, Washington. She says she returned to China because the opportunities just seemed much bigger. “We were struggling to get a thousand users; then I talked with my friend who was working at a startup in China, and she said, ‘Oh, a million users is nothing—we get that in several days,’” she recalls.

This is the key point about everything involving China. It's yuuu...ge!

The numbers are mind boggling even though the US has an impressive population of over 300 million.

And India is not far behind China in joining the developed world. With Indonesia in the wings.

The next few decades look to be transformative, if we don't destroy ourselves first.

The question is whether the planet can handle that kind of growth. Probably not — unless innovation.

The current buzz word in China, direct from the lips of President Xi, is "innovation."

China was leading the world then [in the Shang Dynasty].

And in the future, we will lead again with technological innovations.

MIT Technology Review
China’s AI Awakening – 中国 人工智能 的崛起

Will Knight | senior editor for AI at MIT Technology Review

Rutger Bregman — Look at the phone in your hand – you can thank the state for that

Take the driving force behind the digital revolution, also known as Moore’s law. Back in 1965, the chip designer Gordon Moore was already predicting that processor speeds would accelerate exponentially. He foresaw “such wonders as home computers”, as well as “portable communications equipment” and perhaps even “automatic controls for automobiles”.

And just look at us now! Moore’s law clearly is the golden rule of private innovation, unbridled capitalism, and the invisible hand driving us to ever lofty heights. There’s no other explanation – right? Not quite.

For years, Moore’s law has been almost single-handedly upheld by a Dutch company – one that made it big thanks to massive subsidisation by the Dutch government. No, this is not a joke: the fundamental force behind the internet, the modern computer and the driverless car is a government beneficiary from “socialist” Holland....

The Guardian
Look at the phone in your hand – you can thank the state for that

Rutger Bregman

Ana Maria Santacreu — The New World Leader in Innovation

Fifteen years ago, China was barely on the radar when it came to patents. Now, it files more patent applications than the rest of the world combined.

President Xi has been pushing "innovation."

“We should develop a dynamic, innovation-driven growth model.” — Xi Jinping at Davos, 2017 

He also continued to emphasis harmony.

“It is important to protect the environment while pursuing economic and social progress — to achieve harmony between man and nature, and harmony between man society.”

FRBSL — On the Economy

The New World Leader in Innovation
Ana Maria Santacreu | Economist, Federal Reserve Bank of St. Louis

Jean-Claude Worms — Science And The Entrepreneurial State

The title of this post is adapted from Mariana Mazzucato’s book “The Entrepreneurial State,” published in 2013, and in which she successfully – at least in my view – debunks a number myths that modern capitalism has impressed upon most of us concerning the role of private entrepreneurs in innovation. I am attempting below to link that discussion with the need for public investments in science.

I hope I will be forgiven for extensively quoting from Mazzucato's brilliant work.

SCIENCE IS RISKY

This statement is true inasmuch as science cannot really guarantee a return on investment, at least not in financial terms within a predictable timeframe. It does not serve this purpose. Science is a “public good, difficult to appropriate” (Mazzucato 2013).

Science Connect

Science And The Entrepreneurial State

Dr. Jean-Claude Worms

Autor, Dorn, Pisano, Shu — Competition from China reduced innovation in the US

The discussion of the decline in US manufacturing during the 2016 presidential election campaign largely focused on job losses. This column examines the effects of Chinese import competition on another metric for the health of the US manufacturing sector – innovation. Firms whose industries were exposed to a greater surge of Chinese import competition from 1991 to 2007 experienced a significant decline in their patent output as well as their R&D expenditures. While politicians’ ‘obsession’ with manufacturing is primarily due to job losses, an accompanying reduction in innovation may well affect economic growth in the longer term....

VoxEU.org

Competition from China reduced innovation in the US
Autor, Dorn, Pisano, Shu

Diane Coyle — Free innovation

I polished off Eric von Hippel’s Free Innovation on my Washington trip. It’s an interesting, short book looking at the viability and character of innovation by individuals – alone or co-operating in communities. It is free in two senses: the work involved is not paid; and the innovations – or at least their design – is not charged for, although it may subsequently be commercialised by the inventors or by other businesses. The viability of free innovation has been greatly extended by digital technology and the internet: there is more accessible useful information, it is easier and cheaper to co-ordinate among a group. The diffusion of innovations is also easier, although rarely as extensive as when a commercial business takes them up and markets them. In fact, von Hippel argues that there are some strong complementarities between free innovation and commercial vendors, as the latter can bring the scale economies of production and marketing, while the former can enhance the use case, the complementary know-how, that increase the value of whatever it is....

The Enlightened Economist
Free innovation
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

Chris Dillow — Capitalism & creativity

Another myth debunked.

Stumbling and Mumbling
Capitalism & creativity
Chris Dillow | Investors Chronicle

David F. Ruccio — Hammer time

The future is here. Automation and robots are taking millions of jobs and promise to take millions more.

Larry Summers and Brad DeLong think that's good. David Ruccio, not so much.

I agree with Summers and DeLong that in real terms technological innovation is a benefit in that it increases efficiency, effectiveness and productivity overall. The benefits in real terms are enormous.

I also agree with Ruccio that this needs to be qualified. Like the  terms of trade where imports are benefits in real terms with respect to goods, labor is disadvantaged by embedded labor that costs jobs and reduces pay. So the benefit in real terms only applies at full employment or if workers share in the gains with increased compensated leisure.

Curtailing technological innovation is Luddite and attempts to restrain material progress won't work. The actual issue is distribution of the surplus, was David Ruccio observes, and that needs to be revisited given emerging conditions that are resulting in challenges along with opportunities.

What's needed is innovation in thinking about distribution and also about work as a source of income in a market-based system in which distribution is rationed by price.

Occasional Links & Commentary
Hammer time
David F. Ruccio | Professor of Economics, University of Notre Dame

Charlie Sorrel — The 94-Year-Old Inventor Of The Lithium-Ion Battery Just Came Up With Something Better

The inventor of the lithium-ion battery—which is likely powering the device you're reading this on right now—is 94 years old. But that hasn't slowed down John Goodenough of the University of Texas at Austin, who clearly didn't think that his previous world-changing invention was good enough. He's just invented a sequel: a better battery that lasts longer, charges faster, doesn't use any lithium, and won't explode.

One of the key components of a battery is its energy density—the amount of power it can hold for a given size and weight. That's important for keeping a slim smartphone alive all day, but it's even more important for electric cars, where a lot of a battery's energy is wasted just to move its own weight. Goodenough's new battery, developed in partnership with Cockrell School of Engineering senior research fellow Maria Helena Braga, has three times the energy density of li-ion, which means that for the same weight of batteries, a car would have three times the range....

Co.Exist

The 94-Year-Old Inventor Of The Lithium-Ion Battery Just Came Up With Something Better
Charlie Sorrel

Alex and Don Tapscott — How Blockchain Is Changing Finance

Is this the end of banking as we know it? That depends on how incumbents react. Blockchain is not an existential threat to those who embrace the new technology paradigm and disrupt from within. The question is, who in the financial services industry will lead the revolution? Throughout history, leaders of old paradigms have struggled to embrace the new. Why didn’t AT&T launch Skype, or Visa create Paypal? CNN could have built Twitter, since it is all about the sound bite. GM or Hertz could have launched Uber; Marriott could have invented Airbnb. The unstoppable force of blockchain technology is barreling down on the infrastructure of modern finance. As with prior paradigm shifts, blockchain will create winners and losers. Personally, we would like the inevitable collision to transform the old money machine into a prosperity platform for all.

Harvard Business Review
How Blockchain Is Changing Finance
Alex Tapscott, Founder and CEO of Northwest Passage Ventures, a consultancy, advisory firm and investor in the blockchain industry and Don Tapscott, author of Wikinomics, The Digital Economy, and a dozen other acclaimed books about technology, business and society; according to Thinkers50, Don is the 4th most important living management thinker in the world; he is an adjunct professor at the Rotman School of Management, and Chancellor of Trent University. 

See also

McKinsey
Using blockchain to improve data management in the public sector

Steve Cheng, Matthias Daub, Axel Domeyer, and Martin Lundqvist

Duncan Green — How do we encourage innovation in markets? What can systems thinking add?

Earlier this month I spent a fun 3 days at a seminar discussing Market Systems Innovation. No really. I discovered a community of very smart people working on markets, who seem to be on a similar journey to the people working on governance and institutions, who I have spent most of my time with in recent years. Chatham House Rule, so the speakers must remain shrouded in mystery, but I will say it was at the Rockefeller Foundation’s Bellagio Centre, just to make you jealous....

From Poverty to Power
How do we encourage innovation in markets? What can systems thinking add?
Duncan Green