Are our best days behind us?

By R.A. | WASHINGTON

SCOTT SUMNER adds to the discussion of Tyler Cowen's new book "The Great Stagnation" with an illustrative thought experiment. The thesis being debated, by the way, is that growth in output and median incomes has slowed in rich countries because the pace of innovation has slowed. Mr Sumner's thought experiment (somewhat simplified) is as follows. Consider, first, whether you'd accept a life in America in the year 1900 with a 2011 nominal income. Then consider whether you'd accept a life in 1973 with a 2011 nominal income. Mr Sumner suggests that few people would take the first swap; while a present-day income would make you very rich in 1900, you'd lack a significant array of technological and medical innovations we presently take for granted. In 1973, by contrast, you'd be fairly rich, and you'd have cars and television and climate control and a life expectancy not far off that of the present. Lots of people would probably take the deal.

Kevin Drum offers some sensible qualifiers on this experiment. Life in 1973 will look better to heterosexual white males and those that don't rely on anti-depressants, for instance. But the trade-off seems remarkably plausible. Is it really the case that people are scarcely better off now than they were 40 years ago? Apart from the revolution in computing and information technology, why has the pace of innovation slowed?

Jonah Lehrer offered some interesting thoughts on this question in a piece in yesterday's Wall Street Journal. As it turns out, it takes more people than it used to to produce breakthrough research:

Last year, Samuel Arbesman, a research fellow at Harvard Medical School, published a paper in Scientometrics that documents the increasing difficulty of scientific discovery. By measuring the average size of discovered asteroids, mammalian species and chemical elements, he was able to show that, over the last few hundred years, these three very different scientific fields have been obeying the exact same trend: the size of what they discover has been getting smaller.

Consider asteroids. According to the data, the average diameter of newly discovered asteroids in 1850 was about 250 miles across. By 1950, that size had decreased to about 10 miles, and by 2000 astronomers were forced to look for asteroids in the sky that were less than a mile in diameter. According to Arbesman, it's not that asteroids are shrinking – it's just that all the big ones have already been found. As a result, scientists are forced to search far and wide for smaller chunks of cosmic ice and rock...

What does this have to do with scientific teamwork? The difficulty of modern science means that scientists must work together, pooling their resources and brainpower. They have to share expensive equipment and collaborate with colleagues in different domains. While the pace of discovery has remained fairly constant - we're still finding new asteroids, for instance – the nature of what we're discovering has led to dramatic changes within the scientific process.

I think it's also worth contemplating the disturbing possibility that our cresting living standards might ultimately be rooted in the difficulty of making new scientific discoveries. After all, at a certain point the pursuit of reality is subject to diminishing returns – our asteroids will get so small that we'll stop searching for them.

On the one hand, I find this to be a fascinating and compelling observation. On the other hand, I find myself wondering why humanity is using ever larger teams of scientists to find ever smaller asteroids. Obviously we want to make sure that no killer death rock is on a collision course with earth. But there's a significant opportunity cost to research. Why are bright minds and sensitive equipment being used to track down progressively tinier chunks of space gravel?

Last month, I blogged about a paper presented at the AEA meetings in Denver:

The authors of one recent paper on this subject presented at a great session on climate policy in Denver. "The environment and directed technical change", begins by arguing that the carbon externality isn't the only relevant externality in the mix. There is another important dynamic in which technological innovation draws on previous research, and so firms are more likely to continue on established innovation trajectories than to start new ones. Put simply: if most firms have been researching and building coal technologies in recent decades, they're much more likely to keep on working with coal than they are to switch to, say, solar. This isn't even an argument about vested interests (which is another important factor to keep in mind); it simply looks at things like patent citations to show that there is an inertia to innovation.

Recall the infamous yet useful words of Donald Rumsfeld:

[T]here are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don't know we don't know.

If you go looking for the known unknowns—the tiny asteroids that are undiscovered but statistically likely to exist—then you have a pretty good chance at building and sustaining an academic career. When you start seeking out unknown unknowns, by contrast, you're in risky territory. But that is where the low-hanging innovative fruit lies.

The diminishing returns to work in existing research trajectories will ultimately kindle interest in other, riskier, but potentially more revoluationary lines of inquiry. But it probably wouldn't hurt to give science a nudge. It's these highly uncertain lines of work that the market is least likely to support on its own—who knows whether discoveries of any sort, let alone monetisable ones, will result. Unfortunately, it's also difficult to make a case to voters, particularly in a time of austerity, that it's worth throwing money at research in fields that are far from producing practical innovations. But that may be just what the present, "stagnant" times demand.