Economic Growth and the Roles of Science and Technology
In 1776, Adam Smith published the Wealth of Nations. In this, he described the innovative market society evolving in England, motivated by self-interest and based upon specialization. However, although market transactions laid a basis for subsequent economic growth, that did not occur until much later, as this graph shows. By then, market transactions, other social changes and scientific progress acting in concert became a world-wide cumulative force.
Market transactions are all that classical economics focuses upon, leaving both parties better off because the transactions are voluntary and reflect local knowledge.1
Markets perform at least three important functions: the satisfaction of the wants of buyers and sellers, the identification of those goods and services that are wanted and the discovery of prices…(where) a trail-and-error process of bargaining…takes place. (Simpson, 2013, p. 89)
By emphasizing the motivating factor of self-interest and its allowance of market growth and change, classical economics is closer to reality than equilibrium economics with its emphasis on efficiency. But, it is not the only factor. A more complete explanation of economic behavior must also include the roles of government and of science. Specifically, among other things, governments build roads, canals and fund the scientific research that sets the environment in which the classical economy can profitably operate.
Other social changes included the increasing surplus from agriculture. In England, that included the forced migration of people from the estates and their communal landholdings to the cities to work in textile factories under conditions that were well documented.
Scientific progress enabled societies to increase their wealth by means other than the traditional, trading or raiding. According to Joel Mokyr (2001), starting with the Enlightenment, the sciences finally expanded the “epistemic base" (i.e. knowledge base) to surpass simple trial and error to a more complete knowledge. We note the thermodynamics of steam engines (1824), the electromagnetism of generators (1873) and the quantum mechanics of the atom (1924).2 These now enable highly efficient jet engines, electrical machinery, and the computers of the Internet.
The natures of the following sciences can be seen by how each describes the energy that is necessary to enable a system to change from one state to another. Technology then provides the means to control this energy.
Newtonian Physics: E= ½ mv2. This is the kinetic energy of a mass moving relative to the earth. This formula is derived from the familiar equation F=ma. Newtonian physics is the physics of the ordinary world, that of machines. It is well understood.
Quantum Physics: E = hγ, where E is the energy of an electron, h is Planck’s constant and γ is the frequency of its wave function. This model conceives of an electron as a wave, rather than a particle. Needless to say, quantum physics is abstract and inevitably mathematical. Laboratory measurements to verify the correspondence of quantum theory to quantum reality are accurate to 10 significant figures (Derman, 2011).
Biology: The Citric Acid Cycle → E. The products of this complicated series of metabolic chemical reactions are carbon dioxide, water and the payoff: ATP, “the molecular unit of currency” for intra-cellular energy transfer.
This is a technological civilization; economic progress will therefore occur mainly by the progress of science and technology. More than the transactions of the classical economics are necessary to produce economic growth. In physics, the systems under study are simple; but the math is very complicated. In biology, the living systems under study are complicated; but the math is simpler. In all cases, because scientists build upon the work of others, contemporary understandings of nature are much more intricate than during the 19th and early 20th centuries.
The following are two examples where progress involves expenses and risks that private enterprise will not bear. (The venture capitalists would take a pass.)
● The Iter project in Cadarache, France promises nearly unlimited fusion energy in the future. Iter is a $20 billion project of 34 nations, including the United States. In the tradition of scientific development, the project does not easily jump to conclusions; especially since advances in the Tokamak magnetic containment technology have been slow:
1) The prototype’s construction phase will end in 2019. Its operational phase will begin in 2020 when the machine will first be operated with pure hydrogen and, “promising physics regimes will be tested.” (Everything is not yet tacked down.) Then, the reactor will be operated with deuterium and tritium. By 2040 it will be operated at full fusion power with an expected output of 500 MW of power with an input of 50MW.
2) The major risks of this project are likely to be technological. The fusion process has to be advanced beyond breakeven, and it has to be scaled up. The containment vessel must be made out of materials that can withstand the intense bombardment of elementary particles. Whether such a vessel can be designed will also determine the power plant’s feasibility. The economic benefits of low-cost energy can be very large.
● Stanford Medical School researchers announced a possible therapy for use against many cancers. Cancer, a genetic disorder, is now understood to comprise more than 200 separate and complex diseases that evade the body’s immune system. Researchers found the few cancers they studied expressed a CD47 molecule that lets these cells evade that system.
To their surprise (and this is how the research process prepares the mind), they found that many tumors have a heightened presence of this molecule, and that normal cells have this molecule only to a slight degree. They then designed an anti-CD47 molecule that allows the immune system to kill a wide variety of human cancer cells in vitro and in genetically modified mice.
Trials are due to commence in 2014 on live patients.
1) The anti-CD47 drug was very effective on the mice and had no side effects, beyond causing slight anemia.
2) The anti-CD47 drug has no effect on regular cells, but a devastating effect on cancer cells, which have suppressed the warnings of cell damage with the CD47 molecule.
3) The biggest risk is that it will not be effective within the human body. Medical trials will either confirm or deny the effectiveness of this treatment.
Success in these trials will be of considerable consequence, and will expand the epistemic base of medical knowledge. Part of the research funds were supplied by the National Institutes of Health under grants R0CA86… .
If successful, the above projects will add tremendously to human welfare and to GDP. But since its payoff paths are often distant or uncertain, science research should be taken on its own merit with the idea that future benefits such as the provision of energy, food, and shelter and the protection from harm will come from understanding nature.
The following is a debate question: Besides adding to GDP, will projects like the above add a lot to employment? Probably not, because both are in the process industries, notable for their high up-front costs and high productivity (i.e. low employment).
Markets allow specialization; economies in different countries have different skills. The U.S. model for economic growth is based upon scientific research as a source of disruptive innovation; it still has eight of the ten top universities in the world. The German model for economic growth is based upon machinery, a technology that develops only incrementally. A visitor to the Deutsches Museum in Munich will note that the curators and their audience are fascinated by Newtonian physics and its many applications, but they are not into the other sciences.3
In spite of this, note the German IMF trade surplus in 2011 of $203.9 billion and the U.S. trade deficit of $465.9 billion. To solve an immediate employment problem,4 the U.S. economy has to become somewhat more like Germany's to produce the manufactured goods Americans want with a highly skilled work force. Its economy also needs disruptive innovations from the universities beyond the semiconductor and Internet technologies. Add: U.S. manufacturing is a natural application for advances in materials science.
The U.S. is the largest single market in the world; it can finance its trade deficits by issuing debt in its own currency. The U.S. balance of trade has been negative since 1976, and it is likely this situation can continue indefinitely. If the U.S. had a more balanced trade, its economy and employment would greatly improve.
Is technopessimism justified, the idea that everything that could be invented has been. In the article, “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds,” Robert J. Gordon (2012) essentially says that the prospects for U.S. economic growth are “dismal.” What this paper does not mention at all is progress in the biological sciences. A truer statement is Joel Mokyr’s (2011) article, “Technopessimism Is Bunk” where he writes, “…once the scientific insights improved understanding of why things worked the way they did, it was once possible to improve them further, thus creating a vast virtuous circle, through which science strengthened technology and technology helped create more science….Human history is always the result of a combination of deep impersonal forces (note our Arnold Toynbee quote in the website preface), accidents and contingencies. Technology alone cannot provide material progress; it’s just that without it, all the ways of economic progress soon tend to fizzle out. Technological progress is perhaps not the cure-all for all human ills; but it beats the alternative.”
We think compared with the rest of the world, the United States has a brighter future, provided it can dilute the Tea Party in Congress. Add: This 9/4/13 NYT article describes the impact of the sequester on the NIH.
In “Scalable Innovation” Shteyn (2013, p.p. xxix, xxxv) describes how new technologies affect the pattern of economic development. Quoting Mokyr, “Technological progress has been one of the most potent forces in history in that it has provided society with what economist call a ‘free lunch,’ that is, an increase in output that is not commensurate with the increase in effort and cost necessary to bring it about.” He then writes, “…Invention…is the Big Bang moment. From there on, the universe of innovation expands, creating new ideas, implementations, relationships, opportunities, and so on. In this perspective, innovations (that people use) and technologies...create new spaces (our note) for people and companies to move into and to develop further.” The Internet, developed with the aid of government *, is a perfect example of this. Science and technology have been and should continue to be America's 21st century western frontier.
This is why we think structural changes are necessary in the U.S. to get economic growth restarted at the grass roots level. Industrial technology is a key component of economic growth.
* CERN in Europe, DARPA and the National Science Foundation in the U.S. – also academia.