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.