But finally, let’s step back for a moment, and enjoy some optimism.
This talk from Ted by Alex Tabarrok, entitled how ideas trump crisis, is well worth a view.
To sum it up in a nut shell, ideas promote growth, and ideas grow in number with globalisation. So as China and India join the developed world, there are more potential innovators out there, and the ability to amortise R&D costs improves. So, products with high R&D costs, and low manufacturing costs do well as potential demand grows with globalisation. As Tabarrok says: “If India and China were as big as the US is today, the demand for cancer drugs would be eight times bigger.”
Mr Tabarrok is right. But there is a potential snag. If the products that will define the modern age have high R&D costs but low manufacturing costs, does that not mean the rewards to those who can can facilitate R&D – so that’s innovators, management, engineers, and providers of capital – will rise, while the reward to all but highly skilled workers, probably boasting PhDs or MBAs, falls?
And to an extent, is this not what’s been happening?
In recent years the rewards to capital have been growing, and to labour they have been falling. And maybe this is the underlying cause of today’s problems.
Technology providers are our biggest hope, and our biggest danger.
And above all that is why many economists don’t have a clue. They talk about austerity and make the glummest of predictions in the midst of a new revolution in technology. If more central bankers started reading ‘Wired’, or watched Ted talks, they might get it.
And by ignoring the technological revolution, not only are economists missing the potential, they are missing out on the causes of today’s crisis, too.
©2012 Investment and Business News.
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© Investment & Business News 2013