The Competitiveness of Nations
in a Global Knowledge-Based Economy
April 2003
Nathan Rosenberg
Science, Invention and Economic Growth
The Economic Journal
Volume 84, Issue 333
Mar. 1974
90-108.
Index
III – Supply-Side Considerations
V – Differential State of the Sciences
NOT too many years ago most
economists were content to treat the process of technological change as an
exogenous variable. Technological change
- and the underlying body of growing scientific knowledge upon which it drew - was
regarded as moving along according to certain internal processes or laws of its
own, in any case independently of economic forces. Intermittently, technological changes were
introduced and adopted in economic activity, at which point the economic consequences
of inventive activity were regarded as interesting and important - both for
the contribution to long-term economic growth and to short-term cyclical
instability. Schumpeter, for example,
saw the engine of capitalist development as residing in this innovative process
in the long run, and at the same time he developed a business cycle theory
which centred upon the manner in which the capitalist
economy absorbs and digests its innovations. In Schumpeter’s model, exogenous technological
changes stimulated investment expenditures, the variations of which, in turn,
generated cyclical instability.
In the years after the
Second World War the economist’s attitude gradually changed. The vast expenditures on Research and
Development made it increasingly obvious that inventive activity was - or could
be made to be - responsive to economic needs (or even to non-economic needs if
such needs received sufficient financial support). Clearly much of the search activity of R and D
was highly purposive: business firms were looking for new techniques in
specific categories of products, they spent much money upon this search, and
they were sometimes highly successful. Similarly, government agencies had long
directed research into specific problem areas and in some cases had achieved
conspicuous successes - as in agriculture.
In addition, the growth of
interest in technological change after the Second World War was closely
connected with the increasing concern over the prospects for economic growth in
underdeveloped countries. When
economists turned their attention to this range of problems, they brought with
them an intellectual apparatus which placed overwhelming emphasis upon the role
of saving and the growth in the stock of capital goods as the engine of
economic growth. But it soon became
clear that long-term economic growth had taken place at rates far beyond what
could plausibly be accounted for by mere growth in the supply of
conventionally-measured inputs. It
became increasingly obvious that economic growth could not be adequately
understood in terms of the use of more and more physical inputs,
1. The
author is grateful to Professors S. Engerman, W. B. Reddaway and E. Smolensky, and to an anonymous referee for their helpful comments on
earlier drafts of this paper. They are,
however, accorded the usual absolution for all remaining deficiencies.
90
but rather that it had to be understood in terms of
learning to use inputs more productively. With this realisation
came, of course, a renewed interest in technological change as the source of
rising resource productivity.
The growing interest in the
role of technological change as a contributor to economic growth led to a
considerable amount of empirical research on technological change, particularly
in two areas: (1) attempting to quantify the contribution of technological
change to the growth in long-term resource productivity; and (2) attempting to
study the rate at which new inventions, once made, were diffused throughout the
economy, since clearly inventions exert an impact upon resource productivity
only to the extent that they are actually adopted in the productive process. The work of Griliches
was particularly important in showing that one could explain the diffusion
process in considerable detail as a response to economic forces - i.e., on the
basis of profit expectations as shaped by market size. [1]
Increasingly, therefore,
economists have become more and more confident of their ability to deal with
technological events in economic terms. This growing confidence was capped by the
publication of a major book by Jacob Schmookler in
1966, called Invention and Economic Growth (Cambridge: Harvard
University Press). Schmookler
argued, quite persuasively, not only that one could explain the diffusion of
existing inventions in economic terms - a la Griliches
- but that one could even explain the pattern of inventive activity itself.
As a result of these
developments, the attitude of the economics profession toward technological
change seems to be coming full circle. Whereas technological change was once regarded
as an exogenous phenomenon moving along without any direct influence by
economic forces, it is now coming to be regarded as something which can be entirely
explained by economic forces. Indeed, factors on the technological and
scientific levels are increasingly coming to be regarded as not constituting
very interesting problems, because we already “know” that we can explain their
particular timing in economic terms. [2]
Schmookler’s book is obviously very appealing to the economist
because it argues that inventive activity is an essentially economic
phenomenon, and that it can be adequately understood in terms of the familiar
analytical apparatus of the economist. Perhaps
I should anticipate my conclusions by saying that I propose to start off from Schmookler’s analysis, not because I am in search of a
convenient straw man, but rather because I am in sub-
1 Zvi Griliches, “Hybrid Corn: An Exploration in the Economics of
Technological Change,” Econometrica, October
1957.
2. The
issue is not just whether the scientific and technological spheres are
autonomous or not, although that has been a much-debated issue. Even if one were satisfied, for example, that
the scientific realm is an autonomous sphere, it need not follow that events in
that sphere are unpredictable. They may
not be directly influenced by economic variables, but they may be moving
subject to an internal logic or an external set of forces which can be
identified and then used, by economists, to explain sequences of inventive
activity.
91
stantial agreement with much that he has to say. Moreover, Schmookler’s
analysis is so rich and so suggestive that it has to be the starting point for
all future attempts to deal with the economics of inventive activity and its
relationship to economic growth.
Schmookler’s ultimate interest is, to quote the opening sentence
of his book: “What laws govern the growth of man’s mastery over nature?” His book represents an attempt to supply
building blocks for the answer to that very big question by systematically
studying two smaller questions: (1) how to explain the variations in inventive
activity in any particular industry over time; and (2) how to explain different
rates of inventive activity between industries at a given moment of time. Schmookler’s fundamental
answer to these questions involves the attempt to link up inventive activity
with the structure of human wants and therefore with changes in the composition
of demand which are associated with rising per capita incomes and other
related aspects of economic growth.
The empirical core of Schmookler’s book is an attempt to demonstrate, through the
study of several American industries, that demand-side considerations are the
major determinant of variations in the allocation of inventive effort to
specific industries. In examining the
railroad industry, for which comprehensive data are available for over a
century, Schmookler found a close correspondence
between increases in the purchase of railroad equipment and components, and slightly
lagged increases in inventive activity as measured by new patents on such
items. The lag is highly significant
because, Schmookler argues,
it indicates that it is variations in the sale of equipment which induce the
variations in inventive effort. Schmookler finds similar relationships in building and
petroleum refining, although the long-term data on these industries are less
satisfactory.
Furthermore, and no less
important, in examining cross-sectional data for a large number of industries
in the years before and after the Second World War, Schmookler
finds a very high correlation between capital goods inventions for an industry
and the volume of sales of capital goods to that industry. These data support the view that inventors
perceive the growth in the purchase of equipment by an industry as signalling the increased profitability of inventions in
that industry, and direct their resources and talents accordingly. [1] Thus, Schmookler concludes that
demand considera-
1. Schmookler
draws the implication from his data on inter-industry variations in capital
goods invention that “... inventive activity with respect to capital goods
tends to be distributed among industries about in proportion to the
distribution of investment. To state
the matter in other terms, a 1 per cent increase in investment tends to
induce a 1 percent increase in capital goods invention.” Schmookler, op.
cit., p. 144. Emphasis Schmookler’s.
It is important to note that Schmookler’s results “... depend critically on the fact
that our capital goods inventions were classified according to the industry
that will use them, not according to the industry that will manufacture the new
product or the intellectual discipline from which the inventions arise.” Ibid., p.
164. See also p. 166.
92
tions, through their influence upon the size of the market
for particular classes of inventions, are the decisive determinant of the
allocation of inventive effort.
Far from being an exogenous
variable as most economists had earlier believed - an activity which, although
it had important economic consequences was not controlled by
economic forces - Schmookler concludes that we can
treat invention just like any other economic activity. Just as we can ana1yse production and
consumption in terms of revenues and costs and the desire to maximise some relevant magnitude, so we can analyse inventive activity in precisely the same terms.
Schmookler not only attempts to incorporate inventive activity
into an economic framework. Within that
framework he attaches overwhelming importance, as already indicated, to demand
forces, and regards supply side considerations as relatively subordinate and
passive. Thus, in discussing consumer
goods inventions, Schmookler argues that it is the
changes in consumer demand over time which are the primary
determinant of shifts inthe direction of inventive
effort.
… (I)f we start out at a given point of time with
relative outlay on the different classes of goods given, and allow capital
accumulation, technical progress, education, and so on, to occur, then per
capita income will gradually rise. In
consequence the proportion of income spent on different classes of goods will
also gradually change. As different
classes of goods become relatively more important than before the yield to
inventive effort in different fields will tend to change correspondingly. And if we further grant that inventive effort
is influenced by prospective yield, the direction of inventive activity will
shift. Thus even under the extreme
assumption that the structure of generic wants is permanently fixed,
economic progress will bring successive sections of that structure into play
over time, thereby altering the reward structure confronting inventors and rechannelling their efforts accordingly. This is why, for example, American inventors
concentrated on food production in the first part of the nineteenth century but
gave much more attention in the twentieth century to the requirements of
leisure, by creating motion pictures, radio, television, and so on. [1]
Schmookler’s argument, as presented so far, would seem to be
subject to the fatal objection that its overwhelming emphasis upon demand simply
ignores the whole thrust of modern science and the manner in which the growth
of specialised knowledge has shaped and enlarged
man’s technological capacities. Such
growing technological sophistication, surely, suggests that at least some of
the initiative in the changing patterns of inventive activity lies on the
supply side and not on the demand side where Schmookler
has placed it.
1. Schmookler,
op. cit., pp. 180-1. Of course Schmookler is well aware that consumer expenditure on
particular classes of goods is not entirely a function of prices and incomes. Such factors as age structure of a population,
climate, geography, and extent of urbanisation, will
also play an important role.
93
Schmookler has anticipated this objection, and his answer is in
fact an ingenious one. He argues that
the commodity classes towards which inventors direct their efforts are
determined by expectations concerning financial payoffs which, in turn, are
shaped by the familiar considerations of demand and market size. Developments on the side of science and
technology are highly relevant to the inventive process, but only in determining
the technical realms - mechanical, electrical, chemical, biological
- upon which the inventor will draw. While
the growth in knowledge at the scientific and technological levels will thus
influence the specific characteristics of inventions, the purposes for
which inventions are undertaken will depend upon the state of the market for
classes of final commodities.
The point is that, while a marketable improvement in
envelope-making equipment is probably about as easy to make as one in glass
making, it may be easier today to make an improvement in either field via
electronic means than through some mechanical change... If differences exist in
the richness of the different inventive potentials of the product technologies
of different supplying industries, the pressure to improve an industry’s
production technology tends to be met by the creation of relatively more new
products in supplying industries with richer product inventive potentials. For example, if new electrical machines are
easier to invent than are non-electrical machines, then the aggregate demand
for new machinery tends to induce relatively more electrical than non-electrical
machinery inventions. In brief,
inventors tend to select the most efficient means for achieving their ends, and
at any given moment, some means are more efficient than others. [1]
Schmookler thus argues for the primacy of demand side
considerations, not by suggesting that shifts on the supply side have been
unimportant. Quite the
contrary. Science and technology
have brought about a great transformation in man’s capacity to pursue his
material ends. But it is precisely
because of the versatility of man’s enlarged inventory of scientific and
technical skills that demand side forces retain their primacy.
Oddly enough then, science
and technology play a subordinate role in influencing the direction of
inventive activity within Schmookler’s analysis, not
because his analysis downgrades their historical significance, but rather
because he regards science and technology in the modern age as being, in a
significant sense, omnicompetent. Schmookler looks
upon the body of modern science and technology as constituting a kind of “putty
clay” out of which almost anything can be shaped. As he states, “... mankind today
possesses, and for some time has possessed, a multi-purpose knowledge base. We are, and evidently for some time have
been, able to extend the technological frontier perceptibly at virtually all
points.” [2]
Now this is precisely the
aspect of Schmookler’s argument which seems to be
most inadequate. If Schmookler
is right, then economists need not
1. Ibid., pp. 2
10-11.
2. Ibid., p. 218.
Emphasis Schmookler’s.
94
pay too much attention to the internal histories and
structures of the sciences and technologies in order to understand the
direction of inventive activity. If he
is right, then science and technology have not functioned as major independent
forces in shaping the timing and the direction of the inventive process. If economic forces can so powerfully shape, not only technology, but science as well, in the
achievement of its own ends, then these subjects retain little interest for the
economist or economic historian. [1] On the other hand, if Schmookler is wrong in
this respect, then his analysis needs to be supplemented by a more careful
examination of the manner in which the state of knowledge at any time shapes
and structures the possibilities for inventive activity.
III
– Supply-Side Considerations
To establish the
independent importance of supply side considerations, it is necessary to
demonstrate several things: (1) That science and technology progress, in some
measure, along lines determined either by internal logic, degree of complexity
or at least in response to forces independent of economic need; (2) that this
sequence in turn imposes significant constraints or presents unique
opportunities which materially shape the direction and the timing of the
inventive process; and (3) that, as a result, the costs of invention differ in
different industries.
As soon as one speaks of
the “costs of invention” it is necessary to recognise
that the economic analysis of inventive activity is seriously handicapped by
our present inability to specify the production function for inventive activity
with any pretence of precision. Inventions,
unfortunately, do not come in units of equal size, whether considered from the
point of view of their usefulness or their costs of production. Both the inputs and the outputs in the
production of invention are appallingly difficult to measure. Schmookler’s basic
unit of measurement is, in fact, not an “invention” but a “patent” which serves
as a surrogate for an invention. Schmookler’s primary interest is in illuminating the
process through which society allocates resources to inventive activity. The extreme heterogeneity which is the essence
of inventive output is, Schmookler believes, less
serious a problem for his interests than it would be in an attempt to link up
the number of inventions with the larger phenomena of technological progress
and economic
1. “Thus,
independently of the motives of scientists themselves and with due recognition
of the fact that anticipated practical uses of scientific discoveries still
unmade are often vague, it seems reasonable to suggest - without taking joy in
the suggestion - that the demand for science (and, of course, engineering) is
and for a long time has been derived largely from the demand for conventional
economic goods. Without the expectation,
increasingly confirmed by experience, of ‘useful’ applications, those branches
of science and engineering that have grown the most in modern times and have
contributed most dramatically to technological change - electricity,
electronics, chemistry and nucleonics - would have
grown far less than they have. If this
view is approximately correct, then even if we choose to regard the demand for
new knowledge for its own sake as a non-economic phenomenon, the growth of
modern science and engineering is still primarily a part of the economic
process.” Ibid., p. 177.
95
growth. [1] Schmookler
appears content to regard inventive output as adequately measured by the mere
number of inventions since, it is important to note, he is not attempting a
direct link-up between the inventive process and the larger question of the
historical growth in resource productivity. His results, he is careful to point out, “…
apply only to the number of inventions made, not to their importance... One
of the problems of research now is to establish the nature of the connection
between the number of inventions in a field and the rate of technological
progress.” [2] Within this framework the attempt to compare a unit of
invention in one industry with a unit of invention in another industry (or even
two inventions in the same industry) is obviously fraught with
difficulty. Schmookler
is content to observe that the prospective value of inventive output is
likely to be greater in industries undertaking large amounts of investment than
in industries where such investment is smaller. An industry’s volume of investment activity,
in other words, is the primary determinant of the profitability of a unit of
invention.
This leaves us very much in
the dark in attempting to attach a larger significance to a unit of invention. It would be most convenient, for analytical
purposes, if there were an identifiable unit of invention which lowered the
cost of production in a plant by, say, 1 %. This would enable us to assess the importance
of a unit of invention by relating it to the size or to the rate of growth of
the adopting industry. Unfortunately,
the extreme heterogeneity of inventive output simply does not allow us to
assume any simple relationship between the number of inventions and the number
of such units of invention or productivity growth. [3] Schmookler does, however, hold the view that the cost of
invention is likely to be the same in all industries. He points out that “...
the very high correlations obtained… between capital goods invention and
investment levels in different industries, and the substantial similarity in
the patent-worker ratio of durable and nondurable goods industries indicate
that a million dollars spent on one kind of good is likely to induce about
as much invention as the same sum spent on any other good. Hence, doubling the amount spent on one kind
of good is likely to induce about as much invention as the same sum spent on
any other good.” [4] This position raises serious difficulties to which we will
shortly return.
Although Schmookler’s treatment of the relationship between demand
1. See ibid., chapter 2, for a searching examination
of the problems involved in using patent statistics as a surrogate for
inventions and also for Schmookler’s justification
for his belief that the deficiencies in the patent data and the problems posed
by vast qualitative differences in inventions are less than is generally
supposed. For a careful discussion of
the measurement problems involved in the economics of inventive activity, see
Simon Kuznets, “Inventive Activity: Problems of
Definition and Measurement,” in R. R. Nelson (ed.), The Rate and Direction
of Inventive Activity, Princeton, 1962, pp. 19-43.
2. Schmookler,
op. cit., p. 163. See also p.
208, footnote 1.
3. It is, of course tautologically true to say, as Schmookler
does, that “A given percentage improvement in productivity is more valuable in
a large than in a small industry.” Ibid., p. 91.
4. Ibid., p. 172. Emphasis Schmookler’s.
See also pp. 209 and 212.
96
forces and invention is, in general, highly illuminating,
his conceptual apparatus even here contains some disturbing gaps. This is apparent when he states that, “From a
broader point of view, demand induces the inventions that satisfy it.” [l] One wishes to rush in at once with qualifications: some
demand induces the inventions that satisfy it. But which, and when? As soon as these questions are raised we are
compelled to consider the different rates at which separate branches of science
have progressed. Many important
categories of human wants have long gone either unsatisfied or very badly
catered for in spite of a well-established demand. It is certainly true that the progress made in
techniques of navigation in the sixteenth and seventeenth centuries owed much
to the great demand for such techniques in those centuries, as many authors
have pointed out. But it is also true
that a great potential demand existed in the same period for improvements in
the healing arts generally, but that no such improvements were forthcoming. The essential explanation is that the state of
mathematics and astronomy afforded a useful and reliable knowledge base for
navigational improvements, whereas medicine at that time had no such base. Progress in medicine had to await the
development of the science of bacteriology in the second half of the nineteenth
century. Although the field of medicine
was one which attracted great interest, considerable sums of money, and large
numbers of scientifically-trained people, medical progress was very small until
the great breakthroughs of Pasteur and Lister. Improvements in the treatment of infectious
diseases absolutely required progress in a highly specific discipline – bacteriology
- and the main thrust of medical “inventions” in the past one hundred years
would be difficult to conceive without it. Indeed, it is highly doubtful that, with the
single exception of vaccination against smallpox, medical progress was
responsible for any significant contribution to the decline in human mortality
before the twentieth century. [2]
The point at issue here is
one of general importance to Schmookler’s argument. The role of demand side forces is of limited
explanatory value unless one is capable of defining and identifying them independently
of the evidence that the demand was satisfied. It would not require a very lively
imagination, as the references to medical progress suggest, to
compile an extensive list of “high priority” human needs which existed
for many centuries, which would have constituted highly profitable commercial
activities, but which yet remained unsatisfied. Schmookler’s
formulation is such that it is capable of being fitted to almost any
conceivable set of historical observations. For his argument to be non-tautological,
however, it would have to be formulated in such a way that the component
elements
1. Ibid.,
p. 184.
2. This
is the judgment recently delivered by medical historians. See Thomas McKeown
and R. G. Brown, “Medical Evidence Related to English Population Changes in the
18th Century,” Population Studies, 1955-66, pp. 119-41, and Thomas McKeown and R. G. Record, “Reasons for the Decline of
Mortality in England and Wales During the 19th Century,” Population Studies,
1962, pp. 94-122.
97
of demand could be identified independently of
our observations concerning inventive activity. Until this is done it is difficult to conceive
of any set of observations which could directly refute Schmookler’s
hypothesis. In the absence of a
reasonably clear, independent specification of the composition of demand, one
can never demonstrate either that important components
of demand have gone unsatisfied or that supply side factors played an important
role in laying down the time pattern of inventive activity.
In fact, the argument of
this paper is that, if we want to explain the historical sequence in which
different categories of wants have been satisfied via the inventive
process, we must pay close attention to a special supply side variable: the
growing stock of useful knowledge.
Historical evidence confirms that inventions are rarely equally possible
in all commodity classes. The state of
the various sciences simply makes some inventions easier (i.e., cheaper)
and others harder (i.e., more costly). In
considering the manner in which the stock of scientific knowledge has grown, and
the manner in which this growth has, in turn, shaped the possibilities for
inventive activity, one basic fact stands out: The world of nature contains
many sub-realms, which vary enormously in their relative complexity. If one considers the broad sweep of scientific
progress over the past 300 or 400 years, the timing and sequence of the growth
of knowledge in these separate disciplines is closely related to the relative
complexity of each - as well as to the complexity of the technology upon which
scientific research in the discipline depends. For example, the microbial world and to a
great extent the biological world could not be examined without the assistance
of the microscope, and the contemporary study of the atomic structure of giant
molecules awaited the technique of X-ray crystallography. On the other hand, it is not surprising that
the disciplines which were carried to the most advanced state in antiquity were
astronomy, mathematics, mechanics and optics. These were each disciplines which could be
carried far on the evidence of unassisted human observations, with little or no
reliance upon complex instruments or experimental apparatus. [1] Thus, a mastery of the principles underlying the
mechanical world was attained long before a similar mastery was achieved over
the principles of chemistry - almost 200 years, if we use as our benchmark
dates the publication of Newton’s Principia on the one hand and Mendelejeff’s periodic table of the elements on the other. Similarly, within the discipline of chemistry
itself, progress was more rapid in inorganic than in organic chemistry. Even though it had long been apparent that
there were huge economic benefits to be reaped throughout the vegetable and
animal worlds from a greater knowledge of organic chemistry, such knowledge
persistently lagged behind the growing knowledge of inorganic chemistry. Organic chemistry long remained intractable
and unresponsive to an obvious and compelling demand. Even after it had become apparent
1. See T.
S. Kuhn, The Structure of Scientific Revolutions, Chicago, 1962, chapter
VIII and the same author’s article, “The History of Science,” in the International
Encyclopedia of the Social Sciences.
98
that all organic substances are composed of small numbers
of elements - mainly carbon, hydrogen, oxygen and nitrogen - science quite
simply remained baffled at the mysteries of the organic world. Progress in organic chemistry, we now know,
lagged far behind inorganic chemistry because of a basic and unyielding datum
of the natural world: the far greater size and structural complexity of organic
molecules. [1] Similar considerations underlie a broad range of research
activities and go far towards explaining the timing with which commercially
marketable results are extracted from such activities. Thus, the molecular structure of vitamin B12,
essential in the treatment of pernicious anaemia, is
much more complex than vitamin B1 or C and, as a result, it took far longer to
isolate, synthesise and place in commercial
production. Similarly, the comparative
lateness of the organic chemist’s successful assault upon the structure of
protein molecules is largely attributable, we now know, to their great
complexity. Amorphous materials, as a
group, are much more complicated in their atomic structure than crystalline
solids and have therefore required a much greater research effort to understand.
Progress in the treatment of diabetes
has long been held up by the inability to decipher the insulin molecule. Recent research utilising
X-ray crystallography has finally revealed a remarkably complex three
dimensional structure consisting of no less than 777 atoms. This finding goes a long way towards
explaining why a more effective medical programme has
taken so much longer to launch in the case of diabetes than in the relatively “simple”
diseases such as malaria, syphilis or cholera. Much scientific research at the
micro-biological level is, in fact, preoccupied with mapping out the highly
complex structural arrangement of the component atoms of organic molecules. [2]
Thus, while I believe that Schmookler has supplied an essential corrective to an
earlier, widely-held view which looked upon the scientific enterprise as not
only totally exogenous to the economic sphere but even as a completely autonomous
force, propelled by a purely internal logic, I also believe that
1. The great nineteenth century breakthroughs in
organic chemistry in turn laid the basis for the subsequent twentieth century
revolution in biology. As Bernal points
out: “The new organic chemistry had another essential part to play in the
history of science - it was to lead to a fuller understanding of biological
processes. In fact, the beginning of any
deeper understanding than the microscope could provide was totally impossible without
a knowledge of the laws of combination and the types of structure actually to
be met with in biological systems. The
nineteenth-century development of organic chemistry had to precede logically any
attempt to formulate a fundamental biology.” J. D. Bernal, Science in History, Cambridge,
Mass., 1971, 4 vols., vol. 2, p. 633.
2. On the
great inherent complexity of biological studies Bernal makes the following
interesting observations: “... (T)he same
degree of complexity of even the simplest forms of life is something of an
entirely different order from that dealt with by physics or chemistry. What we had admired before in the external
aspects of life, in the symmetry and beauty of plants and flowers, or in the
form and motion of the higher organisms, now appear, in the light of our wider
knowledge, relatively superficial expressions of a far greater internal
complexity. That internal complexity is
itself a consequence of the long evolutionary history through
which living organisms have raised themselves to their present state.” Ibid., vol.
3, p. 868. The notion that scientific
progress has moved in an orderly sequence from the less complex to the
progressively more complex aspects of the physical universe is clearly
expressed in Frederick Engels, The Dialectics of
Nature, Moscow, 1954.
99
he has overstated his case in some important aspects. Although economic forces and motives have
inevitably played a major role in shaping the direction of scientific progress,
they have not acted within a vacuum, but with the changing limits and
constraints of a body of scientific knowledge growing at uneven rates among its
component sub-disciplines. The shifting
emphasis of inventive activity over the past two centuries - mechanical,
chemical, electrical, biological - is deeply rooted in the history of science,
and it is difficult in the extreme to visualise how
any plausible set of social and economic forces could have brought about a
total reversal of that order. [1] Given that sequence in
the development of science, inventive activity in some commodity classes was
much easier than in others. Furthermore,
although Schmookler is doubtless correct that we have
an increasingly multi-purpose knowledge at our disposal, it is easy to
exaggerate the extent to which separate sub-realms of knowledge offer genuine
options in the satisfaction given categories of human wants, in the sense of
presenting methods which are substitutes for one another. Such substitution is frequently non-existent
and usually highly imperfect. Moreover,
in many cases the inventive process confronts relationships of complementarity rather than substitution. Thus the great twentieth century
transformation in world agriculture is largely a product of biological
knowledge - the mastery of the principles of heredity which have made it
possible to develop entirely new, highly productive strains such as hybrid corn
in the 1930s and 1940s and, more recently, new wheat and rice varieties. But a fundamental characteristic of these life-science
“ inventions “is their high degree of complementarity with chemical inputs. Indeed, the new high-yielding rice varieties
recently introduced into south-east Asia are often no more productive than the
traditional varities if they are grown under the old
techniques of crop and soil management. Their unique feature is a high degree of fertiliser-responsiveness brought about by genetic
manipulation. A much better name than “miracle”
rice would be “fertiliser-responsive.” There are no miracles. In fact, the sharp increases in output per
acre, which superficially suggest massive improvements in resource productivity,
are really the result of large increases in fertiliser
and other chemical inputs combined with rigorous attention to techniques of
water management. [2] Thus, these biological inventions require for their
success, large doses of chemical inputs: fertiliser
on the one hand and pesticides to protect them from the many pests to which
they are peculiarly vulnerable, on the other. [3] In this critical area of agricultural technol-
1. For a brief but highly
perceptive treatment of some of the underlying problems, see William] Parker,
“Economic Development in Historical Perspective,” Economic Development and
Cultural Change, October 1961, pp. 1-7.
2. The
complexity and costliness of water management methods in the growing of rice is
major reason why the new wheat varieties have so often been introduced more
rapidly and with greater success than the new rice varieties. This has been the case, for example, in India.
3. “We know from experience in the U.S. that the rapid
introduction and widespread use new crop varieties
accelerates the biological dynamics of crop disease-host plant
relationships.” [Albert H. Moseman, Building
Agricultural Research Systems in the Developing Nations, N.Y., Agricultural
Development Council, 1970, p. 97.]
HHC – [bracketed] displayed on page 101 of original.
100
ogy, then, and in other areas as well, the dominant
relationships are those of complementarity and not
substitution. In this respect,
therefore, our freedom of choice in drawing upon different realms of science
and technology for ways of increasing food production is largely illusory. The range within which we can exercise genuine
options in the achievement of specific goals is, in fact, severely
attenuated.
When we move from the realm
of science to that of technology, we enter a world where economic motives are
much more direct, immediate and pervasive. Since technological concerns are dealt with
primarily within a matrix of profit-seeking business firms, one would expect to
find, as one does, a high degree of responsiveness to conditions of market
demand and profit expectations generally. But here too it is abundantly clear that an
understanding of demand forces alone provides only very limited insight into
the direction and the timing of inventive activity. Here, too, differences in the inherent
complexity at the technological level shed a flood of light on the inventive
process as it has occurred in historical time. If this is correct, then the Schmookler position that technological problems will be
solved (one way or another) when the demand for such a solution is sufficiently
pressing (i.e., profitable) is seriously incomplete, and needs to be
supplemented by a careful scrutiny of supply side variables.
Consider one of the central
events of the industrial revolution: the substitution of a mineral fuel for
wood in industrial activities. The
growing scarcity of wood and the desirability of substituting coal became increasingly
clear in Great Britain as early as the second half of the sixteenth century,
during which time the price of firewood rose far more rapidly than prices
generally. By 1600 the growing pressure
upon the limited supplies of firewood and timber had already produced numerous
attempts to introduce coal into individual industries. And yet, in spite of strong and pervasive
economic inducements, it took over 200 years before this substitution was
reasonably complete. But what is
particularly interesting from our present vantage point is that, in some industries,
the transition to the new fuel was effected very rapidly, whereas in others,
including some of the most important such as metallurgy, a span of 200 years
was required.
Why? A complete answer would be long and complex,
but a major part of the answer is that the substitution presented no technical
problems at all in some industries, while it created very serious problems in
others. No major problems arose in using
coal in the evaporation of salt water in salt production, or in lime-making or
in brick baking. But in other industries
the use of the new fuel seriously reduced the quality of the final product
101
- as in glass-making, the
drying of malt for breweries and most importantly, in the smelting of metallic
ores. Throughout the seventeenth century
considerable effort and experimentation were devoted to these problems. The problems of glass production were solved
relatively early by the use of closed crucibles which protected the glass from
the destructive effects of the mineral fuel (although, significantly, the
method could be used only to produce a coarse cheap glass). In malt production a more palatable beer was
being produced by mid-century by first reducing coal to coke and thus eliminating
some of the offending elements. Later in
the century a reverberatory furnace was introduced
which was eventually successfully employed in the smelting of lead, tin and
copper. The coke-smelting of iron was
first achieved by Abraham Darby in 1709, but the method produced only a very
inferior quality of iron. As a result
the use of coke pig iron was restricted to the small, cast-iron branch of the
iron industry, and charcoal pig iron continued to be used for almost another
century for all high quality purposes. It
was only after Henry Cort’s introduction of the puddling process in the 1780s for the refining of pig iron
that the transition to mineral fuel was finally completed. [1]
Thus the timing of a whole
series of inventions connected with the introduction of coal can be understood
only in terms of a protracted effort at maintaining quality control while
introducing coal into industrial uses. The
use of coal created a series of new problems, of varying degrees of complexity,
in different industries. Moreover, the
fuel itself varied considerably in its chemical composition from one region to
another. Since the nature of the
chemical interchanges between the new fuel and the various raw materials with
which it was employed were not understood, a great deal of time was required
(in some cases hundreds of years) before crudely empirical methods finally
sorted out the economic opportunities presented by the new fuel. Moreover, the sequence in which solutions were
found to the problems of different industries varied considerably, depending
upon the technical difficulties involved. Indeed, it may be confidently asserted that
the solution came last in precisely that industry where the economic
payoff was greatest: the iron industry.2
1. See
T. S. Ashton, Iron and Steel in the Industrial Revolution, Manchester
1924; John Nef, “The Progress of Technology and the
Growth of Large-Scale Industry in Great Britain, 1540-1640,” Economic
History Review, 1934, pp. 3-24; John Nef, “Coal
Mining and Utilization,” in Charles Singer et al., A History of Technology, London,
1957, 5 vols., vol. 3, pp. 72-88; E. A. Wrigley, “The Supply of Raw Materials
in the Industrial Revolution,” Economic History Review, August 1962, pp.
1-16.
2. It is
interesting to note that the historic links between coal and the iron and steel
industry persist even today, in spite of extensive attempts to sever the links.
As a matter of fact, one of the reasons
for the relatively large size of the coal industry today in the face of strong
competition from other fuels has been the inability thus far, in spite of
prolonged exploration, to develop a satisfactory technique for producing iron
without the use of high-grade coal. Although
other fuels have been readily substituted for coal in many uses, the substitution
in metallurgical processes poses unique and so far intractable difficulties.
102
The burden of my argument
here is that the allocation of inventive resources has in the past been determined
jointly by demand forces which have broadly shaped the shifting payoffs to
successful invention, together with supply side forces which have determined
both the probability of success within any particular time frame as well as the
prospective cost of producing a successful invention. But even if one were to accept the proposition,
which I do not, that demand side forces alone determine the allocation of
inventive resources, it would still remain true that supply side forces
exercise a pervasive influence over the actual consequences of such
resource use: i.e., the output of successful inventions, and the
timing of these inventions. The
explanation of the nature and composition of inventive output necessarily
requires an understanding of the operation of supply side forces. These supply side forces determine whether
the output is of the kind associated with the medieval alchemist or the modern
scientific metallurgist, the medical quack and patent medicines or broad
spectrum antibiotics. Even if knowledge
of demand forces alone yielded sensible predictions about the direction of
inventive effort, such knowledge, in the absence of further information about
supply side forces (the state of scientific knowledge, the prevailing levels of
technological skills, the specific characteristics of raw material inputs, etc.)
is likely to provide only limited insight into the flow of inventive output.
If we turn to the sequence
of invention in textiles, the first major industry to experience full mechanisation, one overriding fact stands out: mechanisation at all stages in the productive process came
much earlier to the new cotton branch of the industry than to the older woollen branch. There
were several economic reasons for this, which were rooted in the underlying
conditions determining the supply of the basic raw materials on the one hand,
and the nature of the demand for each of the final products on the other. But, in addition, there was again a
fundamental technological fact: cotton production lent itself to mechanisation far more easily than did wool production for
reasons intrinsic to the nature of the two materials. As Landes has aptly
pointed out:
… (C)otton
lent itself technologically to mechanization far more readily than wool. It is a plant fibre,
tough and relatively homogeneous in its characteristics, where wool is organic,
fickle, and subtly varied in its behaviour. In the early years of rudimentary machines,
awkward and jerky in their movements, the resistance of cotton was a decisive
advantage. Well into the nineteenth
century, long after the techniques of mechanical engineering had much improved,
there continued to be a substantial lag between the introduction of innovations
into the cotton industry and their adaptation to wool. And even so, there has remained an element of
art - of touch - in wool manufacture that the cleverest and most automatic
contrivances have not been able to eliminate.’
1. David Landes, The Unbound
Prometheus, Cambridge, 1969, p. 83. Landes also points out that, even after machinery was
introduced into the wool industry, the machines could be operated only much
more slowly than in cotton. Ibid., pp.
87-8.
103
If we consider the sequence
in which machine technology was introduced into separate operations in American
agriculture, the relative difficulty of applying machine methods to different
operations again looms up as a critical variable. Why did the reaping and threshing of wheat
come so much earlier than mechanisation in cotton
picking, corn picking and husking, and milking? Here again, conditions affecting the demand
for such individual inventions spring readily to mind. The harvesting of wheat was especially
constrained by weather conditions in a way that the other crops were not. The peculiar history of the cotton-growing
South provided that region with more abundant labour than
other parts of the country and thus considerably weakened the incentive to
introduce labour-saving machinery. Yet, as Parker has pointed out, milking
operations were also subject to a very strong time constraint and were
concentrated in labour-scarce regions of the country
where the incentive to invent labour-saving machinery
should have been correspondingly strong. Moreover, there is abundant evidence - e.g.,
from the Patent Office - that considerable, if unsuccessful, inventive effort
had been directed toward these operations in the nineteenth century.
Surely the most plausible
single answer,” Parker suggests,
is that these operations were all inherently difficult
to mechanize without radical alteration and improvement of basic elements in
the prevailing technology. In the case
of the corn harvester, the problem of harvesting the ear separately from the
stalk, while preserving the stalk for forage, was hard to solve. In cotton picking, the need to make several
passes over the field as the bolls ripened prevented a crude solution. The possibility of mechanical milking was
hardly dreamed of, except by cranks, before the gasoline engine and electric
power. It is no accident that in all
three cases, the mechanical problem was to imitate complex motions of the human
hand rather than the simple sweeping actions of the arm required in reaping and
threshing. [1]
A large part of the
economic history of the past 200 years is; in fact, the story of an enormous
outward shift in industrial man’s capacity to solve certain kinds of production
problems. This growing capacity has been
fitful and highly selective. For most of
the nineteenth century it involved the exploitation of new power sources and an
increasing mastery over the use of large masses of cheap metal (iron and, later,
steel). These techniques became
available with no fundamental accretions to basic knowledge. They nevertheless were developed slowly
because it took time to develop and then to diffuse new techniques in the
precision working of metals and to devise the innumerable small improvements
and adaptations which were often required to enable
them to operate successfully. There is
always a gap, moreover, between the ability to conceptualise
a mechanism or technique and the capacity to bring it into effect. Thus, da Vinci’s
notebooks are full
1. William
N. Parker, “Agriculture,” in Lance Davis, et al., American Economic Growth, New
York, Harper and Row, 1971, p. 385.
104
of sketches for novel machinery which could not be realised, with the primitive metal-working techniques at
his disposal. Breech-loading cannon had
been made as early as the sixteenth century, but could not be used until
precision in metal working in the nineteenth century made it possible to
produce an air-tight breech and properly fitting case. (Without the air-tight breech, a breech-loading cannon was likely to present far greater
danger to the persons engaged in firing it than it did to those at whom the
fire was being directed.) Christopher Polhem, a Swede, devised many techniques for the application
of machinery to the quantity production of metal and metal products, but could
not successfully implement his conceptions with the power sources and clumsy
wooden machinery of the first half of the eighteenth century. Although the principle of compounding was
embodied in a patent in 1781, compound steam engines were not introduced into ocean-going
vessels until the 1880s, a full century later, in spite of strong economic
incentives. Not until major
breakthroughs in steel-making technology was it possible to provide high
quality components such as boiler plates and boiler tubes upon which the
operating efficiency of the compound engine depended. Charles Babbage had conceived of the main
features of the modern calculator over a century ago, and had incorporated
these features in his “analytical engine,” a project which was even favoured with a large subsidy from the British Exchequer. Babbage’s failure to complete this ingenious
scheme was due to the inability of the technology of his day to deliver the
components which were essential to the machine’s success.
The purpose of this
recitation of frustrations and failures is simply to argue that, given the
state of purely scientific knowledge, society’s technical competence at any
point in time constitutes a basic determinant of the kinds of inventions which
can be successfully undertaken. Of
course it is possible to argue, as it has been with respect to the long delay
in the introduction of a mechanical cotton picker, that if factor prices and/or
cotton prices had been significantly different, a practical machine would have
been introduced much earlier. If, for
example, the available labour supply had been much
more expensive, more inventive effort would presumably have been devoted to
solving the complex technical problems of a cotton picking machine much sooner.
While this is probably true, it is also
incomplete. Because it
is also true that, given the set of factor and commodity prices which
actually prevailed, the cotton picking machine would also have been
developed more quickly if the technical problems which had to be overcome were
less serious. These technical
problems and their relative complexity stand independently of demand
considerations as an explanation of the timing and direction of inventive
activity. Therefore any analytical or
empirical study which does not explicitly focus upon both demand and supply
side variables is seriously deficient.
105
V –
Differential State of the Sciences
Where has this analysis
taken us? I have argued that the central
weakness of Schmookler’s approach is his treatment - or,
rather, his neglect - of the supply-responsiveness of technology and invention.
Essentially, Schmookler is saying that, given the state of science (and
regardless of “how we got here”) the supply of inventions is, in effect, perfectly
elastic, and at the same price, in all industries. At any moment in time it is possible to get as
many inventions as wanted in any industry at a constant price. Therefore the observed composition of
inventions is entirely a demand side phenomenon, reflecting the manner in which
inventive resources have been allocated between industries (or, better,
commodity classes) in response to the structure of (demand-induced) profit
expectations.
The main objection which I
have raised is that inventions are not equally possible in all
industries. This is because there is a
crucial intervening variable: the differential development of the state of
sub-disciplines of science and bodies of useful knowledge generally at any
moment in time. Indeed, I think it is
very important that we cease talking about “the state of science” and begin
thinking in terms of “sciences.” A
central problem is to trace out carefully the manner in which differences in
the state of development of individual sciences and technologies have influenced
the composition of inventive activities. Let me suggest further that one way of getting
at this is to pay more attention to historical failures.
Our understanding of
inventive activity (and perhaps of social change generally) is excessively
rooted in success stories. We study the
history of successful inventions but devote little attention to inventions
which were not made. Yet it is highly
relevant to ask why it took so long to do certain things, and why inventors
failed for so long at some inventive efforts while they succeeded quickly at
others. It is certainly possible to
study past patterns of research expenditure and inventive effort, and to seek
the reasons for unsuccessful as well as successful outcomes, for very long
gestation periods in the development of new inventions as well as for shorter
periods. [1] In short, if we want to probe the relations between
science, technology and inventive activity more deeply, we must learn much more
about what was not possible as well as what was possible. We need to understand what scientific and
technological discoveries were needed for key breakthroughs in invention. For knowledge not only permits
- it also constrains. For this
reason we can learn much from the study of unsuccessful attempts to invent
something
1. It is
worth mentioning here that our lack of interest in the study of failures may
also have contributed in an important way to an under-estimation of the costs
of invention. In our preoccupation with
success stories we inevitably ignore the substantial commitment of resources to
unsuccessful inventive efforts, and recognise only
those which were connected with a successful outcome.
106
for which the market was perceived to be ready. In this respect, the study of failure is
essential to a determination of the precise role of supply side variables in
the inventive process. After all, the
demand for higher levels of food consumption, greater life expectancy, the
elimination of infectious disease, and the reduction of pain and discomfort,
have presumably existed indefinitely in the past, but they have been abundantly
satisfied only in comparatively recent times. It. seems reasonable to suppose that the
explanation is to be found in terms of supply side considerations. It is unlikely that any amount of money
devoted to inventive activity in 1800 could have produced modern, wide-spectrum
antibiotics, any more than vast sums of money at that time could have produced
a satellite capable of orbiting the moon. The supply of certain classes of inventions
is, at some times, completely inelastic - zero output at all levels of prices. Admittedly, extreme cases readily suggest
arguments of a reductio ad absurdum sort.
On the other hand, the purely
demand-oriented approach virtually assumes the problem away. The interesting economic situations surely lie
in that vast intermediate region of possibilities where supply elasticities are greater than zero but less than infinity!
The perspective which I am
suggesting, therefore, states that, as scientific knowledge grows, the cost of
successfully undertaking any given, science-based invention declines - from
infinitely high, in the case of an invention which is totally unattainable
within the present state of knowledge, down to progressively lower and lower
levels. Perfectly inelastic supply
curves of invention gradually unbend and flatten out. (To what extent they flatten out is, of
course, an empirical question, on which Schmookler
has adopted the arbitrary and implausible extreme assumption of perfect
elasticity.) Thus, the growth of
scientific knowledge means a gradual reduction in the cost of specific
categories of science-based inventions. The
timing of inventions therefore needs to be understood in terms of such shifting
supply curves which gradually reduce the cost of achieving certain classes of
inventions. More precisely, we need to
think in terms of a number of supply curves for individual industries,
depending upon the knowledge bases upon which inventive activity in that
industry can draw, and we need to understand more clearly the extent to which
different “ pools” of knowledge are potential
substitutes in the inventive process. Schmookler’s hypothesis states, in effect, that there is
one supply curve for all industries and that the extent of substitution renders
it unnecessary to look at supply conditions in individual industries. It seems to me that a clear articulation of
the relations between science, invention and economic growth requires a
critical examination of this assertion. The
basic economic question, of course, is not an “either or” proposition telling
us whether a particular technological achievement is or is not possible at a
particular point in time. The economic
question is: Given the state of the sciences, at what cost can a
technological end be attained? How does
the state of individual sciences differentially structure
107
the cost of society’s technological options? [1] Answers to these questions will carry us a long way towards a
deeper understanding of both the nature of inventive activity and the process
of economic growth by providing further insight into the economy’s changing
capacity to respond to economic needs.
1. Note that my emphasis upon supply and cost considerations does not
imply any sort of scientific or technological determinism. More costly inventions can always precede less
costly ones in time if demand conditions are sufficiently strong.
108
The Competitiveness of Nations
in a Global Knowledge-Based Economy
April 2003