A few weeks ago, the Brookings Institution released a study that looks in detail at patenting activity in the US from 1980 to 2012 - Patenting Prosperity: Invention and Economic Performance in the United States and its Metropolitan Areas. The study examines whether patent activity is a good concrete indicator of innovation, economic growth and productivity by looking at historical data going all the way back to 1790. It includes a number of important findings, chief among them that the rate of patenting in the US stands at historically high levels.
This is a timely report given recent concerns that the US might be losing its innovation edge. For example, in 2011 George Mason University economist Tyler Cowen published The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better. According to Cowen, over the past two centuries the US economy has enjoyed lots of low-hanging fruit, including a vast, resource rich land, waves of immigrant labor, access to education and the technological advances of the Industrial Revolution, e.g., railroads, cars, electricity, telephones, chemicals, steel, and so on. But, Cowen believes that we are at a technological plateau, and wonders whether long term growth is still possible because the supply of low-hanging economic fruit is nearly exhausted.
Then last year, in a provocative paper, Is US economic growth over?, Northwestern University economist Robert Gordon questioned the generally accepted assumption that economic growth is a continuous process that will persist forever. Perhaps the slow growth we are experiencing in the US and other advanced economies is not cyclical, but rather evidence that long-term economic growth may be grinding to a halt. The rapid growth and rising per-capita incomes we experienced during the Industrial Revolution of the past two centuries might have been a unique episode in human history. There was little growth before 1800, and there might conceivably be little growth again for the rest of this century.
Given the close link between innovation and economic growth, it’s not surprising that questions are being raised whether our current slow growth is evidence that the innovation engine is now stalled. The Economist took a look at these innovation pessimism concerns in its January 12 issue. “With the pace of technological change making heads spin, we tend to think of our age as the most innovative ever,” it points out. But, Has the Ideas Machine Broken Down?, asks the lead article in its title. “The idea that innovation and new technology have stopped driving growth is getting increasing attention.” In the end, The Economist concluded that the fears that innovation is slowing are exaggerated and not well founded, a conclusions similar to that reached by the Brookings report.