Has the ideas machine broken down?

The idea that innovation and new technology have stopped driving growth is getting increasing attention. But it is not well founded.

BOOM times are back in Silicon Valley. Office parks along Highway 101 are once again adorned with the insignia of hopeful start-ups. Rents are soaring, as is the demand for fancy vacation homes in resort towns like Lake Tahoe, a sign of fortunes being amassed. The Bay Area was the birthplace of the semiconductor industry and the computer and internet companies that have grown up in its wake. Its wizards provided many of the marvels that make the world feel futuristic, from touch-screen phones to the instantaneous searching of great libraries to the power to pilot a drone thousands of miles away. The revival in its business activity since 2010 suggests progress is motoring on.
So it may come as a surprise that some in Silicon Valley think the place is stagnant, and that the rate of innovation has been slackening for decades. Peter Thiel, a founder of PayPal, an internet payment company, and the first outside investor in Facebook, a social network, says that innovation in America is “somewhere between dire straits and dead”. Engineers in all sorts of areas share similar feelings of disappointment. And a small but growing group of economists reckon the economic impact of the innovations of today may pale in comparison with those of the past.

Some suspect that the rich world’s economic doldrums may be rooted in a long-term technological stasis. In a 2011 e-book Tyler Cowen, an economist at George Mason University, argued that the financial crisis was masking a deeper and more disturbing “Great Stagnation”. It was this which explained why growth in rich-world real incomes and employment had long been slowing and, since 2000, had hardly risen at all (see chart 1). The various motors of 20th-century growth—some technological, some not—had played themselves out, and new technologies were not going to have the same invigorating effect on the economies of the future.

Source and read more:

http://www.economist.com/news/briefing/21569381-idea-innovation-and-new-technology-have-stopped-driving-growth-getting-increasing

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