Innovationism

by Don Boudreaux on June 29, 2011

in Growth, History, Innovation

Wow!  Just wonderful wow!

Lest we forget, amidst the daily/weekly/monthy/yearly ups and downs of the market, the market is an historically off-the-charts (almost literally) innovation machine.

Be happy that you live when you do and, if you live in the first world, where you do.

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{ 46 comments }

W.E. Heasley June 29, 2011 at 8:12 pm

“SOME people recite history from above, recording the grand deeds of great men. Others tell history from below, arguing that one person’s life is just as much a part of mankind’s story as another’s”. – The Economist online

A very well written set of sentences. Let us change it a bit and see what we find:

Some people see history from the perspective of grand politicos with grand schemes. Many others spend an entire life time [history] paying for grand politico schemes.

Don Boudreaux June 29, 2011 at 8:28 pm

Beautifully said.

Michael Tobis June 29, 2011 at 8:37 pm

and not thirty or forty years later…

Joshua Cross June 29, 2011 at 9:17 pm

Indeed a great graph. I’ve seen similar graphs/accounts elsewhere.

I’m wondering about this…(just daydreaming)…The derivative is e^x. One might think that the derivative will always be e^x. History – and the future – always looks the most impressive to those alive/making it.

Scott June 30, 2011 at 6:39 am

Is it sustainable? Factor in permanent energy cost increases, then what happens to the graph?

Methinks1776 June 30, 2011 at 8:49 am

Were you factoring in innovation as you were factoring in energy costs?

ArrowSmith June 30, 2011 at 5:36 pm

ah the magical “innovation fairy” is going to magically solve disappearing cheap energy…

vikingvista July 1, 2011 at 11:07 am

That is a problem of central planners. They assume innovation will fill the gaps in their plans for society, rather than leaving society alone to go where innovation leads it.

jdc June 30, 2011 at 9:17 am

Methinks1776 is right. Also, see any of Don’s many many many posts that (rightly) point out that scarcity is an economic concept, not a physical one. Or, see Julian Simon’s work.

Also, the exponential nature of the curve – and, importantly, that it’s derivative is exponential – suggests that rebuttal to your point: it always appears to the people making history (those alive, at the right edge of the curve) as if they are making/consuming/depleting/building/etc. more than anybody before them. Yet, we haven’t “run out” of anything yet. That’s innovation. That – I think – is why Don has titled this post “Innovationism”.

Scott June 30, 2011 at 9:23 am

I would never disagree with the potential for innovation or the ability of the human mind to create.

But, I would just make the point that from a technical stanpoint right now, there are no suitable alternatives to oil, when cost per BTU is considered. And considering thermodynamics, there is an upper limit on efficiency.

CRC June 30, 2011 at 10:25 am

The operative phrase here is “right now.”

That’s kind of the point.

Thankfully we have whole industries with specialists staying up nights worrying about this for us.

Furthermore, currently and futures pricing on oil doesn’t suggest we’re going to run out any time soon (despite the FUD spread by some.) It’s not like ONE day we will SUDDENLY wake up and there is no oil. It will be a gradual price in increase (some spikes, some dives, etc.) and this pricing trend will prompt us to conserve that resource, look for more and look for alternatives. All of these actions will result in more economical usage, discovery of more of what we need or alternatives that are suitable.

Scott June 30, 2011 at 11:00 am

of course the world won’t run out of oil. that’s pretty simple supply and demand. but it will go up in price and it may not hit a price point critical for alternative technologies, barring government subsidy, until it hits a significantly higher price than it is now. there is a high probability that we have seen a low point in energy pricing already due to the exhaustion of easily accessible hydrocarbons. this is not to say it will run out. it is to say that an EQUALLY inexpensive suitable alternative may not be feasible.

Methinks1776 June 30, 2011 at 11:32 am

So, we’ll keep getting more efficient.

I buy very large CPUs about every 12 months. Each new CPU uses less energy than the one before it and is much more powerful. And that’s but one anecdote.

China is not efficient in its use of fuels – yet. In time it will be.

John Dewey June 30, 2011 at 12:40 pm

Scott: “there is a high probability that we have seen a low point in energy pricing”

That’s your view. It certainly is not mine. Just because nuclear energy and biofuels and solar energy seem to be expensive today does not mean those and other sources will remain expensive forever.

Economiser June 30, 2011 at 1:31 pm

@Scott: there is a high probability that we have seen a low point in energy pricing already

If you really believe that, you should be heavily invested in long energy contracts. If not, you’re just blowing smoke.

The statist’s credo: “I believe in this so strongly that I’m willing to make all of you pay for it.”

Economiser June 30, 2011 at 1:32 pm

Sorry, only the first sentence of my post should’ve been italicized (the Scott quote). I miss the “edit” button.

CRC June 30, 2011 at 1:35 pm

@Scott:

“but it will go up in price and it may not hit a price point critical for alternative technologies, barring government subsidy, until it hits a significantly higher price than it is now.”

Maybe, but as I said there are multiple factors that are at play here including increasing conservation actions as a result of increasing prices that will continue to moderate the need for current fuels and provide incentives, however small, to investigate alternatives on small and large scales.

“there is a high probability that we have seen a low point in energy pricing already”

There’s a way you can bet on that and get rich.

“it is to say that an EQUALLY inexpensive suitable alternative may not be feasible.”

Maybe. But I think you still greatly underestimate the power of human ingenuity and adaptability which can manifest itself in ways we think are ridiculous today but much more palatable in the future. For example, maybe people will migrate to more urban settings and walk to their destinations. Maybe they will chose to occupy smaller homes and offices. There are literally thousands of ways that people can and likely will adapt even to the circumstance you suggest may occur.

Eric Hammer June 30, 2011 at 2:37 pm

Closing tag [/i] hopefully :)

kyle8 June 30, 2011 at 3:00 pm

On the other hand, energy use is much much down on a per device basis. For instance, I can do so much more with a small laptop that uses very little energy than I could with my jusge desktop system of eight years ago. My big flat sreen HD tv uses many less watts of energy than my old vacume tube tv did.

There are similar changes going on in all areas.

kyle8 June 30, 2011 at 3:04 pm

Ugh! Sorry about the misspells, and no the I tag is not off.

lamp3 June 30, 2011 at 3:51 pm

?

lamp3 June 30, 2011 at 3:58 pm

That’s what I love about books like the rational optimist, the problems of today are framed in the context of time and history.

I do understand there is a worry that for thermodynamic reasons, we may suffer inconvenience. Yet I think the economic costs of even approaching such a limit would make it prohibitive. Entrepreneurship and innovation must, out of the potential for profit, reward finding ways around this.

I see now, Economiser closed with “.”

Economiser June 30, 2011 at 5:35 pm

Argh. I could’ve sworn I included a closing italics tag

vidyohs June 29, 2011 at 9:21 pm

The beginning of history is the 1st century according to the chart, hmmmm, time to toss my books on palenotology, no history there….move along nothing to see.

But on the sincere side, for once the looney left has their fondest wish granted. Everyone is totally equal in making history. Yea!!!

Peter McIlhon June 29, 2011 at 11:03 pm

I saw this on Carpe Diem yesterday and it blew my mind. Talk about not appreciating a historical context!

Michael Tobis June 29, 2011 at 11:13 pm

Yes, there are so many similar graphs of various quantities over historical time that they have a collective name, “hockey sticks”.

LowcountryJoe June 30, 2011 at 12:33 pm

The Case for Human Ingenuity
May 2, 2011
By Niels C. Jensen, Nick Rees and Tricia Ward

I’m not a big fan of this bolded sentence from these author’s:

It is probably also fair to say that to many, a two-seater hybrid which can ‘only’ do 0-100 km/h (0-60 mph) in 11.9 seconds would be a step down relative to the gas-guzzler they currently drive (I include myself in this category), but this is where political leadership and, if necessary, legislation comes in. The EU has recently decided to ban all conventionally fuelled cars from city centres across the EU beginning in 2050 . The decision raised the predictable storm of protests, but the key is in the wording. Cars will not be banned altogether, only those using conventional fuels.

But the remainder of the article seems to be well worth the read; particularly toward the end when they discuss technologies that may, in the future, create propulsion/motion and get cars to move.

Subhi Andrews June 30, 2011 at 1:41 pm

Subhi Andrews June 30, 2011 at 1:42 pm

did that close the italics?

brotio June 30, 2011 at 1:45 pm

end HTML tag

I hope this works

brotio June 30, 2011 at 1:46 pm

Oh well.

Daniel Kuehn June 30, 2011 at 2:02 pm

Reminds me of Keynes’s “Economic Possibilities for Our Grandchildren”. There was a man that appreciated innovation, growth, prosperity, investment, the market, and free society.

Daniel Kuehn June 30, 2011 at 2:02 pm

Granted, he would have worried unduly about the population bar, but we all screw up sometimes.

Greg Webb June 30, 2011 at 2:09 pm

I love this graph! It’s good to see objective, verifiable evidence how much people are better off in the period where individual freedom flourished and population increased. More evidence that the central planning and population control crowds are wrong. But, it won’t convince them because they believe that disaster and chaos are just around the corner and that only government-enforced central planning can save the world.

Whiskey Jim June 30, 2011 at 2:49 pm

The world is climbing out of poverty.

This is the absolutely breath taking story of this graph.

Despite evidence that richer economies consume less energy, their air, land and water cleaner than in the last 150 years, it is not surprising to see the lead comments dominated by worry about what all this progress does to the environment.

Thank you for websites like Cafe Hayek that help illuminate this story.

Warren Smith June 30, 2011 at 5:46 pm

The drift up begins with electricity and accelerates as the means of producing power multiply and diversify. Why should this evolution in technology ever cease? Why is it thought of as chained to any limit in the current inventory of a particular fuel?

Scott June 30, 2011 at 7:59 pm

Let’s just be a little more open-minded. Self-proclaimed geniuses did not see the collapse of real estate. My closest family thought it could go on forever too.

Warren Smith June 30, 2011 at 9:02 pm

Asset bubbles are cyclic boom to bust events of varying duration. Many people did foresee the recent collapse in real estste, ie., Robert Shiller. When has the innovative creativity of mankind ever ceased to find solutions technological problems? Who has ever correctly predicted the end of innovation? These innovations are wealth creating and have become more and more prevasive since Faraday and Maxwell circa 1825. Anticipating an end to the future having creative solutions to mankind’s solutions sems to be overly pessimistic given the history of our species.

Scott July 1, 2011 at 12:32 am

I’m not saying that, I’m just saying it might not be exponential.

sethstorm July 1, 2011 at 3:41 pm

“Be happy that you live when you do and, if you live in the first world, where you do.”

Except that businesses would rather penalize you through their actions for being a First World citizen.

Greg Webb July 1, 2011 at 7:22 pm

No, Seth. That would be government penalizing citizens by depriving then of their liberty and their property.

sethstorm July 2, 2011 at 12:06 am

So far, I see business making all the adverse actions – in reaction to government. They would rather use the weight of the world to squeeze any concession from a First World citizen, and doing worse off in the Third.

You would have a point if any citizens of a First World nation had a counterweight to the use of the world. They don’t, and it amounts to having freedom for businesses, but not so much for regular people.

Greg Webb July 2, 2011 at 3:06 pm

Seth, you do not see anything but what you want to see. Read the Kelo vs City of New London for just one eggregious example of government acting badly.

Amoeba July 3, 2011 at 3:27 pm

“Anticipating an end to the future having creative solutions to mankind’s solutions sems to be overly pessimistic given the history of our species.”

Untrue. Look at numerous previous civilisations that failed due to resources. Those that survived lived elsewhere, where the circumstances were different. This time however, we have a global civilisation. And we are simultaneously degrading the land the seas and the sky. There is no ‘elsewhere’ this time to hide. Apparently, the difference gives you grounds for optimism.

Given that we have known the problems and the solutions for decades, but nevertheless allowed the situation to get worse, I think your optimism is ill-founded.

Amoeba July 3, 2011 at 3:30 pm

Previous comment directed at Warren Smith

Warren Smith July 4, 2011 at 9:22 pm

Species is not an equivalent term for civilization. Have you mixed apples and oranges? Changing cultural conditions are often the result of technological innovations. Mankind has continually created technological innovations throughout our time on earth. These break throughs occur regardless of cultural setting and in fact mandate changes which favor one civilization or culture over its neighbors or even its own historical perspective. My expectation of innovation continuing entails a belief that there will be accompanying cultural changes as well. I do not believe that increasing globalization is a problem preventing change.

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