"Innovation - The Propellant for Progress"

Sydney M. Williams

 Thought of the Day

 “Innovation – The Propellant for Progress”

February 1, 2011

Professor Tyler Cowen of George Mason University wrote a piece for the New York Times on Sunday past, in which he provides a dark view of American exceptionalism, as it applies to inventions that both advance living standards and increase average incomes. The article, titled “Innovation Is Doing Little for Incomes”, argues that while “America produces plenty of innovations, most are not geared toward significantly raising the average standard of living.” He cites the example of his mother who was born in 1905 and the widespread adoption of inventions such as “electricity, the automobile, flush toilets, antibiotics and convenient household appliances.” He contrasts that period with todays’ innovations.

Most inventions are processes, not eureka moments; one creation often builds off the last. Their adoptions often take years, if not decades. The first gasoline engine was invented in the 19th Century and people were playing with electricity in the 18th Century and earlier. The first telegraph sent, in 1837, was dependent on electricity, yet a hundred years later almost half the population of the U.S. would not have electricity. The first flush toilets – gravity fed – were installed in mid 19th Century English homes. Even in my youth, one hundred years later in rural New Hampshire, outhouses were not uncommon. Automobiles only became ubiquitous in the 1950s, almost fifty years after Henry Ford introduced the Model A in 1903. It took years and strong economic growth for these inventions to morph into usable and everyday products. Despite the advent of cars and trucks, by 1930 there were still 187,000 horses in New York City, most used for work, not ridden for pleasure. The process of adoption is slow and uneven, and depends upon economic conditions. Even Mr. Cowen concedes: “Scientific progress has never proceeded on an even, predictable basis.”

The professor writes of the period – 1947 to 1973 – when inflation adjusted median income more than doubled. He adds: “But in the 31 years from 1973 to 2004, it rose only 22%. And, over the past ten years, it actually declined.” What he doesn’t explain is that 1947 was two years after the end of a world war, which embroiled Europe and Asia for five years, and eighteen years after the world was catapulted into a world-wide depression following the crash of the U.S. stock market in October 1929. If there ever was a time for incomes to grow, for comparisons to be easy, that was it.

I would take exception with Professor Cowen when he suggests that unique to this period “when there have been measurable monetary gains, they have often been concentrated among a small number of company founders, as with, say Facebook.” He is right; today’s innovative products have created concentrated wealth, but that has always been the case. And it is the way things should be. Has Mr. Cowen forgotten about the great fortunes of the Rockefeller, Ford, Mellon and Carnegie families? And, of course there are always exceptions, such as Charles Goodyear who invented the vulcanization process for curing rubber, yet died penniless.

The last few years have witnessed a revolution in information accessibility and communication. We are still in the process of understanding the full effect of these innovations, but they already have had important consequences for universities, and media and financial services businesses. There will be others affected, both positively and negatively as the process of creative destruction takes place. Just because new companies and industries that will feed off these innovations are not readily visible does not mean they will not come into existence.

Innovation depends upon the study of science and mathematics, as President Obama pointed out in his State of the Union, but it also requires individuals willing to take risks and it needs venture capitalists to financially back those individuals – characteristics that may not be unique to America, but are certainly present. Innovations take time to assimilate. The first four cylinder car – the Locomobile – was built in 1902. Yet it took until the early 1950s for cars to become ubiquitous. The first steam-powered engine was a water pump designed by an Englishman, Thomas Slavery, in 1698; yet it would be over a hundred and nine years before Robert Fulton’s Clermont carried passengers up the Hudson River under steam power. And, while it is true that inflation-adjusted median income has declined over the past ten years, such times have historically given way to periods of increases.

Innovation is critical to progress, and while we should never become complacent with our situation, we may not be as badly off as doomsayers claim. Adam Segal, in his book Advantage, cites a fascinating statistic: “In a November 2009 poll conducted by Newsweek and Intel, 81% of Chinese, compared to 41% of Americans, believed that the United States was staying ahead of China.” Mr. Segal concludes, “Perhaps we should be more confident of our future.”