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Appearing in the world’s renowned newspaper “The Economist”, the article “Innovation Pessimism: Has the Ideas Machine Broken Down?” sheds light on the factors that may have contributed to the stagnation of the global technological advancements and subsequent economic growth in recent decades. This paper summarizes and analyzes the article using the framework of supply and demand.
In summary, the article suggests that stagnation may have arisen due to (1) lack of intensive growth that is fuelled by the discovery of ever better ways to utilize workers and resources to allow continuous improvement in income and welfare as well as enable an economy to grow even as its population decreases, (2) lack of upcoming inventions in spite of heavy investments in education and research activities, and (3) slow pace of economic growth and progress compared with that of the early and mid-20th century (“Innovation Pessimism” 2-3).
In using the supply-demand paradigm, it can be argued that lack of intensive growth in the developed world is caused by lack of supply of the needed technological advancements to drive growth since the demand for better ways of doing things is still there.
Alternatively, it can be argued that the supply of technology is presently there as witnessed by recent advancements in information and communication technology, but the growth effects of these advancements will be witnessed years to come.
Although America’s productivity performance since 2004 has plummeted compared to growth projections of the early and mid-20th century, chances are that recent growth in information technologies will surface in the future as research demonstrates that “the lag between investments in information-and-communication technologies and improvements in productivity is between five to 15 years” (“Innovation Pessimism” 4).
Such an orientation, however, lends credence to the fact the supply of strategies that could be used to achieve intensive growth and productivity improvements is not always informed by demand. The second line of analysis would be to explore the disengagement between the lack of upcoming innovations and heavy investments in research under the supply-demand paradigm.
The authors are clear that, in recent years in the developed world, there exist “unconvincing appeals to the number of patents filed and databases of innovations put together quite subjectively (“Innovation Pessimism” 3). This acknowledgment implies that the supply of new methods of doing things has been an ongoing exercise in the developed world, but these innovations cannot be termed as truly fundamental to fulfill the demands of the economy and spur productivity improvements, leading to growth stagnation.
Consequently, in my view, recent innovations and subsequent patents for the innovations have not automatically led to economic growth in the developed world. Extant literature demonstrates that the urge to develop innovation strategies originates “from increasing international competitive pressures, whereby it is clear that developed regions can only compete with low-wage developing world by successfully developing new, innovative products and production processes, improving quality and achieving productivity gains” (Tsipouri 3).
This view reinforces the article’s standpoint that the economic progression of developed countries has somewhat stagnated in recent years due to lack of break-through innovations compared to those that happened in the early and mid-20th century. There has been a noted upsurge of property rights as individuals come up with new innovations and patent them to prevent misuse, but the supply of these innovations is yet to fulfill the demand that is there to spur productivity gains.
It is therefore clear that patents and property rights for new innovations are good motivators for the creation of new products, but the problem lies in the fact that these innovations are in their present form unable to satisfy the demand for fundamental and break-through technological advancements to drive the economic growth agenda in the developed world (“Innovation Pessimism” 4-6). For developed countries to continue gaining continuous improvements in their economies, therefore, they must develop a balance between demand and supply.
“Innovation Pessimism: Has the Ideas Machine Broken Down.” The Economist 12 Jan. 2013: 1-6. Print.
Tsipouri, Lena. Innovation Strategies Articulating Supply Side and Demand Side Aspects. 2013. PDF file. Web.