In a simpler world, where innovation simply meant lowering the cost of production of, say, an automobile, it was easy to assess an innovation’s value. However, when innovation affects an automobile’s quality, the task becomes far more difficult. And this is even more apparent in other arenas: How do we accurately assess the fact that, owing to medical progress, heart surgery is more likely to be successful now than in the past, leading to a significant increase in life expectancy and quality of life?
Still, one cannot avoid the uneasy feeling that, when all is said and done, the contribution of recent technological innovations to long-term growth in living standards may be substantially less than the enthusiasts claim. A lot of intellectual effort has been devoted to devising better ways of maximizing advertising and marketing budgets — targeting customers, especially the affluent, who might actually buy the product. However, standards of living might have been raised even more if all of this innovative talent had been allocated to more fundamental research — or even to more applied research that could have led to new products.
Yes, being better connected with each other, through Facebook or Twitter, is valuable. However, how can we compare these innovations with those like the laser, the transistor, the Turing machine and the mapping of the human genome, each of which has led to a flood of transformative products?
Of course, there are grounds for a sigh of relief. Although we may not know how much recent technological innovations are contributing to our wellbeing, at least we know that, unlike the wave of financial innovations that marked the pre-crisis global economy, the effect is positive.
Joseph Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University.
Copyright: Project Syndicate