Michael Kremer: prediction

Transcript context

…Don’t you find it puzzling that the global economy is really much larger than 40 or 50 years ago, but total factor productivity or measured rates of innovation seem to be down? The pharmaceutical pipeline, at least pre-COVID, is commonly described as drying up or slowing down, and yet there are so many more consumers out there for drugs. Does this in some way invalidate or raise doubts about increasing-returns-to-scale theories, that maybe market size doesn’t matter very much? The view that I took in my paper on the ’90s on this was . . . I was a near contemporary of Chad Jones, and I think Chad’s fundamental insight . . . Let me put it technically first. “Chad, what’s the production function for new technologies?” Clearly, having existing technologies helps you invent new technologies. Having calculus helps you invent spacecraft or aircraft. But on the other hand, it’s not clear that it helps you, that an improvement in existing technology helps you, one for one, in developing new technologies. In some sense, it’s getting harder and harder to invent new technologies. Chad’s work at the time showed that, and more recent work that Chad has done. In that world, the task of technological advance is getting harder and harder over time. We see that at the macro level. We see that at the micro level. We see that in the increasing size of teams needed to develop new innovations. The task ahead of us is getting harder, and that means that there’s a race between the total resources that are going into innovation and the increasing difficulty of the task. You have those two forces operating against each other. I’ve no doubt that the increasing size of the market and the fact that there are now many people who are contributing to technological change is helping us, but the issue is, we’ve got a harder and harder task ahead of us. If there’s some constraint out there limiting the benefits from larger market size, what is indeed the constraint you would wish to target? You’re Michael Kremer. You’re put in charge of everything, and you can target the constraint that’s slowing down growth. What’s the first thing you look at?…

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