NOEL TURNBULL. Innovation and inequality – not as simple as the tech titans make out

If you were told that an Australian politician had published a new book, backed by a solid evidence base, with a highly original take on a major problem the normal response would be to wonder if Barry Jones had a new book out.

If you were told it was actually by a sitting Federal MP you would probably puzzle away for a while, laugh uncontrollably or suspect it might be by the Member for Farrer, Dr Andrew Leigh.

Leigh and his co-author Joshua Gans (formerly of Melbourne Business School and now at Toronto University) have tackled a problem – innovation and equality – the discussion of which has frequently been more marked by ideology than evidence.

The book – Innovation + Equality How to Create a Future More Star Trek than Terminator – looks at the paradox that societies such as the US are simultaneously more unequal in generations and more technologically advanced than ever. Gans and Leigh say: “Many in business and government say that inequality is merely the price that society pays to enter into a more exciting world” with implications for tax policy in particular areas which act as incentives to innovation and risk taking. In this scenario the rewards for this are the billions the tech titans have accumulated.

Their central argument is that good innovation policies are “those that respect two fundamental facts about the process of innovation: creative destruction and unresolvable uncertainty.” The implication is that if technological change comes at a cost this cost should be shared by those who get the benefit. The uncertainty corollary suggests we need to avoid rigid policies to fix the issues and instead take what they describe as an insurance approach.

The authors compare and contrast the tech optimists (such as Elon Musk of Tesla) and the tech pessimists such as Robert Gordon and Tyler Cowen who argue we are entering an era of diminishing returns. In the pessimist’s corner are all those who have remarked that the late 1990s productivity surge has been replaced by a slow productivity growth in the 21st century and the concurrent decoupling of wages from productivity.

Similarly they look at job optimists and pessimists and point out that while many of predictions of innovation driven unemployment in the past and today have not come to pass the nature of work and the gap between skilled, medium skilled and unskilled workers has widened in terms of the number of jobs and the wages they bring.

They produce a table which details the fastest growing and fastest shrinking occupations: solar panel installers are forecast to grow by 106%; massage therapists by 26% compared with forecasts of locomotive firers shrinking by 79% and prepress technicians by 20% as print media declines. They also produce evidence that immigration has less impact on employment than technology.

Drawing on a range of studies from correlations between patents, copyrights and tax regimes; the complex questions regarding market power; and, a variety of other areas they make it clear that inequality is not a pre-condition for, nor an inevitable outcome of, innovation. Nevertheless they recommend changes to intellectual property rights and policies to avoid network effects becoming then basis of monopoly power.

They also the address the issue which led some business people to ridicule Obama when he pointed out that they didn’t do it on their own despite the fact that much innovation stems from government investment and public infrastructure is essential to every business.

They don’t neglect how to boost innovation and provide ten ideas to do so: encourage healthy competition between research funders; grants fostering moonshot innovation; bringing more balance to intellectual property laws; providing innovation training for everyone; using promises and prizes to encourage innovation (citing the 2007 government-Gates Foundation scheme to produce new vaccines); being wary of tax breaks (give transparent grants rather than hidden subsidies – they cost the same); reduce barriers to entry for entrepreneurs; build catalytical networks and entrepreneurial ecosystems to avoid trying to pick winners); freeing up public sector and university science for innovation; and, updating the national statistics to reflect the realities of a modern economy rather than one primarily based on ‘corn and steel not cloud computing and smartphones’.

Similarly they detail policies which will enhance equality and equality of outcomes focussing justifiably on the educational lessons which can be drawn from the brilliantly successful Finnish system with well-paid respected teachers and flexible curricula; vocational training; and lifelong learning.

They provide ten ideas for reducing inequality: make teacher effectiveness the top schooling priority; boost the quality of vocational training; simplify college loans (much of the book draws on US data and situations) encourage MOOCs; ban non-compete clauses; limit occupational licensing and target it on protecting public health and safety rather than artificial barriers to entry; create a new employment category (independent workers); focus on Earned Income Tax Credits (EITC) rather than universal basic incomes; encourage technologies that make jobs more family friendly; and, reform benefits, taxes and employment law to remove biases against working women.

Much of these latter policy prescriptions follow an illuminating contrast between the advice Benjamin Braddock gets in The Graduate (plastics!) and the career of Benjamin Franklin ‘the original lifelong learner’.

Their conclusion: “An entrepreneurial society need not be an unfair one. The goal is to be more innovative and more equal.” And in an echo of their Star Trek and Terminator subtitle they conclude the book with the invocation: “Rather than an ominous ‘I’ll be back’ when it comes to the traditional innovations-equality trade-off, the motto should be ‘to boldly go’ into a more productive and fairer future.

Noel Turnbull is retired and blogs at http://noelturnbull.com/blog/

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Noel Turnbull is a blogger who has had a 40-year-plus career in public relations, politics, journalism and academia.

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2 Responses to NOEL TURNBULL. Innovation and inequality – not as simple as the tech titans make out

  1. Avatar don owers says:

    The interval from 1950 t0 1970 is sometimes called the golden age of capitalism. It was a time when all the manufacturing capacity created by WW2 could be used to provide all the essential items that had been denied to people because of war time austerities. After that things went wrong. The oil crises , war in Vietnam, and then the market policies of Thatcher /Regan who saw the previous years as something to copy by continuous growth with stuff we didn’t need with methods that ignored the environment and human well being . It was a growth that created all the GHG emissions that bugger us today.

  2. Avatar Stephen Saunders says:

    Thanks, Noel. Up against Andrew Leigh, my money’s on Robert Gordon’s painstaking “The Rise and Fall of American Growth”. In other words, I expect low growth and high inequality to continue. I don’t think the 1% is going to permit any meaningful redistribution any time soon, least of all as envisaged by Piketty. The sort of tinkering that Leigh is on about isn’t going to change things much.

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