Ben Bernanke Is Right About Interconnective Innovation

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I’d just like to double down on Ben Bernanke’s comments on why he is optimistic about the future of human economic progress in the long run:

Pessimists may be paying too little attention to the strength of the underlying economic and social forces that generate innovation in the modern world. Invention was once the province of the isolated scientist or tinkerer. The transmission of new ideas and the adaptation of the best new insights to commercial uses were slow and erratic. But all of that is changing radically. We live on a planet that is becoming richer and more populous, and in which not only the most advanced economies but also large emerging market nations like China and India increasingly see their economic futures as tied to technological innovation. In that context, the number of trained scientists and engineers is increasing rapidly, as are the resources for research being provided by universities, governments, and the private sector. Moreover, because of the Internet and other advances in communications, collaboration and the exchange of ideas take place at high speed and with little regard for geographic distance. For example, research papers are now disseminated and critiqued almost instantaneously rather than after publication in a journal several years after they are written. And, importantly, as trade and globalization increase the size of the potential market for new products, the possible economic rewards for being first with an innovative product or process are growing rapidly. In short, both humanity’s capacity to innovate and the incentives to innovate are greater today than at any other time in history.

My reasons for optimism for the long run are predominantly technological rather than social. I tend to see the potential for a huge organic growth in the long run resulting from falling energy and manufacturing costs from superabundant alternative energy sources like solar, synthetic petroleum, wind, and nuclear, as well as decentralised manufacturing through 3-D printing and ultimately molecular manufacturing.

But Bernanke’s reasons are pretty good too. I see it every day. Using Twitter, the blogosphere and various other online interfaces, I discuss and refine my views in the company a huge selection of people of various backgrounds. And we all have access to masses of data to backup or challenge our ideas. Intellectual discussions and disputes that might have taken years now take days or weeks — look at the collapse of Reinhart & Rogoff. Ideas, hypotheses, inventions and concepts can spread freely. One innovation shared can feed into ten or twenty new innovations. The internet has built a decentralised open-source platform for collaborative innovation and intellectual development like nothing the world has ever seen.

Of course, as the 2008 financial collapse as well as the more general Too Big To Fail problem shows greater interconnectivity isn’t always good news. Sometimes, greater interconnectivity allows for the transmission of the negative as well as the positive; in the case of 2008 the interconnective global financial system transmitted illiquidity in a default cascade.

But in this case, sharing ideas and information seems entirely beneficial both to the systemic state of human knowledge and innovation, and to individuals like myself who wish to hook into the human network.

So this is another great reason to be optimistic about the long run.

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30 thoughts on “Ben Bernanke Is Right About Interconnective Innovation

  1. I’m absolutely confident in technological innovation. What needs to change and be fixed is the faulty money/financial system. Otherwise it will throw stumbling blocks in the process of advancement. A citizen’s dividend would transform the CONSUMER financial paradigm and permanently solve the primary reason for our slow recovery from the GFC, excessive personal debt. Adapt the current systems to such a policy of monetary Grace…and its onward and upward.

    • Right, and the “faulty money/financial system” is top-down elitist control exercised and enabled by government.

  2. All that pessimism out there is the mood of current societies and the people not because they want to but because they are having hard time while feeling bad and hopeless about their current situation and the future.

    They are pessimistic not for no reason. A very large group people who’re getting poorer and have to work harding, lucky if they still have the works, while watching another small group “smart innovated” people getting extremely wealthier in no time. The “smart ones” get to have all and almost unlimited. On the other hand, the larger “not-that-smart” falling behind group is getting more desperate, envy, jealous, and frustrated. Highly likely they will become violent at some point because they got not much to lose anyway. Civil war(s) social unrest are the result which may break down social structure and create some sort of balance at the end. Then a better society may be emerged. Or may be not. Who knows.

    Like Maxis, Ben Bernakee is living in a fantasy land where everyone is or will be nice non greedy non grasping. Well, may be genetic engineering innovation will make that happen one day to produce “nice non-greedy non-grasping” genes by cloning or by mutate the human selfish greedy genes into all loving generous ones. But until then, the “smart innovate” individuals will grasp most of the world’s resources and wealth and leave little to the rest of the dumberings to look forward to.

    • P.S

      On innovation to save the world etc….

      So” the world” needs another financial engineer innovation to fix the last that got the world into one crisis after other?

      But too many are not very motivated unless they get to eat most of the pie (the whole pie if they can help it) before other fools can get to it.

      Human innovation may very well be the fastest way humans to shorterening their own lifespan then nature’s designed for them as a specie and get themselves distinct from the earth prematurely.

    • Respecting the dictum of Yogi Berra, an undoubted genius in futurism as well as logic and ethics, (“Predictions are hard, especially if they’re about the future”), I shall be tolerant of everyone here. But I bet that today’s US, UK and EU will collapse from government default/bankruptcy or hyperinflation before Aziz’s technology saves civilization or ricecake’s starving peasant revolutions erupt. Technology surely changes “means”, but “ends” are determined by unchanging human nature — including greed, sloth, envy, and anger. Money-printing, mass propaganda, and electronic policing extend Big Brother’s tyranny, but human economic and emotional /spiritual strength will endure.

    • I’m agnostic-to-bearish on current markets. This is a discussion about the super-long-run. I think current markets could easily be headed for choppier waters, because things are pretty euphoric. I’ve been very critical this year of people who are jumping in and saying the Dow is going to 20,000, to 30,000, to 40,000 any time soon. I think that is a very big gamble. But in the much longer run, I’m a super bull.

        • I pretty much disagree with the Club of Rome and Malthusians entirely. None of their predictions ever seem to come true! Again and again since Malthus people have pointed to “limits to growth” that we’ve just smashed through using cleverness and innovation. Maybe there are some limits to growth for humans on Earth, but I don’t think we have any clue what they are. All of the environmental and economic problems that are foreseeable are potentially curable even with current-level technology…

      • A lot depends on how long is “long run”. But, John, I believe you will be disappointed about falling energy and manufacturing costs, except for economies of scale. Decentralized solar already is in limited use and will expand. But chemical energy’s concentration and transportability will dominate market share until it’s sources are REALLY scarce.

        Memory lane: (1) In 1950 +/-, I heard a major oil company expert predict that in the second half of the 20th century petrochemicals would become so ubiquitous and valuable that we would be amazed that we had been foolish enough to burn petroleum. While the chemists sure met/exceeded expectations, so did the geologists et al!

        (2) I remember when there were informed and responsible predictions that fusion and, later, that fission would make electric power so cheap that it would not pay to meter consumers.

        • re your point (2), although the timescales given for these things are often wildly optimistic, fusion power is fast becoming a reality with multiple serious projects around the world closing in on a viable solution. I wouldn’t be surprised to see the first successful proof of principle test in the next few decades, with perhaps a viable reactor 50 years off. Fusion power is absolutely destined to become our primary energy source I believe, because of the huge energy density, and because of the realtive simplicity of the system (once it’s perfected of course) compared to say creating a giant orbiting solar array or some other such proposed idea.

          Of course I don’t think for a second that it will translate into cheap energy for all, unless the current way the world is arranged changes dramatically. Also I suspect the bigger challenge for the future is not where to get the energy from, but how to store it in a transportable form.. energy dense liquid fuels currently have no competitors even close.

  3. The political acrimony in our disunited nation is ominous, and the
    optimism expressed by ye intelligent people here cannot console
    my perspective.

    For example: I just watched a network tv report about seemingly
    illegal drug related crime. One very courageous Chicago man changed his
    neighborhood by pressuring drug dealers to go plague a neighborhood elsewhere. The media savvy Mayor refuses an interview because his true prognosis is probably as depressing as I am perceiving the future.
    The 48 HOURS replay is doubtlessly freely available … for self-torture.

  4. Prognostication. What a waste. It’s like trying to figure out if you are going to be in a good mood three weeks from next Thursday, or if the x is going to be y in z time.

    The future no more exists than does the past, or present, for that matter. Each moment is unique although determined by the infinite moments leading up to its existence (outside of time).

    Give up the illusion of time and set yourself free!

  5. I am confident of one certainty.

    Narcissistic people with high intelligence, but low morals will join a political party with the self delusion of being “president” or “Prime Minister”.

    They will push “agenda” and “policy” and deliver the “narrative”.

    They will live in a bubble of aggrandisement, where their advisors kiss their boots and tell them how smart they are.

    They will wear a Cowboy hat when greeting their country constituents, or a Yamulke when in a Temple, or do the sign of the cross when visiting a Church, or kiss a baby in front of the media.

    They will write laws that their Commissions never up hold (Unless it is to defeat an enemy of a lobbyist).

    Swine. A pox on the Earth. Puppets.

    Bring back the elder Statesman. The distinguished person who brings widsom and virtuous morals. One who wants to leave a legacy, not lead a Bunga Bunga Party.

  6. I believe the greatest lesson in history has nothing to do with the events themselves, but instead, human reaction to events. Many notice that these reactions repeat themselves, and have referred to this as, “human nature.”

    The term is unimportant, only understanding the essence of human behavior [particularly in groups]. I believe that human beings use groups to enrich themselves. I can see little purpose for their existence, other than the occasional bake sale in order the save the three-eyed hexa-peds, or some such thing.

    It is the academic classes’ job to rationalize this group behavior and tell you that the guy [or institution] who has his hand in your wallet, desperately needs your money, and is not the thief he appears to be.

    He is there to tell you that that which you see before your eyes is an illusion, that what is real is some grandiose sophistry manufactured by some Ivy League genius with his head up his ass.

    He will never admit that what happens, happens because it is EXACTLY the way it is designed to be, as this basic truth is has been struck from the lexicon of, “those things incredibly apparent,” never to see the light of day again [instead replaced by those golden morsels taken for the truth, such as, "the more you spend, the more you save."]

    Everybody knows what’s going on, except perhaps the guy who has been living in the cave for the past 100 years. People enter this group denial as a way to rationalize their subservience to TPTB, even on this discussion list where you hear why, this is way it is, or how to fix that, or so on and so forth, when each and every one of us knows that human beings [in group-form] are simply a bunch of thieves, always have been and always will be.

    It is only the individual that can manifest the compassion so necessary for us to achieve balance in our lives. Groups are void of compassion and use their power to overwhelm individuals, destroying their ability to enjoy the fruits of their labor-value earned so important to living well, instead, transferring this value to those who control the groups.

    It’s the same battle which has been going on since the beginning of human time, and will rage-on until Nature has finally had Her fill of us.

    • Imp, old friend, I admire your philosophical insights, but I urge you to recognize exceptions. They are rare, but some are exceedingly significant, e.g., academics at CalTech teaching photonics and space communication.

      Admittedly, the good guys are individuals and SMALL groups/teams — as you point out.

      • It is a tough battle being a good guy. Evil is basically high intelligence with selfish motives. Depraved evil is usually mental illness (Serial Killers which the public find easier to identify with), so it is arguable if they are evil or just sick and worthy of redemption.

        How do small groups join up into a collective voice to get increased political power? This must be an issue Tea Parties have?

        BTW I believe I can have duel US and Australian citizenship, but I am too young and unwise to be a President.

      • I would like to suggest that the two kids selling lemonade on the corner of E. California and S. Hill Avenue [across from Cal Tech] are doing much more important work than are the academics [their nests feathered with your tax dollars] consumed with re-inventing every god damn thing.

        Those who worship science and it’s stepchild, technology, live in a world that will never be [fill in the blank] enough, and have converted billions into mindless consumers [and dis-contents] willing to give up everything sacred in order to join them on their endless journey of seeking that which can never be found.

        How can Man possible improve on Nature, on Earth, an econ-system honed for 13B years?, far superior to man’s aesthetic, and His endless pursuit of, something for nothing.

        Man’s intelligence has made a mockery out of His world, relying nearly wholly on that which is imagined as opposed to that which is Real. If only He could accept this incredible world in all its splendor instead of finding everything that needs “fixing,” a process never complete, leaving its adherents frustrated and unsatisfied.

        If one postulates exceptions, one must also re-consider the premise.

        • Monetary Grace is what will finally free individuals…to be wiser and better individuals…instead of insecure, grasping, isolated/alienated and trapped individuals in an enforced economic and monetary paradigm of scarcity.

        • Do you know the addition of Super Phosphate increases plant yields, but also destroy the micro organisms that allow the plant to uptake vital micro nutrients? Talk about empty calories.

          You can’t beat nature, and that is the philosophy I follow in my farming practices. I even allow multiple Rams to run with my flock. Like humans they have preferences too (Possible sub conscious decisions which improve the gene pool). When humans interfere in breeding and plant selection (DNA alteration is a new kettle of fish!) We do untold damage we are only just finding out.

  7. Would you permit a few more words about predictions? It seems to me that Aziz, who is kindly hosting us at the pages of this blog, belongs to the category of “civil religion of progress” true believers, as J.M. Greer uses to define them. I don’t think there is much to object about it, and even if it was a serious stalemate he’s anyway perfectly competent in other fields like economy and finance to deserve my highest consideration.
    However, I would like to quote a writer and philosopher NNT that we admire both ( and that coincidentally dislikes the habit of quotation), that has written the following : “ I am not urging you to stop being a fool…What you should avoid is unnecessary dependence on large-scale harmful predictions—those and only those. Avoid the big subjects that may hurt your future: be fooled in small matters, not in the large.” Certainly, dear Aziz, you may object that also the “Malthusianism” as you call it ( although it is much more complicated theory that includes not only economy but also a lot of political, social, environmental, psychological, etc. considerations) is a large-scale prediction. But there is an enormous difference between self-referenced unlimited progress credo and “green philosophy” paradigm, and it could be summarised in the principle of sustainability. But that is a subject for another discussion.

    • I don’t believe civil progress is guaranteed, or certain, but based on current indicators I think the far future is looking significantly more rosy than it was 5 or 10 or 15 years ago.

      My main problem with Malthusianism is that it keeps making bad predictions that don’t come true. If Malthusianism made good predictions that did come true, I would have no truck with it, but the fact that its dire predictions fail to play out suggests there is something severely wrong with the underlying conceptual framework.

      • Let’s not forget to watch a new “Malthusian” development: a well-thought-out forecast (by Jeremy Grantham?) of future food consumption by huge numbers of people rising from are subsistence to middle class — from eating grain to meat. The latter requires many times more grain production. When this transition took place in previous centuries, the middle class population was quite small compared to modern China, India, Africa, etc.

      • There is always some bright spark coming up with a new and better way. It started with an Ape going from a stick, to stick with a very prominent point.

        • Buddy: Just for fun — you mention “lambs”. Have your Aussie old timers taught you this song popular with WW2 troops?

          We are poor little sheep
          Who have lost our way,
          Bah Bah Bah.

          We are poor little lambs
          Who have gone astray,
          Bah Bah Bah.

          Gentlemen songsters off on a spree,
          Doomed from here to eternity.

          God have mercy
          On such as we,
          Bah Bah Bah.

      • “I don’t believe civil progress is guaranteed, or certain, but based on current indicators I think the far future is looking significantly more rosy than it was 5 or 10 or 15 years ago.”

        John, the argument shouldn’t be whether things are going to be better or worse than they are now [or at some reference point] because each moment is discrete and can be no better or worse than it is [based on the conditions that give birth to it].

        So, it’s an empty argument and sort of intellectually dis-honest. The best hope for making a better future, as we all know, is simply a matter of doing the best we can do now.

        Even if we were [by some miracle], able to convince the entire population of the planet to do only “good” things, this is only a tiny influence considering the notion that we are part of the entire Universe [and it effects on us].

        This is why predicting is impossible, and, as it is said, “it’s why they play the game.”

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