Tag Archives: innovation

What causes innovation? is it worth it?

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Innovation is the special sauce that propels growth and allows a country to lead and prosper. The current Nobel prize believe that innovation powered the Industrial Revolution, causing England to become rich and powerful, while other nations remained poor, weak, and stagnant. Similarly, Innovation, they believe is why 19th century Japan rose to defeat China, and propelled China’s 21st century rise. But why did they succeed when others did not. What could the leader of a country do to bring power and wealth through innovation. Improved education seems to help; all of the innovation countries have it, but it is not the whole. Some educated countries (Germany, Russia) stagnate. An open economy is nice, but it isn’t sufficient or that necessary: (look at China). That was the topic of this year’s, 2025 Nobel prize in economics to Mokyr, Howitt, and Aghion, with half going to Joel Mokyr for his insights, historical and forward looking, the other half going for economic modeling. I give below my understanding of their insights, more technical than most, but not so mathematical as to be obtuse the normal reader..

The winners hold that innovation, as during the industrial revolution, is a non-continuous contribultion caused by a particular combination of education and market opportunity, of theoretical knowledge, and practical, and that a key aspect is depreciation (destruction) of other suppliers. Let’s start by creating a simple, continuous function model for economic growth where growth = capital growth, that is dK/dt. K, Capital, is understood to be the sum of money, equipment, and labor knowledge, and t is time with dK/dt, the change in K with time modeled as equal to the savings rate, s, times economic activity, Y minus a depreciation factor, δ, times capital, K.

growth = dK/dt = sY − δ K.

Innovation, in the Howett model, is discontinuous and accumulative. It builds on itself.

For the authors, Y = GDP + x, where x is the cost of outside goods used. They then claim that Y is a non-linear function of K, where K is now considered a product of capital goods and labor K = xL and,

dY/dK = AKα + γ where 0< α <1, and where γ is the contribution of innovation and/or depreciation. The power function, as I understand it, is a mathematical way of saying there are economies of scale. The authors assume a set of interacting enterprises (countries0 so that the innovation factor, γ for one country is the depreciation factor for the other. That is, growth and destruction are connected, with growth being a function of monopoly power — control of your innovation.

According to the Nobel winners, γ is built n previous γ as shown in the digram at right. It can not be predicted as such, but requires education and monopolistic power. The inventor-manufacturer of the typewriter has a monopolistic advantage over the makers of fountain pens. Innovation thus causes depreciation, δ K as one new innovation depreciates many old processes and products. If you add enough math, you can derive formulas for GDP and GDP growth, all based on factors like A and α, that are hard to measure.

GDP = α(2α/1−α) (1-α2)A L,

Thus, GDP is proportional to Labor, L and per-capita GDP is mostly an independent function related to economies of scale and the ability to use capital and labor which is related to general country-wide culture.

The above analysis, as I understand it, is in contrast to Kensyan models, where growth is unrelated to innovation, and where destruction is bad. In these Kenysean models, growth can be created by government spending, especial spending to maintain large industries with economies of scale and by spending to promote higher education. The culture preferred here, as I understand is one that rewards risk-taking, monopoly economics, and creative destruction. Howitt, and Aghion, importantly codify all this with formulas, as presented above that (to me) provide little specific. No great guidance to the head of a country. Nor does the math make the models more true, but it makes the statements somewhat clearer. Or perhaps the only real value of the math is to make things sound more scientific see the Tom Lehrer song, Sociology.

This insight from movie script by Grham Green suggests to me that progress may not be the greatest of advantages, perhaps not even worth it.

This work seems more realistic, to me, than the Keynesian models Both models are mathematically consistent, but if Keynes’s were true, Britain might still be on top, and Zambia would be a close competitor among the richest countries on earth. Besides these new fellows seem to agree with the views of Peter Cooper, my hero. See more here.

Writing all this reminds me that the fundamental assumption that progress is good, in not necessarily true. I quote above a line that Orson Wells, as Harry Lime, ad-libbed for the movie, “The Third Man.” Lime points out that innovation goes with suffering, and claims that Switzerland had little innovation because of its stability. Perhaps then, what you really want is the stability and peace of Switzerland, along with the lack of domination and innovation. On the same note, I’ve noticed that engineering innovators often ruin themselves dining in ruin, while the peaceable, stable civil engineers live long pleasant lives of honor.

Robert Buxbaum, November 16, 2025. A note about Switzerland is that was peaceful and stable because of a strong military. As Publius Vegetius wrote, Si vis pachim para bellum (if you wish of peace, prepare for war).

American education sucks, how do we succeed?

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Despite my PhD from a top American college, Princeton University, I find I lag ordinary Europeans in languages and history. I can claim to know some math, and a little Latin and a little Greek, but in my case it’s two short friends, Manuel Ramos and Stanos Platsis. It was recently reported that one fourth of college-educated Americans did not know that the earth spun on an axis. With an education system of this sort, how is it that the US has the largest GDP, and nearly the largest per-capita GDP. We have a grosser national product than any European country despite a degree of science ignorance that would be inconceivable there.

Americans hate math.

Americans hate math.

One part of US success is imported talent, of course. We import Nobel lauriate chemists, Russian dancers, German rocket scientists…, but we don’t import that many. The majority of our immigrants are more in the wretched refuse category, and even these appear to do better here in the US than their colleagues that they left behind. Otto von Bismark once joked that, “God protects children, drunks, and the United States of America.” But I’d like to suggest that our success is based on optimism, pronia: a can-do belief in ourselves that our education provides, at least to our more creative citizens.

Most of the great successful businesses of the USA are not started by the A students, it is clear, but by the C students who develop the greatness of the little they know. Consider Colonel Harlen Sanders, founder of Kentucky Fried Chicken. He believed in the greatness of his chicken recipe, and developed to skills to sell it fast. He did not have to know astronomy, whether the earth goes round the sun. It’s an important fact, but only relevant if you can use it, as Sherlock Holmes points out. I suspect that few Europeans could use the knowledge that the earth spins productively, and suspect that the majority of those that might, lack the confidence to do so (I provide some at the end of this essay).

Benjamin Jowett. His students included the heads of 6 colleges and the head of Eaton

Benjamin Jowett, Master of Balliol College, Oxford.

A classic poem about European education describes Benjamin Jowett, shown at right. It goes: “The first come I, my name is Jowett. There is no knowledge, but that I know it. I am master of this college. What I don’t know isn’t knowledge.” Benjamin Jowett was Master of Balliol College, Oxford. By the time he died in 1893, his ex-student pallbearers included the heads of 6 colleges, and the head of Eaton. Most English heads of state and industry were his students directly or second-hand. All left university with a passing knowledge of Greek, Latin, Plato, law, science, theology, classics, math, rhetoric, logic, and grammar. Only people so educated were deemed suited to run banks or manage backward nations like India or Rhodesia. It worked for a while but showed its limitations, e.g. in the Boer Wars.

In France and continental Europe, the education system is similar, to this day ,to England’s under Jowett. There is a fixed set of knowledge and a fixed rate to learn it. Government and industry jobs go largely to those who’ve demonstrated their ability to give the fixed, correct answers to tests on this knowledge. In schools across France, the same page is turned virtually simultaneously in the every school– no student is left behind, but none jump ahead either or deviate. As new knowledge is integrated, the approved text books are updated and the correct answers are adjusted. Until then, the answers in the book are God’s truth, and those who master it can comfort themselves to have mastered the truth. The European system appears to benefit the many, providing useful skills (and useless tidbits) but it is oppressive to others with forward-thinking, imaginative minds, or who see a new truth a year before the test acknowledges it. College, it is said, “..is a place where pebbles are polished but diamonds are dimmed.” The system work well in areas that barely change like French grammar, geometry, law, and the map of Europe. It does not work so well in music, computers, or the art of war. For creative students, bright or otherwise, schooling is “another brick in the wall.” These students need learning in ‘how to get along without a teacher.’

The American approach leans, or perhaps leaned, towards independence of thought, for good or bad. American graduates can live without the teacher, but leave school knowing no language but English, knowing hardly and maths or science, and hardly any grammar. We can hardly find another country on a map, and often can’t find our own. Teachers will take incorrect answers as correct as a way to build self-esteem, so students leave with the view that there is no such thing as truth. Strangely, this model works, at least in music, engineering, and science where change is fast, creativity is king, and nature itself is a teacher. American graduate-schools are preeminent in these areas. In reading, history and math our graduates might well be described as galumphing ignorants.

Every now and again the US tries to Europeanize education. The “no child left behind” movement was a Republican-led effort to teach on the French model, at least in reading and math. It never caught on. Drugs are a popular approach to making American students less obstreperous, but they work only temporarily. Americans leave school ignorant, but not stupid; respectful of those who can do things, and suspicious of those with lengthy degrees. Without Latin, we do OK as managers of the most complex operations, relying on bumptious optimism and distain for hierarchy.

In any moment of decision, the best thing you can do is the right thing, the next bet thing is the wrong thing, and the worst thing you can do is nothing. An American attitude that sometimes blows up, but works surprisingly well at times.

Often the inability to act is worse than acting wrong.

The American-educated boss will do some damage by his ignorance but it is no more than  comes from group-think: non-truths passed as truths. America stopped burning witches far sooner than Europe, and never burned Jews. America dropped nobles quicker, and transitioned to electric lights and motor cars quicker, perhaps because we put less weight on what nobles and universities did. When dealing Europeans, we greet them in a loud, cheerful voice, appoint a subordinate to “get things done,” and get in the way until lunchtime. The Europeans are suitably appalled, both by the crassness and by the random energy.

European scholars accepted that nobility gives one a handle on leadership. This belief held back the talented, non-noble. Since religion was part of education, they accepted that state should have an established religion, Anglican, in England, Catholicism in France; scientific atheism now. They learned from the state, and accepted, that divorce was unnecessary, that homosexuality should be punished by prison or worse, In the early 60s, Turing, a brilliant mathematician and computer scientist, was chemically castrated as a way to cure his homosexuality. In America our “Yankee ingenuity,” as we call it, screwed up too, but in ways like prohibition, McCarthyism, and disco. Such screwups resolved themselves relatively fast. “Ready, fire, aim” is a European description of the American method to any problem. It’s not great, but works better than “steady as she goes.”

The best option, it seems, is when we work together with those “across the pond.” It worked well for us in WWI, WWII, and the American Revolution, benefitting from Lafayette, Baron Von Steuben, Kosciusko, etc. Heading into the world cup of football (fifa soccer) this week, we’re expected to lose badly due to our lack of talent and our general inability to pass, dribble, or strategize. Still, we’ve got enthusiasm, and we’ve got a German coach. The world’s bookies give us 0.05% odds, but our chances are 10 times that, I’d say: 5%. God protects our galumphing corn-fed ignorants when, as in the Revolution, it’s attached to European coaching.

Some businesses where it helps to know the earth spins: rocketry (military and exploratory), communication via geosynchronous satellites (they only work because the earth spins), weather prediction (the spin of hurricanes is because the earth spins), cyclone lifting. It amazes me that people ever thought everything went around the earth, by the way; Mercury and Venus never appear overhead. If authorities could have been so wrong about this for so long, what might they be wrong about today?

Dr. Robert Buxbaum, June 10, 2014 I’ve also written about ADHD on Lincoln’s Gettysburg Address, on Theodore Roosevelt, and how he survived a gun shot.