GROWTH HAP­PENS WHEN SMART PEO­PLE ARE NEIGH­BOURS

GOV­ERN­MENTS AND COM­PA­NIES EV­ERY­WHERE NEED POLI­CIES TO GET THE BEST AND BRIGHT­EST IN PROX­IM­ITY TO ONE AN­OTHER

CEO Middle East - - PRODUCTIVITY BUSINESS -

THE IN­DUS­TRIAL REV­O­LU­TION WAS PROB­A­BLY the most im­por­tant thing that has ever hap­pened in hu­man his­tory. In the space of a few cen­turies, much of the hu­man race, which had long hov­ered on the brink of star­va­tion, was sud­denly lifted into rel­a­tive se­cu­rity through the power of new tech­nol­ogy. But why did this amaz­ing ex­plo­sion hap­pen? There are many the­o­ries, and we’ll prob­a­bly never have a de­fin­i­tive an­swer.

But there’s a strong ar­gu­ment to be made that com­mu­ni­ties of smart in­di­vid­u­als, ex­chang­ing in­for­ma­tion and ideas, were key. Galileo, Ke­pler, New­ton, Boyle and many other giants of the early sci­en­tific rev­o­lu­tion are now house­hold names, but they didn’t op­er­ate in iso­la­tion. They cor­re­sponded with each other, wrote let­ters, read each other’s work. Ideas were in the air. Economists Wil­liam Maloney and Felipe Caicedo have found ev­i­dence that coun­tries with the high­est den­si­ties of en­gi­neers were the ones that con­trib­uted most to the In­dus­trial Rev­o­lu­tion and hence were quicker to ben­e­fit.

Robert Lu­cas, the fa­mous macroe­conomist, put it thus: “The ben­e­fits of col­leagues from whom we hope to learn are tan­gi­ble enough to lead us to spend a con­sid­er­able frac­tion of our time fight­ing over who they shall be, and an­other frac­tion trav­el­ling to talk with those we wish we could have as col­leagues but can­not...[This] is com­mon to all the arts and sciences — the ‘cre­ative pro­fes­sions’. All of in­tel­lec­tual his­tory is the his­tory of such ef­fects.”

Many other economists have praised the value of smart com­mu­ni­ties. Richard Florida speaks of the “cre­ative class,” and Garett Jones of the “hive mind.” Get a bunch of smart peo­ple to­gether, the the­ory goes, and good things hap­pen. En­rico Moretti has found ev­i­dence that pro­duc­tiv­ity rises more than one-for-one with an in­crease in a city’s num­ber of col­lege grad­u­ates, im­ply­ing that smart peo­ple com­ple­ment each other.

Much of the mod­ern econ­omy is based on this idea. Uni­ver­si­ties gather schol­ars in the same place, and aca­demic con­fer­ences and pub­li­ca­tions cre­ate com­mu­ni­ties across dis­tances. Ven­ture cap­i­tal­ists en­cour­age tech­com­pany founders to move to Sil­i­con Val­ley, Seat­tle, or Austin, Texas.

The gov­ern­ment cre­ates na­tional lab­o­ra­to­ries to bring smart peo­ple to­gether in the ser­vice of long-term re­search projects.

So far, it seems to have worked. The rich coun­tries of the world have con­tin­ued to push the bound­aries of tech­nol­ogy ever out­ward. China, In­dia

“PRO­DUC­TIV­ITY GROWTH IN RICH COUN­TRIES HAS BEEN SLOW­ING. MANY ECONOMISTS ARE WOR­RIED THAT THE EN­GINES OF IN­NO­VA­TION ARE SPUT­TER­ING.”

and other de­vel­op­ing coun­tries are now get­ting in on the act, us­ing sim­i­lar strate­gies.

But pro­duc­tiv­ity growth in rich coun­tries has been slow­ing. Tech­nol­ogy is a long-term de­ter­mi­nant of pro­duc­tiv­ity, so many economists are nat­u­rally wor­ried that the en­gines of in­no­va­tion are sput­ter­ing. There are signs that tech­no­log­i­cal im­prove­ments in es­tab­lished fields are get­ting more costly to find. That im­plies two things. First, in or­der to main­tain the pace of in­no­va­tion in ex­ist­ing ar­eas of tech­nol­ogy, it will help to fig­ure out how to make re­search more pro­duc­tive. Sec­ond, we need to in­crease the chances of whole new fields of tech­nol­ogy be­ing cre­ated, as when in­for­ma­tion tech­nol­ogy and ge­net­ics sud­denly emerged in the 20th cen­tury.

The ob­vi­ous way to ad­dress both of these needs is to dou­ble down on the strat­egy that worked well in past cen­turies — do more to en­cour­age smart peo­ple to lo­cate in com­mu­ni­ties where they can ex­change ideas. The in­ter­net will hope­fully help this hap­pen, es­pe­cially once ma­chine trans­la­tion low­ers lan­guage bar­ri­ers across coun­tries.

But on­line in­ter­ac­tion is still fun­da­men­tally lim­ited, and may re­main so for a long time to come. Phys­i­cal prox­im­ity, and the ran­dom ex­tended in­ter­ac­tions it gen­er­ates, is still im­por­tant. That means that con­cen­trat­ing smart peo­ple in cities and uni­ver­si­ties is im­por­tant.

The U.S. and other rich coun­tries can ac­com­plish this if they do three things. First, they need to al­low high­skilled im­mi­gra­tion to con­tinue and even to in­crease. Rich coun­tries pro­vide re­searchers and en­gi­neers and thinkers with the most re­sources, and al­ready have high-class uni­ver­si­ties and thriv­ing tech hubs. High­skilled im­mi­gra­tion sim­ply builds on these ex­ist­ing strengths, let­ting smart peo­ple go where their ideas can be re­al­ized most quickly.

Sec­ond, rich coun­tries should pro­vide ways for smart peo­ple to live close to one an­other. Tech hubs need to pro­vide enough hous­ing so that smart res­i­dents can af­ford to be in densely con­cen­trated ar­eas. Uni­ver­si­ties should be en­larged, and their re­search ca­pac­i­ties up­graded.

Fi­nally, coun­tries need to adopt poli­cies that fa­cil­i­tate the free flow of ideas among their smart peo­ple. Harsh re­stric­tions on speech, as China now main­tains, are a big im­ped­i­ment to group cre­ativ­ity. And the U.S.’s slow­down in re­search spend­ing starves smart peo­ple of the phys­i­cal re­sources they need to in­no­vate.

It’s likely that the en­gines of to­mor­row’s in­no­va­tion will be the same as yes­ter­day’s — namely, dense com­mu­ni­ties of freely in­ter­act­ing smart peo­ple. Rich coun­tries should aim to cre­ate ever-bet­ter in­tel­li­gent com­mu­ni­ties in or­der to keep push­ing out the bound­aries of hu­man tech­nol­ogy. To do oth­er­wise, risks stag­na­tion and an end to the re­mark­able hu­man progress of the last few cen­turies.

“GALILEO, KE­PLER, NEW­TON, BOYLE AND MANY OTHER GIANTS OF THE EARLY SCI­EN­TIFIC REV­O­LU­TION ARE NOW HOUSE­HOLD NAMES, BUT THEY DIDN’T OP­ER­ATE IN ISO­LA­TION. THEY COR­RE­SPONDED WITH EACH OTHER, WROTE LET­TERS, READ EACH OTHER’S WORK.”

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