Let science drive economic growth forward

Without advances in scientific knowledge we would all be poorer, unhealthier, die sooner, and be more ground down and bored

THERE IS a crucial public policy debate taking place in Britain at present, about how to boost growth and what the Government can do to help.

One of the strands of this debate is overt. It concerns the sorts of measures Gordon Brown announced in the Budget last week - tax incentives for small firms to carry out more R&D, extending first year capital allowances, offering relief on employer loans of computers, and so on. The principle underlying such measures is that growth requires investment. Investment builds the necessary capacity, and also embodies new technological developments.

These were just the latest measures by a government which clearly recognises the importance of science and technology. It is careful to avoid opening itself to the charge that it is picking winners - the ghost of the doomed Ministry of Technology, created in 1964 and fanning the "white heat of technology" for six years looms large. However, it has significantly increased its science budget, set about creating an environment that will encourage the commercial development of new ideas, and appointed in Lord Sainsbury a Minister for Science who is passionately interested in science.

The theory of economic growth has always recognised the importance of the amount of investment - both the "neoclassical" theory and the more recent "endogenous" growth theory. And there is a strong empirical correlation between the share of investment in GDP and the growth of GDP over the long term, although certainly not over the business cycle. The recent experience of South East Asian countries suggests over-investment is possible, but no country that has achieved big leaps forward in incomes per head, and basic measures of development such as mortality rates and literacy rates has done so without high levels of investment.

However, attempts to measure how much growth can be attributed to investment and how much to other causes has always found that by far the biggest chunk is the result of technological change - in reality, the bit left over after all the growth that can be assigned to higher levels of capital and more labour input has been accounted for. This motivated the modern growth theory, which tries to explain how technology moves forward as an economy grows, contributing to more growth.

A classic statement of this "endogenous" growth theory, set out in 1990 by Paul Romer, a US academic, incorporates a group of skilled workers who generate ideas. They - or their employers - need to earn a return on their ideas, requiring the protection of patent and copyright law.

For, once an idea exists, it is out there, free to copy without some legal protection. As Professor Danny Quah of the London School of Economics points out (in the latest journal of the Society of Business Economists), in our increasingly weightless economies, such protections are even more important, for more and more goods do not even get used up physically. Once a new medicine is injected it is used, so charging at the point of use is practicable. But software code or music is cheap and easy to copy; getting people to pay for it, and safeguarding the financial reward that keeps innovators producing new software or music, is tricky.

Sustaining the pace of technological innovation in the advanced economies is therefore something of a challenge. There are new difficulties on top of the age-old problem of encouraging innovation, using every means from improving the education system to creating incentives for enterprise; for it is becoming increasingly difficult to guarantee high enough rewards to sustain the pace of invention.

This takes us neatly back to the second, crucial strand of the current policy debate. And that is about the place of science in society. There is clearly a small-c conservative and romantic backlash against some of the scientific developments that will prove crucial in determining whether living standards in both advanced and developing countries can rise in the 21st century as they have in the 20th, and whether they can do it in a cleaner and less resource-intensive way. It is the first time in a generation that attitudes to scientific and technological innovation have been so polarised.

Rather than pretend to a magisterial objectivity on this debate, I should state that I am on the side of science and technology. Without advances in scientific knowledge and their embodiment in our everyday lives, we would all be poorer, unhealthier, would lose more of our children to illness, die younger - and, moreover, be more ground down and bored. Economic progress is about making human lives better in the most fundamental ways, and that does not happen without scientific progress.

However, there is clearly a big question about the role of the profit motive in the kinds of scientific advance we are seeing now. The returns to, say, genetic modification of food need to be high enough to encourage genuinely helpful technological advances. But they must not be so high that they either drive companies to cut corners on safety or even give the appearance of doing so.

There is a further issue, and that is the property rights inherent in weightless resources such as genetic code. Who owns the DNA of an Amazonian plant? The native people who live in the area? The Brazilian Government on behalf of all the Brazilian people? The rancher who owns the land? The multinational that decodes the plant material? Or is it part of the common human heritage?

We do not begin to have right answers to these questions from any standpoint, least of all that of maximising economic growth. But economics does indicate that some degree of private appropriation of profit will be necessary in order to trigger the scientific and technical development.

As the ferocity of the rows over our own development of GM foods and the rights of US multinationals to export such products to Europe indicates, the need for a debate has become urgent.

Suggested Topics
Life and Style
The new Windows 10 Start Menu
tech
News
More than 90 years of car history are coming to an end with the abolition of the paper car-tax disc
newsThis and other facts you never knew about the paper circle - completely obsolete today
Arts and Entertainment
There has been a boom in ticket sales for female comics, according to an industry survey
comedyFirst national survey reveals Britain’s comedic tastes
Arts and Entertainment
Hilary North's 'How My Life Has Changed', 2001
books(and not a Buzzfeed article in sight)
PROMOTED VIDEO
Arts and Entertainment
Mystery man: Ben Affleck and Rosamund Pike in '‘Gone Girl'
films... by the director David Fincher
News
Kim Jong Un gives field guidance during his inspection of the Korean People's Army (KPA) Naval Unit 167
newsSouth Korean reports suggest rumours of a coup were unfounded
News
people'I’d rather have Fred and Rose West quote my characters on childcare'
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
stoptober... when the patch, gum and cold turkey had all faied
Travel
Bruce Chatwin's novel 'On the Black Hill' was set at The Vision Farm
travelOne of the finest one-day walks you could hope for - in Britain
Arts and Entertainment
Gay and OK: a scene from 'Pride'
filmsUS film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
News
people
Life and Style
Magic roundabouts: the gyratory system that has excited enthusiasts in Swindon
motoringJust who are the Roundabout Appreciation Society?
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?
Why do we like making lists?

Notes to self: Why do we like making lists?

Well it was good enough for Ancient Egyptians and Picasso...
Hong Kong protests: A good time to open a new restaurant?

A good time to open a new restaurant in Hong Kong?

As pro-democracy demonstrators hold firm, chef Rowley Leigh, who's in the city to open a new restaurant, says you couldn't hope to meet a nicer bunch
Paris Fashion Week: Karl Lagerfeld leads a feminist riot on 'Boulevard Chanel'

Paris Fashion Week

Lagerfeld leads a feminist riot on 'Boulevard Chanel'
Bruce Chatwin's Wales: One of the finest one-day walks in Britain

Simon Calder discovers Bruce Chatwin's Wales

One of the finest one-day walks you could hope for - in Britain
10 best children's nightwear

10 best children's nightwear

Make sure the kids stay cosy on cooler autumn nights in this selection of pjs, onesies and nighties
Manchester City vs Roma: Five things we learnt from City’s draw at the Etihad

Manchester City vs Roma

Five things we learnt from City’s Champions League draw at the Etihad
Martin Hardy: Mike Ashley must act now and end the Alan Pardew reign

Trouble on the Tyne

Ashley must act now and end Pardew's reign at Newcastle, says Martin Hardy
Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?