Podcast
Questions and Answers
What does the term '𝛼' represent in the equation 𝑔𝑦 = 𝛼𝑔𝑘 + (1 − 𝛼)𝑔𝐴?
What does the term '𝛼' represent in the equation 𝑔𝑦 = 𝛼𝑔𝑘 + (1 − 𝛼)𝑔𝐴?
- The share of income attributed to capital (correct)
- The growth rate of technological progress
- The growth rate of capital deepening
- The share of income attributed to labor
What is the approximate value of the constant '𝛽' in the equation 𝛽 = 1−𝛼?
What is the approximate value of the constant '𝛽' in the equation 𝛽 = 1−𝛼?
- 0.33
- 2.00
- 1.33
- 0.67 (correct)
If technological progress is 'disembodied', meaning it is not directly linked to capital investment, how should we adjust the social benefit-cost ratio?
If technological progress is 'disembodied', meaning it is not directly linked to capital investment, how should we adjust the social benefit-cost ratio?
- Multiply by one-third
- Divide by two-thirds
- Multiply by two-thirds (correct)
- Divide by one-third
What is the key assumption underlying the 'capital-embodied productivity growth' concept?
What is the key assumption underlying the 'capital-embodied productivity growth' concept?
What is the average annual net domestic investment of the U.S. private sector since 1960?
What is the average annual net domestic investment of the U.S. private sector since 1960?
How does the 'capital-embodied productivity growth' concept change our understanding of the costs associated with innovative investments?
How does the 'capital-embodied productivity growth' concept change our understanding of the costs associated with innovative investments?
How can we empirically estimate the additional costs associated with 'capital-embodied productivity growth'?
How can we empirically estimate the additional costs associated with 'capital-embodied productivity growth'?
What is the key takeaway from the discussion about the returns to innovative investments?
What is the key takeaway from the discussion about the returns to innovative investments?
What happens to the marginal returns of additional R&D as the effort becomes increasingly duplicative or ineffective?
What happens to the marginal returns of additional R&D as the effort becomes increasingly duplicative or ineffective?
What is the symbol used to represent the degree of intertemporal spillovers?
What is the symbol used to represent the degree of intertemporal spillovers?
In models where the innovative search process becomes more costly as progress is made, what is the expected value of 𝜃 ?
In models where the innovative search process becomes more costly as progress is made, what is the expected value of 𝜃 ?
Which of these examples is mentioned in the text as a possible reason for 𝜃 > 0?
Which of these examples is mentioned in the text as a possible reason for 𝜃 > 0?
What range of values for 𝜃 did Kremer (1993) suggest, based on his analysis of economic growth and population growth over the very long run?
What range of values for 𝜃 did Kremer (1993) suggest, based on his analysis of economic growth and population growth over the very long run?
What are the two underlying notions embedded in the possibility of diminishing returns at the macro level?
What are the two underlying notions embedded in the possibility of diminishing returns at the macro level?
What kind of evidence does the text cite to refute the notion of substantial 'idea constraints' in settings like firms and the NIH?
What kind of evidence does the text cite to refute the notion of substantial 'idea constraints' in settings like firms and the NIH?
What are two potential ways mentioned in the text to expand the innovative talent pool in the United States?
What are two potential ways mentioned in the text to expand the innovative talent pool in the United States?
What is the median delay between R&D investment and product introduction found by Mansfield in 1971?
What is the median delay between R&D investment and product introduction found by Mansfield in 1971?
What percentage of firms reported a 1-2 year delay between R&D investment and product introduction according to Ravenscraft and Scherer (1982)?
What percentage of firms reported a 1-2 year delay between R&D investment and product introduction according to Ravenscraft and Scherer (1982)?
What does Argente et al. (2018) estimate for the delay between R&D and product introduction for Compustat firms?
What does Argente et al. (2018) estimate for the delay between R&D and product introduction for Compustat firms?
How long do growth trends usually continue after R&D investment, based on Leonard's study of manufacturing industries?
How long do growth trends usually continue after R&D investment, based on Leonard's study of manufacturing industries?
For new consumer products, when do sales typically hit their peak according to Argente et al. (2019)?
For new consumer products, when do sales typically hit their peak according to Argente et al. (2019)?
What does the appropriate discount factor, represented as $𝑟̂$, account for?
What does the appropriate discount factor, represented as $𝑟̂$, account for?
How long does Adams (1990) suggest the lag is between academic research and productivity growth in the relevant industry?
How long does Adams (1990) suggest the lag is between academic research and productivity growth in the relevant industry?
What is the average delay between U.S. patent applications and their direct precursor science publications, according to Ahmadpoor and Jones (2017)?
What is the average delay between U.S. patent applications and their direct precursor science publications, according to Ahmadpoor and Jones (2017)?
What is the total cost of innovative investments as a percentage of GDP?
What is the total cost of innovative investments as a percentage of GDP?
How does the embodied version of capital deepening affect social returns to R&D?
How does the embodied version of capital deepening affect social returns to R&D?
What annual growth rate has the U.S. population experienced on average since 1960?
What annual growth rate has the U.S. population experienced on average since 1960?
What is the average ratio of the U.S. capital stock to GDP since 1960?
What is the average ratio of the U.S. capital stock to GDP since 1960?
What percentage of GDP does the capital deepening cost suggest in total?
What percentage of GDP does the capital deepening cost suggest in total?
What has been a contributing factor to understating the social returns in calculations?
What has been a contributing factor to understating the social returns in calculations?
What factors could contribute to capital deepening costs beyond net domestic investment?
What factors could contribute to capital deepening costs beyond net domestic investment?
How are the costs of investment that increases capital per worker expressed in relation to per-capita income growth?
How are the costs of investment that increases capital per worker expressed in relation to per-capita income growth?
What assumption is made when taking 𝜎 = 0.23 regarding investment in innovation?
What assumption is made when taking 𝜎 = 0.23 regarding investment in innovation?
What is the estimated internal social rate of return per annum when the investment in innovation is analyzed?
What is the estimated internal social rate of return per annum when the investment in innovation is analyzed?
Which factors are considered when estimating social returns to innovations?
Which factors are considered when estimating social returns to innovations?
What is indicated about the average social returns to investments in innovation?
What is indicated about the average social returns to investments in innovation?
What does accounting for health benefits do to the estimates of social returns?
What does accounting for health benefits do to the estimates of social returns?
What can be inferred about the marginal returns of additional investment in innovation?
What can be inferred about the marginal returns of additional investment in innovation?
Which of the following is NOT listed as a factor in assessing social returns?
Which of the following is NOT listed as a factor in assessing social returns?
What does the content suggest about the role of formal R&D in productivity gains?
What does the content suggest about the role of formal R&D in productivity gains?
What is a major challenge for venture capitalists in predicting the success of their investments?
What is a major challenge for venture capitalists in predicting the success of their investments?
What is the connection between Einstein's theory of general relativity and the modern-day ride-sharing companies like Uber and Lyft?
What is the connection between Einstein's theory of general relativity and the modern-day ride-sharing companies like Uber and Lyft?
The text highlights the difficulty in assessing the marginal returns to innovation, particularly for basic research. Which of the following is NOT a reason for this difficulty?
The text highlights the difficulty in assessing the marginal returns to innovation, particularly for basic research. Which of the following is NOT a reason for this difficulty?
What is the primary reason why the marginal returns to innovation are difficult to assess?
What is the primary reason why the marginal returns to innovation are difficult to assess?
What is the core concept emphasized by the original approach to endogenous growth theory?
What is the core concept emphasized by the original approach to endogenous growth theory?
The text mentions that 'the connections between basic research and its ultimate applications appear broad, deep, and hard to predict'. Which of the following examples BEST illustrates this point?
The text mentions that 'the connections between basic research and its ultimate applications appear broad, deep, and hard to predict'. Which of the following examples BEST illustrates this point?
Which of the following is a reason why it is difficult to assess the marginal return of innovation projects?
Which of the following is a reason why it is difficult to assess the marginal return of innovation projects?
The text discusses the difficulty in assessing the marginal return to innovation, particularly for basic research. What is the key argument presented in the text?
The text discusses the difficulty in assessing the marginal return to innovation, particularly for basic research. What is the key argument presented in the text?
Flashcards
R&D to Product Introduction Delay
R&D to Product Introduction Delay
The time lapse between the initial investment in research and development (R&D) and the introduction of a new product in the market.
Typical Delay in Product Introduction
Typical Delay in Product Introduction
Studies show that for most businesses, the typical delay between investing in R&D and releasing a product is around 3 to 6 years. This delay is relatively short, considering the complex process involved in research, development, and commercialization.
Delay to Market Peak
Delay to Market Peak
The time that elapses between a product's initial introduction and the point where it achieves peak sales and market penetration.
Delay to Market Peak in Mature Sectors
Delay to Market Peak in Mature Sectors
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Discount Factor (r^)
Discount Factor (r^)
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Basic Research Impact on Productivity
Basic Research Impact on Productivity
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Delay from Patent Application to Precursor Science
Delay from Patent Application to Precursor Science
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Long-Term Impact of Remote Basic Research
Long-Term Impact of Remote Basic Research
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Growth in Per-Capita Income
Growth in Per-Capita Income
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Capital Share of Income (𝛼)
Capital Share of Income (𝛼)
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Disembodied Technological Progress
Disembodied Technological Progress
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𝛽 = (1 - 𝛼) = 2/3
𝛽 = (1 - 𝛼) = 2/3
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Capital-Embodied Productivity Growth
Capital-Embodied Productivity Growth
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Costs of Capital-Embodied Productivity Growth
Costs of Capital-Embodied Productivity Growth
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U.S. Private Sector Net Domestic Investment
U.S. Private Sector Net Domestic Investment
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Total Cost of Innovative Investments
Total Cost of Innovative Investments
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Beta (β)
Beta (β)
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Capital deepening
Capital deepening
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Embodied social returns to R&D
Embodied social returns to R&D
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Disembodied innovation calculation
Disembodied innovation calculation
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Population growth and investment costs
Population growth and investment costs
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Capital deepening cost
Capital deepening cost
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Capital deepening outside private businesses
Capital deepening outside private businesses
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Linear Growth Model
Linear Growth Model
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Uncertainty in Innovation
Uncertainty in Innovation
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Marginal Returns to R&D
Marginal Returns to R&D
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Endogenous Growth Models
Endogenous Growth Models
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Linear Growth Model
Linear Growth Model
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Unpredictability of Basic Research
Unpredictability of Basic Research
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Assessing Marginal Returns to Innovation
Assessing Marginal Returns to Innovation
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Average Return
Average Return
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Diminishing Returns to R&D
Diminishing Returns to R&D
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Intertemporal Spillovers (𝜃)
Intertemporal Spillovers (𝜃)
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Fishing Out the Pond of Ideas
Fishing Out the Pond of Ideas
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Fruitful Inputs of Innovation
Fruitful Inputs of Innovation
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Macro-Level Diminishing Returns
Macro-Level Diminishing Returns
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Micro-Evidence of High Marginal Returns
Micro-Evidence of High Marginal Returns
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Opportunities to Expand Innovative Talent
Opportunities to Expand Innovative Talent
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Constraints on Innovative Talent
Constraints on Innovative Talent
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Social Returns to Effort
Social Returns to Effort
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Capital-Embodied Technological Progress
Capital-Embodied Technological Progress
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Costs of Capital-Embodied Technological Progress
Costs of Capital-Embodied Technological Progress
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Social Returns to Innovation
Social Returns to Innovation
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Returns to Innovative Investments
Returns to Innovative Investments
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Average Social Returns to Innovation
Average Social Returns to Innovation
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Study Notes
A Calculation of the Social Returns to Innovation
- This paper estimates the social returns to investments in innovation
- The disparate spillovers associated with innovation make calculations difficult
- The paper provides an economy-wide calculation that nets out the many spillover margins
- The paper assesses the role of capital investment, diffusion delays, learning-by-doing, productivity mismeasurement, health outcomes, and international spillovers in assessing the average social returns
- Estimates suggest social returns are very large
- Innovation efforts produce social benefits that are multiples of the investment costs
Introduction
- Standards of living in advanced economies have risen dramatically over the last two centuries
- Innovative advances are thought to be critical drivers
- Measuring social returns to scientific and technological advance has proven difficult
- This paper introduces a new method for calculating the average social returns to innovation
- This method integrates across the many types of spillovers
- The paper considers how social returns vary according to features like diffusion delays, capital embodiment, learning-by-doing, productivity mismeasurement, health outcomes, and international spillovers
- The robust finding is that the social returns to innovative investments appear large
- The existing literature emphasizes the difference between private and social gain from new ideas
The Average Social Returns to R&D: A Baseline
- This section introduces a baseline calculation of the average social returns to innovation investment
- This method integrates across spillovers
- It clarifies the basic logic for why social returns appear high
- It provides a foundation for discussing and clarifying additional issues related to social returns
Extending the Baseline
- The baseline calculation assumes that the payoff from R&D investments occurs immediately
- However, there may be delays in receiving the fruits of R&D investments
- A simple approach to potential delays assumes that R&D investments borne today increase productivity permanently starting D years in the future.
- This leads to a straightforward correction to the present value calculation.
- The case study approach attempts to measure social returns
- It is difficult to measure the marginal returns
The Average Return vs. the Marginal Return
- The analysis focuses on the average social return to innovation investments
- Advantages include an aggregate-level analysis accounting for successes and failures, and including complex spillovers
- It considers additional issues like capital embodiment, lagged effects, productivity measurement, health benefits, and international spillovers
- The average social returns are found to be very large
- The analysis investigates how the average social return relates to the marginal social return, considering both micro and macro perspectives
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Description
This quiz delves into the concepts of capital-embodied productivity growth and the equations critical to understanding economic returns on investment. Test your knowledge on key terms like '𝛼' and '𝛽', and explore the implications of disembodied technological progress. Prepare to challenge your understanding of innovative investments and their costs.
