Economics of Technological Progress

Futurologists have a tendency to describe either a future they desire, or a future they despise. In previous posts I have built the argument that the discipline can only mature when we move away from normative models of our future world to descriptive model. The descriptive models of what the future has in store for us will consist of a set of dependent variables: the stuff we want to predict; a number of independent variables: The factors that determine the dependent variables; And finally most models will have a number of intermediate variables, so variables that stand in the causal model between the independent input variables and the dependent variables. We can have long discussions about all these different variables, but one thing is certain: the variable MONEY is a very significant part of any model of our future!

In a previous post (see here) I boldly presented seven technological mega-trends. Not all move at the same speed. Why is that?

Why did the USA bring men to the Moon in less than 10 years? Because the US government, supported by the US population, decided to spend USD 20 billion (USD 170 billion in 2005 dollars) on the project. Why did they decide to spend such a large sum on this endeavor? Because there was a cold war raging between the USA and the USSR, and president Kennedy and his administration selected the Apollo project as one of the arenas to fight out a battle on prestige.

Apollo 11

This battle of prestige was won by the USA, and in July 1969 Neil Armstrong and Buzz Aldrin had their stroll on the Moon. (How Apollo Flew to the Moon (Springer Praxis Books / Space Exploration).

Two questions I cannot answer, but need some consideration: Would the USA have put men on the Moon without the cold war? And: Would Nixon (who was known to oppose the Apollo project) have cancelled the project were it not for the fact that the initiator was a national hero after his assassination?

After the end of the Cold War, both the US and the Russian space efforts were throttled down dramatically. Has the peace been holding down our willingness to invest in our technological progress? It is clear: Without money you don’t get very far in this area.

Another example: Why has electronics taken off so vigorously, and keeps moving forward? The answer is simply that people are earning vast amounts of money with the developments in this area. And that again has been possible because the cost of electronics has been falling at least as fast as the performance of this technology has been growing. That means that you and I pay for the incredible progress in electronics by buying PCs, mobile phones, smart TVs etc.

The economics of scientific and technological progress is simple: Progress requires R&D Euros and Dollars and whatever currency you want to use. The amounts of required investment have gone up sharply, the times when a single inventor was able to make significant developments in his cellar are long time over. The decision to invest this kind of money on R&D depends on a cost side and a benefit side.

Benefits can be either business benefits (as is now the case with electronics and e.g. genetics) or on the geopolitical side: defense spending, other safety and security spending, national status spending.

Checking the mega-trends we can summarize the money situation as follows:

I. All trends that depend on the increase of electronics performance are driven by the reduction of cost to produce it, and will continue, at least as long as Moore’s law remains active.

II. All trends that depend on software will be driven by the combined intelligence and work force of all the bright code hackers in the world, with possibly step-by-step an acceleration due to Computer Aided SW Development.

III. All trends that have direct impact on health care and  life extension, especially for inhabitants of the richer countries, will receive plenty of funding, and will move forward at a rapid pace.

IV. All trends that provide only indirect benefits, benefits in the far future, or benefits of a geopolitical nature will continuously struggle to receive the funds required to drive them forward.

For the seven mega-trends that we presented in the previous post we can therefore expect the following developments:

1. Genetics will thrive, driven by the willingness of all people to pay money for health and life extension. Many initial innovations will take place in universities and governmental laboratories, productizations will be taken care of in commercial labs. Ethical hurdles will disappear step by step.

2. Prosthetics will thrive, in the areas of mechanics, organs and neural and brain stimulation and (partial) replacement. These technologies will be of a mechanical, electronical and biological nature. Hurdles will be minimal.

3. Life extension technologies will thrive. The challenges here are of a technical, genetical-technological nature, as we need to learn how to reengineer the aging mechanism in each and every cell. The bottleneck here will be the technological capability, not the available money. The same ethical hurdles as mentioned for genetical engineering exist here, but will diminish.

4. Robotics will thrive as far as it concerns the development of artificial intelligence, which depends fully on the development of electronics and of software. Currently there are not strong ethical objections regarding unrestricted AI development, this may, in the near future, change.

The development of humanoid robots will not happen very quickly. The reason for this is that the required mechanics is expensive to develop and expensive to produce, and does not have a strong economies of scale effect as the electronics part has. Therefore the strong growth in robotics will happen in the form of intelligent homes, intelligent vehicles, intelligent terminals etc.

5. Space travel will keep moving much slower than we would be able to realize from a technological perspective. Sad as it sounds, serious space travel – beyond Low Earth Orbit (LEO) – requires huge funds with very poor direct pay-back, making it uninteresting for private companies. The space companies that currently exist develop old-fashioned technology for LEO, mostly funded by national and international space organizations. Viable space ventures like space mining, settlements-for-profit on Mars and space-based power generation are too far away for any serious business plan.

Therefore the development of space will depend on the willingness of national and international organizations to make big upfront investments. Within the confines of populist democracies this requires either extremely mature and visionary populations (the people who elect the governments) of geopolitical conflict (like the cold war). For this reason we must expect that the mega-trend Space will move forward, but much slower than we would hope or think possible.

6. Terraforming depends fully on space travel, and will therefore also move slower than we would hope for. Actually this mega-trend may require a “compelling reason to act” before we are willing to pull the wallet. A compelling reason to act would be for example a global warming process that has gotten completely out of control, or a major catastrophic collision between Earth and an asteroid.

7. Energy is the final of the mega-trends I presented. As long as we are able to burn cheap oil and gas, the required funds for developing serious energy alternatives  will not be made available. Again, humanity will wait until the fossil fuels start to run out before they put some serious effort into nuclear fusion energy. Energy is fundamental for whatever we do, including space travel, especially once we want to go beyond our own Solar system. There should be plenty of money available in the energy sector for the required investments in alternatives, however the short sighted logic of modern business does not support such developments.

So: We can be confident that most of the mentioned mega-trends will happen within the current economic logic. The last three (space travel, terraforming and energy) will require different funding mechanisms in order to move forward. In a later post I will evaluate a number of alternatives for long-term funding such exciting and necessary technology.

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5 thoughts on “Economics of Technological Progress

  1. “Energy is the final of the mega-trends I presented. As long as we are able to burn cheap oil and gas, the required funds for developing serious energy alternatives will not be made available.”

    Wrong. LENR is emerging onto the market this year, and according to Forbes.com will make energy “too cheap to meter.” It uses nickel and hydrogen, no nuclear material in or out, it is clean, very very cheap, and super abundant. Therefore it will quickly replace all other energy technologies, not because it is clean, but because competition forces us to lower fuel cost to stay competitive. Here is a primer:

    Check out this third-party verification of a LENR reactor that will soon hit the market: http://arxiv.org/abs/1305.3913
    “Given the deliberately conservative choices made in performing the measurement, we can reasonably state that the E-Cat HT is a non-conventional source of energy which lies between conventional chemical sources of energy and nuclear ones.” (i.e. about five orders of magnitude more energy dense than gasoline, and a COP of almost 6).

    This phenomenon (LENR) has been confirmed in hundreds of published scientific papers: http://lenr-canr.org/acrobat/RothwellJtallyofcol.pdf

    “Over 2 decades with over 100 experiments worldwide indicate LENR is real, much greater than chemical…” –Dennis M. Bushnell, Chief Scientist, NASA Langley Research Center

    “Total replacement of fossil fuels for everything but synthetic organic chemistry.” –Dr. Joseph M. Zawodny, NASA

    By the way, here is a survey of some of the companies that are bringing LENR to commercialization: http://www.cleantechblog.com/2011/08/the-new-breed-of-energy-catalyzers-ready-for-commercialization.html

    For those who still aren’t convinced, here is a paper I wrote that contains some pretty convincing evidence: http://coldfusionnow.org/the-evidence-for-lenr/

    • Cold fusion, as far as my information goes, remains highly questionable. There is not an agreed upon theoretical model, and the experimental results are debatable and usually reported in non-peer reviewed journals. I remember very well when Pons and Fleischmann made their initial claims, but their findings were not reproducible. Cold fusion would be a dream, obviously, but unfortunately it seems too good to be true. I will follow the topic with great interest and hope that I will be proven wrong. Until then I will stand with my claim that fossil fuels will remain dominant for as long as they are cheaply available.

  2. This was an incredibly fascinating post, and one I have been meaning to comment on since I read it. The fact is you’re right about space exploration being hamstrung by short-sighted investors unable to appreciate an open slate of possibility, despite all the evidence pointing to how investment into dealing with such harsh, demanding conditions has already revolutionized our world several times over.

    It’s not short-sighted, it’s practically *blind*. It makes me angry that progress into something so vital to our future survival (with the kind of civilisation we want and need if we’re to avoid mass extinction) is just being shelved because of stupidity and base greed.

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