Courtesy Reuters

Tech-World

By Jonathan Willner

To the Editor:

In "Is America Losing Its Edge?" (November/December 2004), Adam Segal states that Americans should be apprehensive about the possible decline of U.S. pre-eminence in research and development (R&D) because of seemingly negative implications for both the U.S. economy and the United States' status as a global leader in technology. His assertion is disturbing--as an overstatement, and even more so because of its relativist measure of well-being. On the one hand, the overstatement makes a complex world economy seem simpler than it is; on the other, the appeal to relativism points toward a zero-sum view of national interests reminiscent of the mercantilist thinking of the eighteenth century, carrying disastrous prospects for the United States and the world.

Segal overstates the extent that R&D has advanced the U.S. economy. "For the last five decades, U.S. scientific innovation and technological entrepreneurship have ensured the country's economic prosperity," he asserts. But extensive empirical evidence indicates that the main source of U.S. economic prosperity has been capital accumulation: simple investment that allows each worker to have more to work with. Some of the United States' increasing income, on a per capita basis, does come from technological innovation, but most of it is a function of quantitative growth of inputs.

In the early 1950s, the United States was definitely ahead of the rest of the world in terms of per capita income and total production. The nation had gained this advantage relatively rapidly, largely because of the two world wars. Since the United States was spared the bombing visited on Japan, Germany, and the United Kingdom, it quickly surpassed them economically.

During that time, the United States expanded in aggregate and on a per capita basis through three main standard mechanisms. First, human capital, or the skills of the population, increased dramatically. Second came investment in capital equipment: the more you have to work with, the more you will produce and the higher your income will be. Lastly, there was technological change--the results of R&D. Although significant, it is not clear that the U.S. advantage in this regard is as decisive as Segal suggests. As with all high-income countries, the United States now has so much that it is hard to increase its income by large percentages.

Of greater concern is Segal's focus, not on how well Americans live, but on how well they live relative to other people. Statements that the U.S. economy must "remain dominant" and retain its "privileged position" suggest the desire to stay ahead of others, rather than to simply live well.

Technological innovation is important because, no matter its source, it tends to increase real incomes across the globe, not just in the country from which it originates. Segal's article implies, for example, that if someone in Germany discovers a patentable medicine that is then sold at a premium price in the United States, somehow the United States is failing to prosper. But are Americans really worse off because the German company Bayer discovered aspirin? Or are they better off because someone did?

The United States should continue to conduct R&D for its positive effects in general. With more R&D, the income of the average American is likely to increase, regardless of where the R&D originates.

JONATHAN WILLNER

Professor of Economics and Chair, Economics and Finance Department, Meinders School of Business, Oklahoma City University

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