13 October 2021
"Productivity isn't everything, but, in the long run, it is almost everything." ― Paul Krugman
Welcome to the Economic Surplus, the newsletter brought to you by the Marshall Society! We are the University of Cambridge’s flagship economics society. Every week, we bring you our bespoke commentary on economic trends, updates on our exclusive members’ events as well as a summary of the headlines you can’t ignore! You’ve probably received this email because you were previously subscribed to the Marshall Society’s old email list, but if you have been forwarded this by a friend, feel free to subscribe here!
This week’s Marshall’s Thoughts are written by George Baxendale.
Comparing the impact of new technologies is hard: is the microwave more or less important than the dishwasher? Has the iPhone had a greater impact than the invention of the train? Will the invention of bitcoin be more significant than the credit card?
Previously, economists have often used the number of citations that the patent receives as a measure of the technology’s impact. This paper comes up with a different methodology to measure technological breakthroughs. Their key idea is that a particularly important patent will be linguistically distinct from previous patents – because it is a new idea – but similar to patents issued afterwards, as an important patent influences future innovation. The researchers use natural language processing to find these particularly important patents.
The line graph on the left shows how important inventions have come from different inventions over time. Transportation dominated the period between 1860-1910, which includes improvements in railroads and their electrification. From 1900-1950, chemistry becomes increasingly important. For example, bakelite, the first synthetic plastic, led to other inventions such as PVC and nylon. Other chemistry patents include Enovid, the first oral contraceptive, and Tetracycline, which is a cheap and one of the most prescribed broad-spectrum antibiotics. From the 1980s onwards, computers and electronics have towered over other industries. The graph on the right shows that computers and electronics have accounted for an unprecedented proportion of new breakthrough patents since 1980.
(Note: the patents studied have been issued in the United States; this research has not yet been replicated for other countries)
The Downton Abbey effect: British aristocrats, American brides | VOX, CEPR Policy Portal (voxeu.org) – As agricultural prices fell in the late 19th century, the incomes of British aristocrats shrank. To raise money, British aristocrats started to marry US heiresses with large dowries but no blue-blood.
Business confidence in UK economy ‘falls off a cliff’ to lockdown levels in face of rising costs | Business News | Sky News – The Institute of Directors’ index of how directors feel about the financial outlook in the UK has plummeted to levels last seen in February 2021, during the lockdown, over rising costs and uncertainty.
Energy Crisis Forces German Power Plant to Halt on Lack of Coal - Bloomberg – the latest in the energy crisis: as coal prices skyrocket, German power plants start to run out of coal.
POLITICO Playbook: ‘The strangest thing I’ve ever seen’ - POLITICO – US government avoids a shutdown, funding the government into December. Additionally, US Congress’ wrangling over a series of contentious spending bills has resulted in strange parliamentary behaviour.
Evergrande bonds snapped up by distressed debt investors | Financial Times (ft.com) – Distressed debt investors have been buying Evergrande bonds on the basis that the CCP would rather restructure Evergrande than allow it to collapse.
That’s it from us for now!
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