What if ideas rather than land are the fixed factor? Wages and profits stagnate. Some “idea landlords” receive enormous pecuniary returns, while others do not.
I think that the standard estimate is that innovators earn less than 2 percent of the surplus from their ideas. Further remarks:
1. For really important ideas, there is a lot of surplus. For those ideas, someone who gets a significantly non-zero portion of the surplus is super-rich (Bill Gates), someone who gets a less significantly non-zero portion of the surplus is rich (Jim Clark, Marc Andreessen), and someone who gets essentially 0 percent of the surplus is only modestly affluent (Tim Berners-Lee).
2. One reason that ideas do not often generate significant rents is that they can easily be copied. A lot of the reward goes to those who come up with ways of creating and capturing rents, not necessarily for those who create the most valuable ideas. (Again, Gates vs. Berners-Lee illustrates this.)
3. Many workers in the Garett Jones economy are paid for coming up with little ideas. These are not ideas that produce staggering rents, but they are ideas that incrementally improve business processes. Little ideas matter a lot in the aggregate, and therefore Bill Gates does not capture all of the wealth. The distribution of income is going to be winners-take-much, but not winner-take-all. The typical Garett Jones worker can earn a decent living.
4. Bureaucracy represents a top-down mechanism for allocating rents from ideas. The stock market represents a more bottom-up mechanism. Both mechanisms are highly flawed, and certainly other mechanisms might emerge.
An asymptotically free good is a good where almost of all of the cost involved consists of research and development.
In A Meditation on Innovation I suggested that in the future valuable innovations will be innovations in how we filter innovation.
Going forward, the pressures on our processes for filtering and adopting innovations are going to experience stress. For change to accelerate, there has to be continuous improvement in these processes. We need to get better and better at filtering and adopting innovations. Otherwise, these processes will become bottlenecks in the innovation system.
I think that the adoption and filtering bottlenecks will start to have a visible effect on the rate of technological progress within ten years. Perhaps we will look back in ten years and say that the deceleration of change had already begun at the time that I wrote my essays.
Another way of making the case that a deceleration is inevitable is to do so in terms of the rate of obsolescence. Innovations make old technologies obsolete. As the pace of innovation speeds up, the pace of obsolescence must speed up. How fast can it go?
Finally, from a summing up of my first 27 essays.
The critical resource to allocate in today’s economy is no longer capital, but talent… The institutions best suited to allocating talent probably have not yet evolved. Neither bureaucracies nor the stock market are likely to continue to be as central as they are today.