Science and Employment: You Must Remember This, The Fundamental Things Apply As Time Goes By

Deven Desai

Deven Desai is an associate professor of law and ethics at the Scheller College of Business, Georgia Institute of Technology. He was also the first, and to date, only Academic Research Counsel at Google, Inc., and a Visiting Fellow at Princeton University’s Center for Information Technology Policy. He is a graduate of U.C. Berkeley and the Yale Law School. Professor Desai’s scholarship examines how business interests, new technology, and economic theories shape privacy and intellectual property law and where those arguments explain productivity or where they fail to capture society’s interest in the free flow of information and development. His work has appeared in leading law reviews and journals including the Georgetown Law Journal, Minnesota Law Review, Notre Dame Law Review, Wisconsin Law Review, and U.C. Davis Law Review.

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3 Responses

  1. A.J. Sutter says:

    Actually, there’s a huge difference between 1945 and now: at the time of the report, full employment, not economic growth, was the objective of economic policy.

    Such ideas as “structural unemployment” and an obsession with productivity improvements in order to stimulate growth were still invisible over the horizon. Today we focus on increasing GDP by any means, because we believe it will increase jobs, stimulate innovation, make everyone rich, fund Social Security, etc. Back then the point of policy was to employ people — and increasing output was one means to do so.

    Today we hypocritically reward, with bumps in share price, “productivity improvements” achieved by massive layoffs, while also spouting that GDP growth is necessary to create jobs. Back in the 1940s, though, the point was to increase production, not productivity, because increased production would employ more people. Vestiges of this idea persisted even into the 1960s, when Arthur Okun would try to answer the question, ” ‘How much output can the economy produce under conditions of full employment?’ … It is a question of policy significance because the pursuit of full employment (or ‘maximum employment’ in the words of the Employment Act) is a goal of policy.” And some macroeconomists even today believe that either the causation is ambiguous (e.g.,here), or else runs in the opposite sense, i.e., that unemployment depresses output (see, e.g. here).

    It’s thanks to the military (and Uncle Joe) that today we in the US put the cart before the horse. In post-war Europe, labor was scarce, and unemployment wasn’t an issue — rebuilding bombed-out production was the key. Re-interpreting for its own political ends an inapposite, Depression-era growth model focused on full employment (the Harrod-Domar model), in 1949 the UK government became the first to make economic growth an official policy goal. 1949 was also the year when the Soviet Union exploded its first atomic bomb. At the time, there was a struggle going on in Truman White House between economic advisers and the military. The military wanted to increase defense spending, while the economists worried about huge budget deficits. The new British growth policy allowed the US military to argue that defense spending wasn’t just necessary for security, it would be good for the economy too, by stimulating growth. As Domar himself explained in 1951, there was a double reason for prioritizing growth: first, “full employment without growth is impossible,” and second, “the present international conflict” made growth “a condition of [America’s] survival.” Thereafter, the GNP growth contest served as a proxy for a shooting war between US and Them, enabling GNP growth to become an end in itself. At the same time, the list of things growth was supposedly good for grew like the spiel of a patent medicine huckster warming to his topic. See H. Walter Arndt’s The Rise and Fall of Economic Growth (Longman 1978; UChicago 1984), an excellent, if prematurely-titled, history written during the height of the Cold War. Despite the end of the Cold War, its mythologies and justifications of growth, bolstered by Promethean mythologies of innovation (visible in the Bush report to Roosevelt, but at least as old as Descartes), persist to this day.

    The connection of scientific research to full employment is no longer true. In 2010, it took 62,000 employees to create $1 billion of profit at Toyota, and 33,900 at GM; whereas it took only 3,692 employees to create that much at Microsoft, only 2,535 at Google and only 2,330 at Apple (FY2011). Google doesn’t even have 33,900 employees worldwide, much less 62,000. And forget about coming close to Toyota’s 317,700 employees in its consolidated subs; the 69,000 employees of its non-consolidated subs alone are more than double Google’s global workforce.

    Bottom line: a lot more changes over time than one might think. Context is all.

  2. A.J. Sutter says:

    BTW, scientific research doesn’t necessarily boost GDP, either. See my discussion of the Paul Romer growth model here, and the 1995 papers of Romer’s Stanford colleague Charles Johnson cited therein (showing, inter alia, no increase in total factor productivity proportional to increase in number of researchers in US, France, Germany, Japan).

  3. A.J. Sutter says:

    [An attempt was made to post the following comment before the 2011/11/05 12:01 (whence the “either” in that comment), but was “awaiting moderation” for several days without action being taken. This is a re-try, minus hyperlinks. Apologies if this is duplicative:]

    Actually, there’s a huge difference between 1945 and now: at the time of the report, full employment, not economic growth, was the objective of economic policy.

    Such ideas as “structural unemployment” and an obsession with productivity improvements in order to stimulate growth were still invisible over the horizon. Today we focus on increasing GDP by any means, because we believe it will increase jobs, stimulate innovation, make everyone rich, fund Social Security, etc. Back then the point of policy was to employ people — and increasing output was one means to do so.

    Today we hypocritically reward, with bumps in share price, “productivity improvements” achieved by massive layoffs, while also spouting that GDP growth is necessary to create jobs. Back in the 1940s, though, the point was to increase production, not productivity, because increased production would employ more people. Vestiges of this idea persisted even into the 1960s, when Arthur Okun would try to answer the question, ” ‘How much output can the economy produce under conditions of full employment?’ … It is a question of policy significance because the pursuit of full employment (or ‘maximum employment’ in the words of the Employment Act) is a goal of policy.” And some macroeconomists even today believe that either the causation is ambiguous (e.g.,here), or else runs in the opposite sense, i.e., that unemployment depresses output (see, e.g. here).

    It’s thanks to the military (and Uncle Joe) that today we in the US put the cart before the horse. In post-war Europe, labor was scarce, and unemployment wasn’t an issue — rebuilding bombed-out production was the key. Re-interpreting for its own political ends an inapposite, Depression-era growth model focused on full employment (the Harrod-Domar model), in 1949 the UK government became the first to make economic growth an official policy goal. 1949 was also the year when the Soviet Union exploded its first atomic bomb. At the time, there was a struggle going on in Truman White House between economic advisers and the military. The military wanted to increase defense spending, while the economists worried about huge budget deficits. The new British growth policy allowed the US military to argue that defense spending wasn’t just necessary for security, it would be good for the economy too, by stimulating growth. As Domar himself explained in 1951, there was a double reason for prioritizing growth: first, “full employment without growth is impossible,” and second, “the present international conflict” made growth “a condition of [America’s] survival.” Thereafter, the GNP growth contest served as a proxy for a shooting war between US and Them, enabling GNP growth to become an end in itself. At the same time, the list of things growth was supposedly good for grew like the spiel of a patent medicine huckster warming to his topic. See H. Walter Arndt’s The Rise and Fall of Economic Growth (Longman 1978; UChicago 1984), an excellent, if prematurely-titled, history written during the height of the Cold War. Despite the end of the Cold War, its mythologies and justifications of growth, bolstered by Promethean mythologies of innovation (visible in the Bush report to Roosevelt, but at least as old as Descartes), persist to this day.

    The connection of scientific research to full employment is no longer true. In 2010, it took 62,000 employees to create $1 billion of profit at Toyota, and 33,900 at GM; whereas it took only 3,692 employees to create that much at Microsoft, only 2,535 at Google and only 2,330 at Apple (FY2011). Google doesn’t even have 33,900 employees worldwide, much less 62,000. And forget about coming close to Toyota’s 317,700 employees in its consolidated subs; the 69,000 employees of its non-consolidated subs alone are more than double Google’s global workforce.

    Bottom line: a lot more changes over time than one might think. Context is all.