Yesterday, over at Café Hayek, Don Boudreaux noted the work of the Yale economist William Nordhaus and his finding that:
innovators capture a mere 2.2% of the total “surplus from innovation. (The total surplus of innovation is, roughly speaking, the total value to society of innovation above the cost of producing innovations.)
“The smallness of this figure is astounding. If it is anywhere close to being an accurate estimate, the implication is that “society pays a paltry $2.20 for every $100 worth of welfare it enjoys from innovating activities.
He asks: “Why do innovators work so cheaply? But his answers, excessive optimism and the illusory lure of big winnings, dont seem to me to tell the whole story.
Doesnt this turn on the difference between intrinsic and extrinsic rewards? It is fun to make stuff up. More to the point, making stuff up is its own reward.
Anthropologists spend a lot of time talking to people who think in the well-worn groves supplied by culture. George Bernard Shaw said: “Most people would rather die than think. Most do. But every so often, anthropologists run across people who are mad keen to beat their way out of the received assumptions and the defining ideas for their culture.
These are the innovators. Innovators love innovating. They look at the “road closed signs posted by culture and drive right through them. They like to crawl into the Platonic cave and say, ‘that cant be right.
Maybe, its the sheer excitement of going “where no man has gone before. Maybe its a willful, contrarian, anarchic wish to defy convention. Maybe its the sheer pleasure of building a bridge as we go, in real time, with no net, with the clear knowledge that we have no knowledge. This is intellectual weightlessness. Its an opportunity, for a brief moment, to escape the gravitational pull of culture. For a moment, we exist “out” of culture, convention, the body, and our minds.
For innovators, this moment is its own reward. I figure this is why Xerox captured so little of the value they created. The egg heads were running the shop, and they were already very nicely compensated. They were the first ones to ‘think a Graphical User Interface. Let someone else, at Apple and then still more belatedly, at Microsoft, figure out the details. Let some one else take it to market. And, yes, let someone else reap the “rewards. The innovator has already taken his or her cut.
I have a test for my proposition. (This is rare for an anthropologist, so let me pause for a moment of self congratulation.) Let us canvas the winners of the Nobel prize and give them this choice. They must choose between the moment of their “innovation and all the credit that came to them as a result of the innovation: riches, prestige and the Nobel prize itself. The additional condition: if they take the Nobel prize, they will be prevented from engaging in innovative thought ever again. We will put a Denver boot on their brain.
I am prepared to bet virtually every winner would turn down the prize for the chance to think again. For someone who has tasted the joys of making stuff up, anything else would be a torment and the end of the great joy of life. Most innovators would innovate for room and board. They are thrilled, and a little surprised, to discover that a university or a corporation is prepared actually to pay them.
“2.2% of the total surplus of the innovation? Great. Put it over there. Got a moment? See, I have this idea
Boudreaux’s post here
Fox, Richard G. 1991. For a Nearly New Cultural History. in Recapturing Anthropology. editor Richard G. Fox, 93-113. Santa Fe: School of American Research Press.
With a hat tip to Tyler Cowen for the lead here