i think this piece would benefit from a few examples of historic ideas which boosted the labor productivity multiple. it’s not clear to me why ideas aren’t treated as just a specific “type” of capital: if the ideas you’re thinking of are things like “lean manufacturing” or “agile development”, these all originated under existing capital structures and at one time had specific “owners” (like Toyota). we have intellectual property laws, so some of these ideas can be owned: they operate as an enhancement to labor productivity and even require upkeep (depreciation) to maintain: one has to teach these ideas to new workers. so they seem like a form of capital to me.
my suspicion is that these “ideas” are just capital which has escaped any concrete ownership. they’re the accumulation of positive externalities. it’s worth noting that even once these ideas escape ownership, they don’t spread for free: we have schools, mentorship, etc. people will voluntarily participate in the free exchange of ideas (e.g. enthusiast groups), but that doesn’t mean there’s no upkeep in these ideas: it just isn’t financialized. in the end, a new idea displacing an old one doesn’t look all that different from a more efficient (higher output per input) machine displacing a less efficient machine: they’re both labor productivity enhancements which require some capital input to create and maintain.
“Ideas which boosted the labor productivity multiple”: pretty much every major technology! Mechanization, the factory system, engines, electricity, etc.
Why ideas are treated distinct from capital is a good question. Basically, it is a matter of economic accounting. In a nutshell: We can measure the amount of money invested in capital equipment, and we can measure the increase in labor productivity (output produced per worker-hour). And it turns out that productivity increases much faster than capital investment. The residual is chalked up to technology.
The difference between ideas and physical capital is that the former is nonrival (although, with intellectual property, partially excludable).
(Note that it’s important to differentiate between ideas as such, and ideas as learned/understood by humans. The latter is more like capital, indeed it is referred to as “human capital.” See here and here.)
i think this piece would benefit from a few examples of historic ideas which boosted the labor productivity multiple. it’s not clear to me why ideas aren’t treated as just a specific “type” of capital: if the ideas you’re thinking of are things like “lean manufacturing” or “agile development”, these all originated under existing capital structures and at one time had specific “owners” (like Toyota). we have intellectual property laws, so some of these ideas can be owned: they operate as an enhancement to labor productivity and even require upkeep (depreciation) to maintain: one has to teach these ideas to new workers. so they seem like a form of capital to me.
my suspicion is that these “ideas” are just capital which has escaped any concrete ownership. they’re the accumulation of positive externalities. it’s worth noting that even once these ideas escape ownership, they don’t spread for free: we have schools, mentorship, etc. people will voluntarily participate in the free exchange of ideas (e.g. enthusiast groups), but that doesn’t mean there’s no upkeep in these ideas: it just isn’t financialized. in the end, a new idea displacing an old one doesn’t look all that different from a more efficient (higher output per input) machine displacing a less efficient machine: they’re both labor productivity enhancements which require some capital input to create and maintain.
“Ideas which boosted the labor productivity multiple”: pretty much every major technology! Mechanization, the factory system, engines, electricity, etc.
Why ideas are treated distinct from capital is a good question. Basically, it is a matter of economic accounting. In a nutshell: We can measure the amount of money invested in capital equipment, and we can measure the increase in labor productivity (output produced per worker-hour). And it turns out that productivity increases much faster than capital investment. The residual is chalked up to technology.
The difference between ideas and physical capital is that the former is nonrival (although, with intellectual property, partially excludable).
Much more explanation and history in this draft essay of mine: https://progressforum.org/posts/W6cSxas75tN8L47e6/draft-for-comment-ideas-getting-harder-to-find-does-not
(Note that it’s important to differentiate between ideas as such, and ideas as learned/understood by humans. The latter is more like capital, indeed it is referred to as “human capital.” See here and here.)