Are ideas getting harder to find?

Abstract

Long-run growth in many models is the product of two terms: the effective number of researchers and their research productivity. We present evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore’s Law. The number of researchers required today to achieve the famous doubling of computer chip density is more than 18 times larger than the number required in the early 1970s. More generally, everywhere we look we find that ideas, and the exponential growth they imply, are getting harder to find. (JEL D24, E23, O31, O47) This paper applies the growth accounting of Solow (1957) to the production function for new ideas. The basic insight can be explained with a simple equation, highlighting a stylized view of economic growth that emerges from idea-based growth models: Economic, growth e.g., 2% or 5% = Research productivity ↓(falling) × Number of researchers ↑(rising). Economic growth arises from people creating ideas. As a matter of accounting, we can decompose the long-run growth rate into the product of two terms: the effective number of researchers and their research productivity. We present a wide range of empirical evidence showing that in many contexts and at various levels of disaggregation, research effort is rising substantially, while research productivity is